COD Dropshipping on Shopify: Complete Setup Guide

EasySell
2026-04-12T15:26:20+01:00

Standard dropshipping guides assume your customers pay with a credit card before anything ships. That works fine in the US or Western Europe. But if you're selling in Pakistan, Egypt, Morocco, or anywhere in South Asia and MENA, most of your customers won't enter card details online. They want to pay cash when the product arrives at their door.

COD dropshipping on Shopify follows a different playbook. You pay your supplier upfront, but you don't collect cash until the courier delivers — sometimes 7 to 14 days later. Nearly 26% of COD shipments come back as returns (compared to under 2% for prepaid orders), according to Unicommerce's 2025 logistics report. Every returned order costs you the supplier payment, forward shipping, and return shipping. Get the setup wrong, and your margins disappear before you've made your first hundred sales.

How COD Dropshipping Differs From Prepaid Dropshipping

In a prepaid dropshipping model, money flows in a clean sequence: customer pays, you forward the order to your supplier, supplier ships. Your risk is low because the customer already committed with their wallet.

COD dropshipping flips that. You pay the supplier before the customer pays you. The customer's "commitment" is just a form submission — no money changes hands until the courier knocks on their door. This creates three problems prepaid dropshippers never deal with:

Cash flow gap: You fund inventory and shipping costs 7-14 days before you collect payment. Scale to 50 orders a day and you're floating thousands of dollars.

Higher RTO rates: COD orders see 20-30% return-to-origin rates across emerging markets. Customers change their mind, give fake addresses, or simply aren't home. Each failed delivery costs you triple — supplier cost, forward shipping, return shipping.

Fraud volume: Without a payment barrier at checkout, fake orders spike. Competitors, bored teenagers, and serial returners can submit orders with zero friction.

None of these are reasons to avoid COD dropshipping. They're reasons to set it up correctly from the start.

Choose a Supplier Who Understands COD Markets

Your supplier choice matters more in COD dropshipping than in any other model. You need a supplier who can ship fast — because RTO rates climb from 22% to 35% when delivery takes more than 5 days, according to Unicommerce data.

Look for these specifics:

Local or regional warehouses. A supplier shipping from China to Pakistan adds 15-20 days of transit. A supplier with stock in Dubai, Karachi, or Cairo cuts that to 2-5 days. Faster delivery means fewer cancellations.

Courier integration. Your supplier should work with local couriers (Leopards, TCS, Aramex, Bosta) who handle COD collection. Ask how they remit cash — weekly or biweekly — and what their reconciliation process looks like.

Return handling. Clarify who absorbs the cost of returned inventory. Some suppliers accept returns and restock; others charge you a restocking fee or refuse returns entirely.

If you're starting with AliExpress-style suppliers, factor in that your cash flow gap stretches to 3-4 weeks. That's manageable at 5 orders a day. At 50, you'll need working capital you might not have.

Set Up Your Shopify Store for COD Orders

Shopify doesn't have a native "cash on delivery" payment method for most countries. You'll need to configure it manually or use an app that adds COD as a payment option.

The basic setup:

1. Enable manual payment methods. In Shopify Settings → Payments → Manual payment methods, add "Cash on Delivery" as a custom payment option. This lets customers complete checkout without entering card details.

2. Set up a COD-optimized order form. The default Shopify checkout flow is designed for credit card buyers. For COD markets, you want a shorter form that collects name, phone number, address, and order details on a single page. Apps like EasySell replace the multi-step checkout with a streamlined COD order form that includes phone verification and address validation built in.

3. Add phone number as a required field. In COD markets, phone number is the primary identifier — not email. Your courier needs it for delivery coordination, and you need it for order verification.

4. Configure shipping zones. Set up shipping rates for the specific countries and regions you're targeting. If you're dropshipping with a local supplier, their shipping rates should be your baseline.

How to Verify COD Dropshipping Orders Before They Ship

Order verification is the single most important step in COD dropshipping — and the one most new merchants skip. Unverified orders that become failed deliveries cost you money you'll never recover. Verification alone can cut fake orders by 40-60%.

Order verification options, ranked by effectiveness:

OTP (one-time password) verification: Send a code via SMS or WhatsApp when the customer submits the order. They must enter the code to confirm. This alone can cut fake orders by 40-60% because it proves the phone number is real and the person is actively placing the order.

WhatsApp confirmation: Send an automated WhatsApp message with the order summary and ask the customer to reply "confirm." Response rates on WhatsApp in MENA and South Asia run 70-80%, far higher than email or SMS.

Phone call verification: For high-value orders, a quick call to confirm the order details and delivery address. More expensive per order, but effective for products above $50.

Don't forward any order to your supplier until it's verified. This one rule will save you more money than any other optimization in this guide.

Manage the Cash Flow Gap

The math on COD dropshipping cash flow is unforgiving. Say you're selling a product for $25, paying your supplier $10, and spending $3 on shipping. Your gross margin is $12 per delivered order. But you pay the supplier and shipping cost on day 1, and you collect the $25 from the courier on day 10-14.

At 20 orders per day, you're floating $260/day in costs. Over a 14-day collection cycle, that's $3,640 in working capital tied up at any given time. Factor in a 25% RTO rate — 5 of those 20 daily orders come back — and you lose $65/day on failed deliveries ($13 per failed order in supplier + shipping costs with no revenue).

Three ways to manage this:

Start small and reinvest. Begin with 5-10 orders per day. Use the first 30 days to measure your actual RTO rate and collection cycle. Don't scale ad spend until you know your real numbers.

Offer partial prepayment. Let customers pay a small deposit (10-20% of order value) online and the rest on delivery. This filters out impulse orders and recovers some cost if the order is returned. Even a small deposit drops RTO rates significantly.

Negotiate courier remittance terms. Some couriers remit collected cash weekly; others take 15-20 days. The difference between a 7-day and 14-day remittance cycle is thousands of dollars in working capital at scale.

Reduce RTO Rates With These 5 Tactics

RTO is the profit killer in COD dropshipping. A 25% RTO rate means one in four orders you pay to ship comes back with zero revenue. These five tactics — proven to cut RTO rates by up to 40% — bring that number down:

1. Verify every order before shipping. OTP or WhatsApp confirmation. Non-negotiable. This alone filters out the majority of fake and impulse orders.

2. Ship fast. Orders delivered within 1-2 days see a 22% RTO rate. Orders that take more than 5 days hit 35%. Speed is the single biggest factor in whether a COD customer actually accepts delivery.

3. Send delivery updates. WhatsApp messages at each stage — order confirmed, shipped, out for delivery. Customers who know their package is coming are more likely to be home and ready to pay.

4. Block repeat offenders. Track phone numbers and addresses that have refused delivery before. Build a blocklist and automatically reject orders from those contacts. Most COD fraud comes from a small number of repeat offenders.

5. Add a COD fee. A small surcharge ($0.50-$2) for COD orders does two things: it slightly increases the customer's commitment, and it offsets some of the cost when orders do come back.

Connect Your Supplier to Your Shopify Store

Manual order forwarding — copying order details from Shopify and sending them to your supplier via WhatsApp or email — works for your first 10 orders. It breaks at 30.

Automation options depend on your supplier type:

AliExpress/CJ Dropshipping suppliers: Apps like DSers or CJ Dropshipping connect directly to Shopify and auto-forward orders. But most don't handle COD payment status, so you'll need to manually hold orders until they're verified.

Local suppliers: Most local suppliers in MENA and South Asia don't use automated platforms. You'll likely work with Google Sheets or WhatsApp for order forwarding. Set up a Shopify Flow automation that exports verified orders to a Google Sheet your supplier checks daily.

Fulfillment centers: If your supplier ships through a fulfillment center with API access, connect it to Shopify for automatic order routing and tracking updates.

Whatever method you use, build in a verification checkpoint. No order goes to your supplier until a human or automated system confirms it's legitimate.

Track What Actually Matters

COD dropshipping has different KPIs than prepaid ecommerce. These are the four numbers that determine whether your store is profitable:

RTO rate: Track weekly. If it's above 25%, your verification process or shipping speed needs work.

Cash collection cycle: Days between paying your supplier and receiving the courier's cash remittance. Shorter is better. Anything over 14 days at scale will strain your working capital.

Cost per delivered order: Not cost per order — cost per delivered order. Include the cost of failed deliveries in this number. If your product costs $10 from the supplier and your RTO rate is 25%, your real cost per delivered order is $13.33.

Verification-to-delivery rate: What percentage of verified orders actually get delivered? This tells you whether the problem is fake orders (pre-verification) or delivery failures (post-verification).

Check these numbers every week. COD dropshipping margins are thin enough that a 5% shift in RTO rate can turn a profitable store into a losing one.

Start With One Market, One Supplier, One Product

The biggest mistake new COD dropshippers make is launching in five countries simultaneously with twenty products. Every market has different courier options, different remittance cycles, different customer behavior, and different RTO patterns.

Pick one market where you understand the delivery infrastructure. Find one reliable supplier who ships fast within that market. Choose one product category with proven demand. Get your verification process, cash flow cycle, and RTO rate dialed in. Then expand.

COD dropshipping on Shopify is viable and growing — the global dropshipping market hit $351 billion in 2026, and COD remains the dominant payment method across South Asia, MENA, and North Africa. The merchants who profit from it aren't the ones with the biggest ad budgets. They're the ones who built their operations to handle the cash flow gap and RTO risk before they scaled.