Average Order Value (AOV)
Also known as: AOV
Average Order Value (AOV) is the mean revenue per order across a merchant\'s sales over a defined period. In COD e-commerce, AOV is a critical input to unit economics because each RTO event consumes a roughly fixed cost regardless of the order value.
Why AOV matters more in COD than in prepaid e-commerce: every failed COD order costs roughly the same in absolute terms (packaging + forward courier + reverse courier + handling, typically $4-8 USD in LATAM). When AOV is low, RTO consumes a larger share of the gross margin per attempted order.
The practical implication: low-AOV merchants need lower RTO rates to break even. A merchant with $20 AOV running 25% RTO is usually unprofitable; the same merchant at $60 AOV with 15% RTO is comfortable. Pick products with the right AOV-to-RTO ratio, or build the SOPs that get RTO low enough to make low-AOV work.
Return to Origin (RTO)
Return to Origin (RTO) is the percentage of cash-on-delivery orders that never reach the customer or are refused at the doorstep — the package returns to the warehouse instead of being delivered. RTO is the single largest cost driver in COD e-commerce.
Cash on Delivery (COD)
Cash on delivery (COD) is a payment method where customers pay for products at the time of delivery rather than during online checkout. The carrier collects cash from the customer and remits it to the merchant through settlement cycles.
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