An order that is shipped but cannot be delivered, because the buyer refuses it, is not reachable or gave a wrong address, so the courier sends it back to the seller. The seller usually pays shipping both ways and earns nothing.
Formula
RTO rate = orders returned to origin ÷ orders shipped × 100. ROAS after RTO = (orders × (1 − RTO rate) × average order value) ÷ ad spend
Example
Meera starts offering cash on delivery. Her ads bring 200 orders worth ₹4,00,000, and 40 come back undelivered, an RTO rate of 20%. Only 160 orders, ₹3,20,000, are actually paid for, so her ROAS on delivered orders is 3.2x, not 4x.
How you'll hear it
“Meta shows 4x, but at 20% RTO on COD our delivered ROAS is 3.2x, so let's push prepaid with a small discount.”
What it helps you decide
Whether to offer cash on delivery, whether to confirm COD orders by call or WhatsApp before shipping, whether to nudge buyers to prepaid, and what ROAS to treat as real.
Where people misread it
People judge ads on the sales the platform reports. The pixel fires when the order is placed, not when it is delivered and paid, so ROAS is overstated by the RTO rate, and the two-way shipping cost does not appear anywhere in the ad dashboard.
The story
Meera adds cash on delivery to her website. Orders jump, and Meta reports her usual 4x ROAS. A month later, the courier sends back a pile of parcels.
| Ad spend | ₹1,00,000 |
| Orders placed | 200 |
| Sales at ₹2,000 per order | ₹4,00,000 |
| Reported ROAS | 4.0x |
|---|
| Orders returned to origin (20%) | 40 |
| Orders delivered and paid | 160 |
| Delivered sales | ₹3,20,000 |
| ROAS on delivered orders | 3.2x |
|---|
The 40 returned parcels also cost money. She paid ₹100 to send each and ₹80 to get each back: 40 × ₹180 = −₹7,200, for no sale. The stock was also stuck in transit for two weeks during the festive season.
Her breakeven ROAS has not changed; her real ROAS has dropped. She now sends a WhatsApp confirmation for every COD order before shipping, offers a small discount for paying by UPI, and judges campaigns on delivered sales.
All figures are illustrative. RTO rates vary widely by category, region and payment method.
See what RTO does to your ROAS
The example's numbers are filled in. Replace them with yours.
Compare ROAS on delivered orders with your breakeven ROAS, and add the wasted shipping to your costs.
Don't confuse it with
- Customer return: the buyer receives the product and sends it back later.
- Cancellation: the order is stopped before it ships.
In India: RTO is mainly a cash-on-delivery problem in Indian e-commerce: COD lets the buyer refuse at the door. Common responses are confirming COD orders on WhatsApp or by call, and nudging buyers to prepaid UPI.
Related terms
Want to use this at work? AI-led PPC Excellence is aFactor's 16-week program for paid ads.
Sources
- RTO Explained: How Indian SMBs Can Reduce It, Amazon Shipping India