A cash on delivery (COD) sale is profitable when its net revenue covers acquisition, merchandise, fulfillment, delivery, collection and its share of unsuccessful-order costs. For CPA businesses operating in Mexico, Colombia and Peru, evaluating only the orders that succeed can overstate profitability. The practical question is: does the campaign generate enough contribution from paid sales to cover the entire operation?
Answering this requires connecting campaign data with delivery outcomes, returns and financial reconciliation.
1. Separate an Order from a Completed Sale
COD allows customers to pay when their order arrives. However, submitted orders, confirmed orders, dispatched parcels and paid deliveries represent different stages.
Cost per acquisition (CPA) also needs a defined event. An affiliate may receive payment for a lead, a confirmed order or a completed sale. Your calculation must reflect the actual agreement.
Track these indicators separately:
- Confirmation rate: confirmed orders divided by submitted orders.
- Dispatch completion rate: delivered and paid orders divided by dispatched orders.
- Acquisition cost per completed sale: total acquisition spending divided by delivered and paid orders.
- Settlement timing: elapsed time between the agreed collection event and remittance.
A delivered order with unresolved collection should remain visible as an exception. Later refunds must also reduce the campaign’s results.
2. Calculate Contribution Before Calling It Profit
Start with:
Campaign contribution = net sales revenue − attributable variable costs.
Net sales revenue should reflect discounts and refunds and exclude taxes collected on behalf of authorities.
Include acquisition spending, product costs, fulfillment, outbound transport, unsuccessful-delivery expenses, collection fees and applicable currency conversion costs. Avoid counting media spending and affiliate payouts twice when they represent alternative acquisition models.
For imported inventory, identify freight, duties and other landed costs already included in product cost. The International Trade Administration’s Incoterms guide explains how shipping terms allocate responsibilities between buyers and sellers; they do not replace a complete cost calculation.
Positive contribution is not final business profit. It must still cover fixed overhead, financing and other expenses outside the model.
3. Include Failed Deliveries Without Writing Off Every Returned Product
A rejected parcel may generate outbound transport, return freight, inspection and repacking costs without producing revenue.
However, a returned product that remains sellable is not automatically a total merchandise loss. Distinguish recoverable inventory from damaged, expired or missing stock.
The IFRS Foundation’s IAS 2 inventory guidance explains the recognition of inventory costs when goods are sold and the treatment of inventory losses and write-downs.
For campaign analysis, assign actual return-handling costs and inventory losses. Track the cash tied up in recoverable stock separately.
4. Model a Complete Campaign
Consider these hypothetical assumptions in US dollars, not Kiki quotations or country benchmarks:
Assumption | Amount |
Dispatched orders | 100 |
Net revenue per completed sale | $100 |
Acquisition spending for the cohort | $1,500 |
Fulfillment, packaging and outbound delivery | $800 |
Other attributable operating costs | $100 |
Product and collection cost per completed sale | $28 |
Additional cost per failed delivery | $6 |
Assume unsuccessful orders return as fully recoverable inventory, with no later refunds. The $28 includes product landed cost and collection fees.
At 70 completed sales:
Net revenue: $7,000
Acquisition and dispatch-related costs: $2,400
Product and collection costs: $1,960
Failed-delivery costs: $180
Campaign contribution: $2,460
That equals $35.14 per completed sale, before fixed overhead and financing.
Compare alternative outcomes:
Delivered and paid orders | Net revenue | Campaign contribution |
40 | $4,000 | $120 |
55 | $5,500 | $1,290 |
70 | $7,000 | $2,460 |
The acquisition budget is identical. Delivery outcomes substantially change the result.
5. Identify Your Break-Even Completion Rate
Using the same assumptions, let d represent the share of dispatched orders delivered and paid.
Expected contribution per dispatch is:
d × ($100 − $28) − $24 − (1 − d) × $6
Setting this to zero gives:
Break-even completion rate = ($24 + $6) ÷ ($100 − $28 + $6) = 38.46%.
With 100 dispatches, at least 39 completed sales would generate positive contribution under this simplified model. More would be needed to cover overhead and financing.
This threshold is specific to the assumptions. Recalculate it when pricing, acquisition costs, destination mix or return losses change.
6. Check Cash Flow Before Scaling
A campaign can generate positive contribution while consuming more cash than the business can fund.
Map when you pay for inventory, acquisition and logistics against when collected funds become available. Confirm settlement schedules, deductions, transfer fees and reconciliation procedures.
Evaluate fulfillment, last-mile delivery and COD services against both your contribution model and cash requirements.
Review completed order cohorts by country, campaign and destination. Allow time for delivery outcomes, returns and settlements to mature before increasing spending. Scale when conservative assumptions leave sufficient contribution and working capital.
Evaluating a COD operation in Mexico, Colombia or Peru? Talk to an international logistics expert at Kiki LATAM to review your logistics costs, delivery process and collection requirements before scaling.
