How to Price a COD Product in Pakistan (Returns, Courier and Ads Included)
Many cash-on-delivery (COD) sellers set the price as the product cost plus a markup. In COD that price has to pay for much more than the product: every returned parcel, the courier both ways, packaging, confirmation calls and the ads. This guide works out the right price for one example store, the same store as our guide to COD profit after returns, using the Fiscora pricing and e-commerce profit calculators. The store is an illustration, not a real client.
By Shahzeb Jan Gondal · Updated · 4 min read
The mistake: a markup on the product cost
The product costs Rs 1,000. Add 20% and the price is Rs 1,200. It looks like Rs 200 of profit on every sale.
At that price the example store, with the same 40 orders and Rs 8,000 of ads, loses Rs 13,386 in a week. The markup only covered the product.
What one delivered order really has to pay for
Only the 19 delivered parcels bring in money, so they carry the costs of the whole week:
| Cost | Week | Per delivered order |
|---|---|---|
| Ads | Rs 8,000 | Rs 421 |
| Courier (deliveries and returns) | Rs 5,650 | Rs 297 |
| Packaging (all dispatched parcels) | Rs 1,680 | Rs 88 |
| Confirmation calls (all orders) | Rs 800 | Rs 42 |
| Returned stock that cannot be sold | Rs 600 | Rs 32 |
| Total besides the product | Rs 16,730 | Rs 881 |
Each delivered order carries Rs 881 on top of its own Rs 1,000 product. Its true cost is Rs 1,881, not Rs 1,000.
The price formula
Price = (product cost + other costs per delivered order) ÷ (1 − target margin − COD fee %)
- Break-even (0% margin): (Rs 1,000 + Rs 881) ÷ (1 − 0.02) = Rs 1,919. Below this price every sale loses money.
- 20% net margin: (Rs 1,000 + Rs 881) ÷ (1 − 0.20 − 0.02) = Rs 2,411.
Check: at Rs 2,411 the example store makes Rs 9,163 in the week, a net margin of 20% of the cash collected. Its real price of Rs 2,500 gives 22.78%.
Find your own price
Enter your product cost, your other costs per delivered order and the COD fee, choose a target margin and get the price. Free, no sign-up.
Your return rate changes the right price
The same store with fewer or more returns (same orders, same ads, same courier rates):
| Return rate | Other costs per delivered order | Break-even price | Price for 20% margin |
|---|---|---|---|
| 10.71% | Rs 760 | Rs 1,797 | Rs 2,257 |
| 21.43% | Rs 881 | Rs 1,919 | Rs 2,411 |
| 32.14% | Rs 1,046 | Rs 2,088 | Rs 2,623 |
Going from 10.71% to 32.14% returns raises the price you need by Rs 366 for the same margin. That is why cutting returns is often worth more than raising the price.
Do it with your own numbers
- In the e-commerce profit calculator, enter one recent week or month: orders, deliveries, returns, ads and costs.
- Work out the other costs per delivered order: total costs minus the product cost of the delivered orders, divided by the delivered orders.
- In the pricing calculator, enter your product cost, that number as “Other costs per unit”, the COD fee as the percentage fee, and your target margin.
- Compare the answer with your current price and with what competitors charge.
Start with your real costs
Orders, deliveries, returns, ads, courier and COD fee in one place, with profit per delivered order. Free.
What this does not tell you
- A higher price can bring fewer orders. This guide assumes the same orders and ads at every price; test a new price on a small batch first.
- Fixed costs such as rent, salaries or software are not included. Add them per delivered order if you have them.
- The store is an example, not a real client. Courier rates, COD fees and return rates differ by courier, city and product. Figures are calculated with the Fiscora calculators and rounded to the rupee.
Questions
How do I calculate the selling price of a COD product?
Add the product cost and all other costs per delivered order (returns, courier, packaging, calls, ads), then divide by (1 − target margin − COD fee %). In the example store: (Rs 1,000 + Rs 881) ÷ 0.78 = Rs 2,411 for a 20% margin.
Why is cost plus markup wrong for COD?
Because the markup only covers the product. Returns, courier, packaging, calls and ads are paid by the delivered orders. In the example store a 20% markup (Rs 1,200) loses Rs 13,386 a week.
What is a break-even price?
The lowest price at which a sale covers all its costs, with zero profit. In the example store it is Rs 1,919.
Should I raise my price or cut returns?
Both help. In the example store, going from 21.43% to 10.71% returns lowers the price needed for a 20% margin from Rs 2,411 to Rs 2,257, without any change customers can see.