The Real Economics of Dropshipping in India: How Reverse Shipments Eat Your Margins

When most people hear “dropshipping in India,” they imagine selling products online with no inventory, no warehouse, and making easy profits.

The truth? In India’s COD-heavy e-commerce market, your margins can evaporate faster than you think — not just from ads and GST, but from a silent killer: reverse shipments caused by NDR (Non-Delivery Rate).

Let’s break down the numbers step-by-step.

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Why Reverse Shipments Matter More in India

In prepaid orders, a product is shipped, delivered, and you get paid — simple.

In COD orders, 25% or more of packages in many niches don’t get delivered. This is your NDR rate. Every failed COD delivery leads to a reverse shipment (the courier returns the package to you or your supplier).

You lose money on these orders because:

• You already paid forward shipping (₹60–₹90 per parcel).
• You pay reverse shipping (₹40–₹70 per parcel, depending on the courier).
• The packaging is wasted (box, bubble wrap, branding).
• You spent on ads to acquire the customer.
• The returned product may be damaged or unsellable.

If your NDR is 25%, your profit on COD orders can quickly turn negative.

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Assumptions for the Breakdown

• Selling Price (MRP): ₹999
• GST Rate: 18% (general category product)
• Product Cost from Supplier (incl. GST): ₹350
• Forward Shipping (per order): ₹70
• Reverse Shipping (for returns): ₹50
• COD Fee: ₹40/order
• Ad Spend (Customer Acquisition): ₹250/order
• Packaging Cost: ₹20/order
• Helper Cost: ₹15/order
• Payment Gateway Fee (Prepaid): 2% = ₹20/order
• Average NDR (COD): 25%

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Detailed Profit Impact Table

Metric	Prepaid Orders	COD Orders (No NDR)	COD Orders (25% NDR)
Sale Price (incl. GST)	₹999	₹999	₹999
GST Output Tax	-₹152.54	-₹152.54	-₹152.54
Net Revenue	₹846.46	₹846.46	₹846.46
Product Cost	-₹350	-₹350	-₹350
Forward Shipping	-₹70	-₹70	-₹70
Reverse Shipping	₹0	₹0	-₹50
Packaging	-₹20	-₹20	-₹20
Helper	-₹15	-₹15	-₹15
COD Fee	₹0	-₹40	-₹40
Ad Cost	-₹250	-₹250	-₹250
NDR Cost Allocation	₹0	₹0	-₹181.67
Payment Gateway / COD Fee	-₹20	-₹40	-₹40
Net Profit/Order	₹121.46	₹61.46	-₹170.21
Net Margin %	12.15%	6.15%	Negative

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How the Reverse Shipment Calculation Works

1. NDR Volume Impact:
   If you have 100 COD orders and NDR = 25%, then 25 orders are returned.

2. Loss Per Returned Order:
   Forward shipping (₹70) + Reverse shipping (₹50) = ₹120 lost logistics cost per failed order.

3. Total Reverse Logistics Loss:
   ₹120 × 25 = ₹3,000

4. Ad Loss on NDR Orders:
   ₹250 ad spend × 25 = ₹6,250 wasted.

5. Total NDR Loss:
   Logistics loss ₹3,000 + Ad loss ₹6,250 = ₹9,250.

6. Loss Spread Over Successful COD Orders:
   You have 75 delivered COD orders left → ₹9,250 ÷ 75 = ₹123.33 NDR cost per successful COD order.

In our table, we used a slightly higher allocation (₹181.67) to factor in packaging waste and damaged goods.

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Why NDR-Driven Reverse Shipments Are Dangerous

• Even with positive margins on prepaid orders, your COD orders with high NDR can go negative.
• Reverse shipments don’t just reduce profit — they cause net loss.
• Most new sellers ignore this because Shopify dashboards show revenue, not real profit after returns.

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How to Reduce NDR and Reverse Shipments

1. Prepaid Incentives: ₹50–₹100 discount for prepaid orders.
2. COD Confirmation: Call or WhatsApp customers before shipping.
3. Fast Shipping: Reduce delivery time to 2–4 days to prevent order cancellations.
4. Address Validation: Use pin-code checkers and auto-fill to avoid failed deliveries.
5. Blacklist Repeat Offenders: Keep track of customers who frequently refuse delivery.

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The Pricing Formula to Stay Profitable

If you want a target sale price based on your product’s inhousing cost and all operational expenses, here’s the formula:

Sale Price (incl. GST) =
(Product Cost + Forward Shipping + Reverse Shipping Impact + Packaging + Helper + COD/PG Charges + Ad Cost) ÷ (1 - Target Margin%) × (1 + GST Rate)

Example:
Product Cost = ₹350
Forward Shipping = ₹70
Reverse Shipping Impact (spread) = ₹30
Packaging = ₹20
Helper = ₹15
COD Fee = ₹40
Ad Cost = ₹250
Target Margin = 15%
GST = 18%

Sale Price =
(350 + 70 + 30 + 20 + 15 + 40 + 250) ÷ (1 - 0.15) × 1.18
= ₹775 ÷ 0.85 × 1.18
= ₹1070.59

So to make 15% profit, you’d need to sell at ₹1,070 MRP — not ₹999.

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Final Word

Dropshipping in India can be profitable, but only if you know your true costs.
Reverse shipments from COD NDR are a silent drain that can turn your most popular products into loss-makers.

The winning formula is simple:
Track NDR weekly → Adjust pricing → Push prepaid orders → Optimize ad spend.
Without that, the Indian logistics reality will eat your margins alive.