What does RTO mean?
RTO stands for return to origin. The courier tried to deliver, failed, and sends the parcel back to the warehouse it left. It is not the same as a customer return, and the two need different fixes.
| RTO | Customer return | |
|---|---|---|
| Was it delivered? | No | Yes |
| Who decides? | The delivery fails: refusal, no answer, wrong address | The customer, after receiving it |
| Condition | Usually sealed, as you packed it | Opened, sometimes used |
| Money | COD (cash on delivery): nothing collected. Prepaid: refund due | A refund, exchange or store credit, by your policy |
| Fixed by | Checks before dispatch | Sizing, product pages and a good exchange flow |
Why do parcels go RTO?
- Refused at the door, most often on COD, where saying no costs the customer nothing.
- Customer not reachable: a wrong or switched-off phone number.
- Incomplete address: no house number, no landmark, a wrong pincode.
- Slow delivery, which gives the customer time to lose interest.
- Fake orders, placed with no intention to accept.
What does an RTO cost?
Forward freight, RTO freight, packing, and stock stuck in transit when it could have been sold. A COD order brings in nothing to set against it; a prepaid one also needs a refund.
Seven ways to reduce RTO
- Confirm COD orders before you ship, by WhatsApp, SMS or a call, and cancel the ones that say no. Shopify marks a COD order's payment Pending; Shopify Flow, free on the Basic, Grow, Advanced and Plus plans, can tag each new one so the team sees which wait for confirmation.
- Check the address and phone number: a house number, a landmark, a 10-digit mobile. Fix gaps with the customer before dispatch.
- Make prepaid the better deal, with a small prepaid discount or a COD fee. A COD fee must appear in the price breakup before payment (rule 7(1)(e) of the Consumer Protection (E-Commerce) Rules 2020), and for GST it is part of the value of the goods, taxed at their rate (section 15(2)(c) of the CGST Act).
- Limit COD where the risk is high. Under Settings > Payments > Payment customizations, an app can hide, rename or reorder payment methods at checkout, on the Basic plan or higher. The conditions vary by app: cart value, pincode, first orders.
- Act on failed attempts. Couriers report each one as an NDR (non-delivery report). Call the customer that day and ask for a reattempt.
- Ship fast, with the tracking link and the expected delivery day sent to the customer.
- Read your RTO list monthly, by pincode, product and courier. A pincode that keeps refusing may be better served prepaid only.
When the parcel comes back
- Inspect it, and restock it if it is sealed and undamaged.
- Cancel the order in Shopify, so stock and reports are right.
- Issue a credit note if the invoice was issued before dispatch. Goods returned by the recipient is a ground in section 34 of the CGST Act; the credit note goes in that month's GSTR-1 and takes the sale and its tax out, and must be declared by 30 November after the financial year of the sale, or the annual return's filing date if earlier. The COD and RTO guide has the rest.
- Refund prepaid orders within a reasonable period (rule 4(10) of the E-Commerce Rules).