How do I build a cash-on-delivery fee into my selling price?
Enter the COD fee from your courier's invoice in fixed fees. A product costing 45 with shipping of 20 and a 25% margin is priced at 86.67 for a prepaid order, and needs 100 once a COD fee of 10 is added.
Why it is a fixed fee, not a percentage
Couriers usually charge for cash collection as a set amount per parcel rather than a share of the order value. Check your own invoice: if the fee is a flat amount it belongs in fixed fees, and if it is a percentage of the amount collected it belongs in the percentage field. Do not guess, because the difference changes the price.
Work out both prices
- In the Selling-price calculator, enter product cost, shipping and margin without the COD fee, and note the price.
- Add the COD fee to fixed fees and note the new price.
- Compare the two. The difference is what COD orders cost you if you want to keep the same margin.
Prepaid: cost 45, shipping 20, margin 25%: price 86.67, profit 21.67.
Cash on delivery with a fee of 10: price 100, profit 25.
A COD order sold at 86.67: profit only 11.67, a margin of about 13.5% instead of 25%.
Three ways to handle the gap
- One price for everyone that covers COD: you price at 100, so prepaid buyers pay more than they need to, and your price may look higher than competitors'.
- A separate charge on COD orders only: 86.67 for everyone, with an extra charge for those who choose COD. To keep a 25% margin on that order the charge needs to lift the total to 100, so 13.33 rather than 10, because margin applies to the larger amount too.
- A weighted average: if about half your orders are COD, the average fee per order is 5. Put 5 in fixed fees and the price comes out at 93.33.
Mind the limits of the average
The average only works while the share of COD orders stays close to what you assumed. At 93.33 a prepaid order earns 28.33, while a COD order earns 18.33, a margin of about 19.6%. If COD rises in a particular season, your average margin slips without you noticing. Check the share monthly and solve again when it moves. To review the margin of a real order after the fee, use the Profit margin calculator.
Common questions
Is VAT due on the COD charge?
The tool works with pre-tax prices. If you charge tax on the extra fee, work it out afterwards at the rate you enter.
What about orders refused at the door?
That is a different cost: a return shipment, not a collection fee. Estimate its average per order and add it to fixed fees if you want the price to carry it.