Returns and RTO on Ecommerce Marketplaces quietly decide whether a sale made money or lost it, because every returned or undelivered parcel costs you the shipping both ways, the damaged or unsellable stock, and the ad spend that produced the order in the first place. Return to origin (RTO) is when a shipment never reaches the customer and comes back to you. A customer return is when the parcel is delivered and then sent back. They look similar on a P&L but have different causes and different fixes, and with Big Billion Days and the Great Indian Festival opening this week, both are about to spike.
Key takeaways (The TL;DR)
- RTO and customer returns are different problems: RTO is mostly a delivery and payment-mode problem, while returns are mostly a product-expectation problem (fit, colour, quality, damage).
- Industry datasets put COD RTO at roughly 26 to 35 percent against under 8 percent for prepaid orders, so payment mode is usually the single biggest RTO lever a brand controls.
- Fashion and footwear return at 25 to 40 percent in several industry estimates, and size and fit drive the majority of those returns, which makes size guidance and imagery a margin tool, not just a conversion tool.
- Amazon and Flipkart have both tightened seller fees and penalties for cancellations and dispatch lapses this season, so operational slips now cost more than they did a year ago.
RTO vs Returns: Know Which One You Are Fighting
RTO happens before the customer has the product. Usual causes are a wrong address, an unreachable phone number, an impulse order that was regretted, or repeated failed delivery attempts. It is heavily skewed towards cash on delivery (COD). A customer return happens after delivery and is driven by what the customer expected versus what arrived. An RTO parcel is a pure logistics loss, while a returned parcel adds quality checks and often a unit that can no longer be sold as new, so treating both under one “returns” line is the first mistake.
What the Numbers Say
Published figures vary by dataset, so treat them as ranges rather than promises. A Pragma analysis of 142 Indian D2C brands put COD RTO at 28 to 35 percent versus 4 to 8 percent for prepaid, and Shipway’s FY25 data showed around 26 percent on non-prepaid orders against under 2 percent on prepaid. For fashion, GoKwik estimates return rates of 25 to 40 percent, the highest of any category, while the all-category baseline across Indian ecommerce has been quoted at roughly 10 percent. Unicommerce data showed RTO touching about 39 percent at the November 2025 festive peak before easing to about 21 percent by March 2026 among optimized brands.
On cost, industry estimates put direct logistics on an RTO parcel at roughly Rs 150 to 300, with a commonly cited loss of Rs 200 to 250 on a Rs 1,000 order once handling and ad spend are counted. One RTO can erase the margin from several good orders.
Why Festive Sales Make It Worse
Sale periods bring a different kind of buyer: more first-time customers, more impulse purchases, more COD orders from tier 2 and tier 3 pincodes, and heavier courier load that stretches delivery times. Speed matters too: in one dataset, COD orders delivered within two days showed about 22 percent RTO, against about 35 percent beyond five days. Sellers are also under tighter rules this season. Reports on the August changes say Amazon moved its cancellation fee for Easy Ship and Self Ship orders to a percentage-of-order-value model from August 17, with closing fees rising on September 7, while Flipkart introduced per-shipment penalties of Rs 30, Rs 60 and Rs 90 for dispatch delays and cancellations. In short, missing a dispatch date or cancelling an order is more expensive than it used to be.
How to Reduce RTO Without Killing Demand
Verify before you dispatch
A WhatsApp or SMS confirmation of the order and address before the parcel leaves the warehouse catches wrong addresses and impulse orders cheaply. On sale days, apply it to high-value orders, first-time buyers and risky pincodes rather than every order.
Nudge towards prepaid, do not ban COD
Because COD carries the highest RTO, even a small prepaid incentive, such as a modest discount or free shipping above a threshold, moves the mix in your favour. Blanket COD restrictions can cut demand, so a risk-based approach works better. Amazon’s own shipping team publishes guidance on managing COD to cut RTO without cutting demand, and it makes the same point about targeting by risk.
Fix the failed-delivery loop
A large share of RTO starts with a failed first delivery attempt. Responding to non-delivery reports within 24 hours and locking a specific re-attempt window is one of the highest-leverage fixes, and it costs far less than the parcel coming back.
How to Reduce Customer Returns
Answer the size and fit question on the listing
For apparel and footwear, industry research attributes more than half of returns to fit. A size chart with real garment measurements, a model’s height and size, and an image that shows the product on a body rather than flat all reduce guesswork. Other categories need the same honesty: dimension images, a what-is-in-the-box image and true colour.
Use your return reasons as a product brief
Marketplace return reasons are free customer research. If “not as described” keeps appearing on one SKU, fix the title, images or A+ content. If “damaged” appears, fix the packaging. Reviewing reasons by SKU every month beats debating the overall rate.
Stop advertising the SKUs that keep coming back
Ad spend on a high-return SKU pays for the click, the shipping and the return. Compare each SKU’s ROAS after returns, not before, and pause or reduce spend on the ones that look profitable only on gross revenue. This is where marketplace advertising and returns management meet, and where many brands lose margin without noticing.
How AKOI Approaches This
AKOI’s ecommerce marketing team treats returns as part of marketplace performance rather than a separate operations topic. Listing content is built to set accurate expectations, ad budgets are reviewed against SKU-level profitability and not just top-line sales, and sale-season plans account for the order mix and dispatch discipline that keep fees and RTO in check. The aim is a sale that still makes money after returns are counted.
Conclusion
Returns and RTO will never reach zero, but they are among the most controllable margin losses in marketplace selling. Separate the two, watch payment mode and SKU-level return reasons, verify risky orders before dispatch, and judge your ads on what is left after returns. With the festive sales days away, the brands that do this now will keep more of the revenue they are about to win.
Frequently Asked Questions
What is RTO in ecommerce?
RTO stands for return to origin. It is when a shipment cannot be delivered to the customer and is sent back to the seller, usually because of a wrong address, an unreachable customer, a refused parcel or repeated failed delivery attempts.
What is a good RTO rate for Indian ecommerce?
It depends on your COD share and category. Published datasets put COD RTO at roughly 26 to 35 percent and prepaid RTO at under 8 percent, so a brand with a high prepaid share should aim well below the COD range.
How can I reduce RTO on COD orders?
Confirm the order and address by WhatsApp or SMS before dispatch, screen high-value and first-time orders, respond to failed deliveries within 24 hours, and offer a small incentive to pay online instead of banning COD outright.
What is the difference between RTO and a customer return?
RTO happens before delivery, when the parcel never reaches the customer. A customer return happens after delivery, when the customer sends the product back. RTO is mainly a delivery and payment problem, while returns are mainly a product-expectation problem.
Why are returns so high in fashion ecommerce?
Size and fit are the main reason. Industry research attributes more than half of apparel returns to fit issues, with colour mismatch and damage making up much of the rest, which is why size charts and on-body imagery matter.
Do festive sales like Big Billion Days increase returns and RTO?
Usually yes. Sale periods bring more first-time buyers, impulse purchases and COD orders, and heavier courier load can slow deliveries. Unicommerce data showed RTO reaching about 39 percent at the November 2025 festive peak.