The verdict in three sentences
Cash on delivery reassures the customer but destroys margin through 15 to 30 percent returns, cash to handle and locked-up working capital. Prepaid MoMo cuts returns below 5 percent but adds friction that can cost conversion. The 2026 answer is hybrid: a small prepaid deposit to commit the customer, the balance on delivery — you protect margin without breaking the sale.
The real cost of cash on delivery
Cash on delivery looks free to the merchant, but every refused parcel costs round-trip delivery, tied-up cash and a re-shipped product.
| Cost item | Cash on delivery | Prepaid MoMo |
|---|---|---|
| Return rate | 15 - 30 % | < 5 % |
| Cash-handling cost | 1 - 2 % of revenue | 0 % |
| Working capital locked | 5 - 15 days | Immediate |
| Re-delivery fees | 100 % on returns | Rare |
| Checkout friction | Low | Medium |
| Conversion impact | +gross conversion | -5 to 10 % conversion |
A 25 percent return rate on cash on delivery can swallow the entire margin of a low-value category.
The hybrid model that protects margin
Instead of choosing, combine: a prepaid deposit via MoMo to filter non-serious orders, balance on delivery to reassure.
| Model | Prepaid deposit | Balance | Expected returns |
|---|---|---|---|
| All on delivery | 0 % | 100 % delivery | 15 - 30 % |
| Light hybrid | 20 % (delivery fee) | 80 % delivery | 8 - 12 % |
| Strong hybrid | 50 % | 50 % delivery | 5 - 8 % |
| All prepaid | 100 % MoMo | 0 % | < 5 % |
A deposit equal to the delivery fee (20 percent) already eliminates most phantom orders while keeping the customer reassured about the product.
Mini case study
Emeka sells shoes in Lagos, average basket NGN 25,000, 100 orders/month. On all-cash-on-delivery he suffers 25 percent returns: 25 parcels re-shipped at NGN 2,000 round trip, or NGN 50,000 lost, plus tied-up cash. Switching to a 20 percent hybrid deposit, returns fall to 10 percent: only 10 returns, NGN 20,000 in fees. Monthly saving: ~NGN 30,000 and working capital that turns over twice as fast.
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FAQ
Does cash on delivery really lose money?
Yes, once returns exceed 15 percent. Every refused parcel stacks round-trip delivery (1 to 2 percent of revenue in cash handling) and ties up your working capital for 5 to 15 days.
Does mobile money really cut returns?
Yes: prepaid MoMo drops returns below 5 percent, because the customer truly commits. The trade-off is friction that can cost 5 to 10 percent of conversion.
What is a hybrid model?
A small prepaid deposit (often equal to the delivery fee, ~20 percent) with the balance on delivery. It filters non-serious orders while reassuring the customer.
Which model for a low average basket?
The lower the basket, the more cash on delivery destroys margin. Below NGN 10,000 basket, favor a prepaid deposit or full prepayment.
How do I keep conversion while requiring a deposit?
Clearly show the deposit covers delivery and is deductible from the total. Transparency limits conversion loss to just a few points.
Let's talk about your project. We configure the hybrid payment model that protects your margin without breaking sales. WhatsApp +221 77 596 93 33.
Mohamed Bah
Fondateur, Kolonell
Passionate about digital and entrepreneurship in Africa, Mohamed has been helping Sénégalese businesses with their digital transformation since 2020. Founder of Kolonell, he believes every SME deserves a professional and accessible online présence.
