How to Reduce RTO in E-commerce: 13 Proven Strategies to Protect Margins

Key Takeaways:

• RTO = lost sales + extra costs of reverse logistics + blocked inventory.
• RTO or Return to Origin impacts margins and profitability, which is why RTO reduction is a major pain point for e-commerce, retail, and D2C brands.
• Offering affordability through BNPL options, EMI on UPI, and multiple payment options can reduce dependence on COD, hence reducing RTO rates.
• Use AI/ML to detect fraudulent orders and fake customer profiles. You can even set order limits for new COD customers.
• Reducing RTO basically means more profit for the company. So, try these proven strategies to reduce RTO in e-commerce.

Introduction

Nothing compares to the joy of getting a sale from a newly acquired customer, but when that same package bounces back as an RTO, it’s not just disappointing; it’s costly. From extra shipping charges to tied-up working capital, RTOs silently eat into the very profits you worked so hard to secure. 

You can avoid this direct hit on your margins through some simple RTO reduction strategies. Feels like something you need? Let’s dive right into it

What is RTO (Return to Origin) in e-commerce?

As a D2C founder, the term return-to-origin is not something unfamiliar. From e-commerce to retail, every brand has suffered the pain of RTO on its COD orders.

But do you know why it keeps happening?
RTO, or Return to Origin, usually happens when:

• The customer cancels the order after it has been shipped.
• The delivery partner is unable to reach the customer.
• The customer refuses to accept the package at the doorstep.

Why is RTO a major problem for online brands? 

High RTO is a common challenge in e-commerce, where the placed order is sent back to the seller. When an RTO occurs, the order doesn’t just fail; it creates double costs. The seller pays for both forward and reverse logistics, loses potential revenue, and has inventory stuck in transit until it returns.

In short, RTO = lost sales + extra costs + blocked inventory. 
That’s why reducing return to origin is critical for protecting margins and improving profitability in e-commerce.

Understanding Key Reasons Behind RTO in E-commerce

Before you jump to how to reduce RTO in e commerce, let’s understand why you get RTO in the first place: 

High COD Orders

High share of cash-on-delivery orders is one of the biggest causes of RTO in e-commerce. To reduce RTO, you need to focus on reducing the number of COD orders.

Incorrect addresses

Many RTOs happen simply because customers enter the wrong address, incomplete pin codes, or outdated contact details during checkout. Without accurate information, delivery agents struggle to locate the customer, and the package is sent back.

Customer indecision

Many customers place an order while they are still making up their minds. Sometime, they even place multiple orders from different websites and eventually cancel the orders or refuse delivery. This indecision creates unnecessary logistics costs for the seller.

Fake orders

There’s no proper explanation to why this happens. Sometimes, its purely out of mischief, while other times, due to fraudulent reasons. Fake orders just create unnecessary stress and financial losses for sellars.

Delivery delays

Late deliveries can cause frustration, especially for time-sensitive purchases like gifts or festive shopping. Customers may reject the package if it arrives after the expected date, adding to RTO percentages.

The Real Cost of RTO for Brands

• Impact on margins and profitability
• Increased logistics & reverse logistics costs
• Inventory holding and depreciation issues
• Negative customer experience

13 Proven Strategies to Reduce RTO in E-commerce

Let’s get to the point. You know RTOs are eating up your margins, but how to reduce RTO in e-commerce? What can you do to reduce RTO charges? Well, with these 13 proven methods, you can reduce RTO rates  and boost your profits.

1. Improve Address Accuracy at Checkout

If incorrect addresses is the cause behind your return-to-origin costs, you can reduce RTO by improving address accuracy at checkout. Use address validation tools that auto-complete PIN codes, cities, and landmarks.

Send an address confirmation SMS/email right after order placement.

2. Offer Multiple Payment Options 

Imagine your customer uses CRED or PhonePay, instead of credit card and they resort to COD because their preferred payment is not available.

COD orders have a higher RTO rate compared to prepaid. So, enable UPI, EMI, and BNPL (Buy Now, Pay Later) to encourage customers to move away from COD.

3. Incetivize Prepaid Orders

Provide discounts, cashback, or loyalty points for prepaid orders. This way, you are giving your customer a reason to ‘not choose’ COD.

4. Pay-in-Parts Option

When you provide EMI or pay-in-parts options to your customers, it increases affordability and flexibility, and allows them to pay some amount instead of the lump sum amount.

This reduces their dependence on COD when making high ticket purchases. Partner with EMI/BNPL providers like Snapmint so customers don’t cancel for affordability reasons.

5. Use Smart Order Confirmation Systems

Customers sometimes place orders by mistake or change their mind.

Enabling an IVR/WhatsApp confirmation before dispatch can resolve this issue. Add a “Confirm Order” button via SMS/WhatsApp after checkout.

Allow easy order modification or cancellation before shipment to avoid unnecessary logistics costs.This will save any reverse logistics costs.

6. Analyze Customer Buying Behavior with Data

RTO is often caused by repeat offenders or non-serious buyers.

A simple solution is to create a RTO risk score using AI/ML models based on past customer behavior.

• Flag high-risk customers and restrict COD for them.
• Prioritize loyal customers with faster delivery and more flexible payment options.

7. Invest in Fraud Prevention & Risk Management

Fake orders, prank COD bookings, and fraud inflate RTO costs.

Use AI fraud detection systems to spot unusual order patterns. Block suspicious IPs, duplicate phone numbers, and blacklisted customers.

Set order limits for new COD customers.
Tip: Multiple high-value orders from the same customer are potential red flags. Use fraud detection filters for suspicious COD orders.

8. Don’t Limit EMIs to Credit Card

Credit card penetration is still limited to around 10 crore people in India, while UPI users exceed 30 crores, which is 3 times more than credit card users. When you limit EMI options to the credit card holders, you are technically limiting your customer pool.

By offering EMI on UPI, you can reduce COD orders and in turn, reduce RTO.

9. Partner with Reliable 3PL & Logistics Providers

Work with trusted delivery partners who have strong networks. Use NDR (Non-Delivery Report) management tools to quickly reschedule failed deliveries.

You can also incentivize delivery agents for first-attempt delivery success.

10. Reduce Delivery Times (Faster Fulfillment = Lower RTO)

Did you know that long delivery windows often cause cancellations? Yes, when you give weeks to your customer to sit and think after placing the order, they might change their mind and cancel. Infact, longer delivery time also pushes customers to opt for offline or other shopping options if they need the product urgently.

What can you do to reduce RTO due to this reason?

• Enable hyperlocal delivery models for metro areas.
• Invest in regional warehouses to cut down TAT (Turnaround Time).
• Highlight “Fast Delivery” badges on product pages to set the right expectations.

11. Strengthen Returns & Refund Policies

Some RTOs happen because customers feel unsafe about refunds.

If you offer hassle-free returns & instant refunds for prepaid buyers, they would not choose COD as a safe option.

Educate customers via FAQ pages, social media, and emails about policies.

12. Provide Flexible Payment on Delivery

Some customers reject COD because of no cash or lack of payment options.

It has a simple solution - allow UPI/QR-based digital payments at delivery. This way, even if the customer does not have cash/change, they can pay conveniently.

13. Token Payments While Ordering

If you experience high RTO rate, you can enable partial payment collection before dispatch (token advance). This will ensure that the customer don’t cancel their orders.

Final Thoughts on How to Reduce RTO Charges

Reducing RTO is not about a single hack, it’s about combining tech, logistics, customer experience, and smart payments. Brands that implement these strategies not only protect margins but also boost customer satisfaction and repeat purchases.

8 out of 10 major brands trust Snapmint to reduce their RTO.

FAQs on RTO reduction