Reducing RTO in D2C Businesses: Challenges & Solutions

Reducing RTO in D2C Businesses: Challenges & Solutions (Including Buy Now, Pay Later - BNPL)
Introduction
Running a successful D2C (Direct-to-Consumer) business in India comes with its own set of challenges, and Return to Origin (RTO) is one of the biggest headaches. High RTO rates can lead to revenue losses, increased logistics costs, and cash flow disruptions. A significant reason behind high RTO rates is the preference for Cash on Delivery (COD) orders, which often result in cancellations, refusals, and fraudulent orders.

To tackle this, D2C brands need a multi-faceted approach, including reducing COD dependency, fraud detection, faster deliveries, and implementing alternative payment options like Buy Now, Pay Later (BNPL). Let’s explore the key challenges of RTO and how to effectively reduce it.

 
Challenges with RTO in D2C Businesses

1. High COD Orders & Non-Committed Customers
India has a high preference for Cash on Delivery (COD), leading to 20-40% RTO rates, whereas prepaid orders have an under 5% RTO rate. Many COD customers refuse orders due to impulse buying, lack of funds, or change of mind.

2. Fake Orders & Fraudulent Buyers
Fraudulent buyers place orders using fake addresses or numbers, leading to undelivered shipments and return losses. Some customers also misuse easy return policies.

3. Incorrect Addresses & Failed Deliveries
Incomplete or incorrect addresses lead to delivery failures and unnecessary logistics costs. Many customers also provide non-serviceable pin codes.

4. Long Delivery Times & Customer Unavailability
Delays in delivery reduce excitement, leading to order refusals upon arrival. Many customers are also unavailable when delivery attempts are made.

5. Price Drops on Marketplaces (Amazon, Flipkart, Blinkit, Zepto)
Customers compare prices across multiple platforms and reject D2C orders if the same product is available at a lower price on marketplaces.

6. Return Abuse & Free Product Fraud
Some customers misuse return policies by ordering multiple sizes/colors and returning most of them. Others attempt fraudulent claims to receive free products.

7. High Logistics & Reverse Shipping Costs
RTO results in double shipping costs (forward + return shipping), along with packaging losses and inventory blockage.

8. No RTO Prevention System
Many brands lack automated fraud detection tools to identify and block high-risk orders before shipping.

 
Solutions to Reduce RTO in D2C Business

1. Reduce COD Orders & Promote Prepaid Payments
✅ Offer Prepaid Payment Incentives

Provide discounts or cashback for prepaid orders.
Example: "Get ₹50 off on prepaid payments!"
✅ Enable Partial COD Payments

Charge a small advance fee (₹50-₹100) on COD orders to filter out fake orders.
Example: "Pay ₹50 now, rest on delivery!"
✅ Disable COD for High-Risk Pin Codes

Blacklist areas with a history of high RTO rates.
 
2. Implement "Buy Now, Pay Later" (BNPL) to Reduce RTO
✅ Enable BNPL Payment Options
Integrate Simpl, LazyPay, ZestMoney, Amazon Pay Later, Paytm Postpaid, Mobikwik ZIP at checkout. BNPL allows customers to order without immediate payment, reducing COD dependency.

✅ Why BNPL Helps Reduce RTO?

Better than COD – Customers commit to payment later, reducing fraud.
Increases Conversions – Buyers with limited funds can purchase immediately.
Reduces Order Refusal – Customers feel financially obligated to accept delivery.
Lower Risk for Brands – BNPL providers handle payment recovery, reducing losses.
✅ How to Promote BNPL?

Highlight "Buy Now, Pay Later" badges on product pages.
Offer zero-cost EMI options for high-ticket items.

Make BNPL the default payment option at checkout.
 
3. Verify Orders & Detect Fraud
✅ Enable OTP Verification for COD Orders

Customers must enter an OTP before confirming their COD order to filter out fake buyers.
✅ Use AI-Based RTO Prediction Tools

Implement GoKwik, Razorpay Thirdwatch, Shiprocket X to detect risky COD orders.
✅ Blacklist Fraud Customers

Maintain a database of repeat RTO customers and block COD for them.
✅ Confirm High-Value COD Orders Manually

Use WhatsApp or IVR calls to confirm large COD orders.
 
4. Improve Delivery Speed & Reduce Order Rejections
✅ Use Multiple Warehouses & Logistics Partners

Partner with Delhivery, BlueDart, Ecom Express, XpressBees, and Shiprocket for faster deliveries.
✅ Enable Real-Time Delivery Tracking via WhatsApp/SMS

Keep customers informed about order progress to reduce refusals.
✅ Offer Flexible Delivery Scheduling

Allow customers to reschedule deliveries instead of rejecting orders.
 
5. Manage Price Drops on Marketplaces (Amazon, Flipkart, Blinkit, Zepto)
✅ Match Marketplace Prices or Offer Exclusive Discounts

Provide exclusive offers or freebies on your D2C website to retain customers.
✅ Send Reminder Messages for COD Orders

Use WhatsApp & SMS reminders to prevent last-minute cancellations.
 
6. Optimize Return Policies & Customer Education
✅ Make Prepaid Refunds Faster

Ensure quick refunds (within 24-48 hours) to encourage prepaid payments.
✅ Limit Free Returns for COD Orders

Introduce a return handling fee for COD orders to discourage casual returns.
✅ Use Videos & Size Guides to Reduce Returns

Detailed product videos and images help set accurate expectations and reduce mismatched orders.

 
Conclusion
RTO is a huge challenge for D2C brands, but implementing BNPL alongside COD reduction strategies, fraud detection tools, and faster deliveries can significantly reduce losses.

Key Actions to Implement Now:

✅ Enable BNPL options (Simpl, LazyPay, ZestMoney, etc.)
✅ Introduce partial COD payments to filter out fake orders
✅ Use AI-based tools (GoKwik, Razorpay Thirdwatch) for RTO risk detection
✅ Enable WhatsApp confirmation for high-value orders
✅ Reduce delivery times using multiple logistics partners

By adopting these strategies, D2C brands can increase conversions, reduce losses, and optimize profitability. 🚀

 
Need Help Implementing BNPL or RTO Reduction Strategies?
If you’re looking to integrate BNPL payments, AI-based RTO detection, or WhatsApp automations for your store, reach out today! Let’s scale your D2C brand while minimizing losses. 🔥