How cash on delivery works
The customer places an order online and pays nothing at that moment. The parcel goes to a courier, the courier collects the money at the door, and the shop is paid later when the courier remits what was collected, minus a fee. Until the money changes hands the order is a promise in words only, and that is the whole difference between this and paying at checkout.
In practice it puts three costs on the shop that a prepaid order does not: shipping goods that may come straight back, a delay between the sale and the cash arriving, and a reconciliation job matching what the courier collected against what was ordered.
Why cash on delivery matters
In Nepal and much of South Asia it is not a niche option; for many shoppers it is the default. Card ownership is uneven, online payment failures are common, and buying from an unfamiliar shop feels safer when the money only moves after the goods arrive. Removing the option can remove a large part of your demand with it.
It also changes every number you report. A conversion recorded at checkout is not yet revenue, so ad platforms end up optimising towards orders that may never be paid for, and your reported return on ad spend stays optimistic until deliveries are settled. Any serious view of performance has to reconcile orders placed against orders delivered.
Where cash on delivery goes wrong
Refused deliveries are the main cost. An order placed on impulse, with no money committed, is easy to turn away at the door, and the shop pays both legs of the shipping for nothing. Fake and duplicate orders are easier too, because nothing at all is verified at the point of ordering.
The quieter problem is measurement. If the ad account counts every placed order as a success, bidding drifts towards audiences that order plenty and accept little. Feeding back the delivered order rather than the placed one keeps smart bidding pointed at customers who actually pay.
What to do about it
Confirm before you dispatch. A short call or message that acknowledges the order and asks the customer to confirm it filters out the impulsive and the mistaken very cheaply. Keep a record of refusals by customer and by area, so repeat offenders can be asked to prepay and unprofitable routes can be restricted.
Make prepayment attractive rather than compulsory: a small saving, faster delivery, or simply a payment page that works reliably on a phone. Offer the methods people in your market actually hold, and be honest on the product detail page about charges, delivery time and returns, because most refusals are disappointment rather than fraud. If you are building or rebuilding the shop, decide how this is handled during the ecommerce website build instead of bolting it on afterwards.