How do I factor RTO, returns, COD, shipping and discounts into my true margin?
The short answer
These are the silent margin killers that live inside CM2, and in India they're brutal: COD orders can cost 50-100% more to serve, RTO on COD often runs 20-35%, and each returned order burns forward + reverse shipping, repackaging, blocked capital and wasted CAC. The honest way to model it is to spread total RTO/return cost across every order shipped, not just the ones that came back, and to net every discount and coupon off revenue before you calculate CM1. Do that and your real contribution margin usually drops several points below what your gross margin promised.
A quick summary to orient you. The real value is below: the resources worth your time, from people who've actually done it, not us.
Here are the resources
Hand-picked from around the web, each with a note on why it earns your time. India-specific ones carry a badge.
Why we picked it
A data-backed benchmark from 410M+ shipments across 6,000+ brands, the closest thing to an industry yardstick for where your RTO and returns should sit versus peers, including the stark COD-vs-prepaid return gap.
Why we picked it
A reference list broader than just CM1/CM2, useful once you've got the basics down and want to know what an actual CFO would track for a scaling Indian D2C brand.
Why we picked it
The best worked-example explainer for actually doing the math: Net Sales minus product cost, shipping, payment fees, fulfilment and allocated ad spend, computed across orders and SKUs. It shows you the arithmetic rather than just defining the term.
Why we picked it
The most concrete India-specific breakdown of what a returned COD order actually costs - forward + reverse shipping, packaging, product damage, blocked capital and wasted CAC - with a formula and calculator. RTO is the biggest hidden line in Indian CM2, and this is the resource that makes it real.
