Return Rate Impact Calculator

Calculate how product returns affect net revenue and margin, including return shipping, restocking, and the share of returned goods that cannot be resold at full price.

↩️ Ecommerce📐 Net margin = (kept revenue − COGS − return costs) / gross revenue💼 Business

Gross orders

Average order value

Return rate (%)

Cost of goods (% of price)

Return shipping cost per return

Processing/restocking cost per return

Share of returns resold at full price (%)

Please enter valid values.

Formula & Reference

Variable	Symbol	Formula	Units
Return Rate Impact Calculator	—	Net margin = (kept revenue − COGS − return costs) / gross revenue	percent

Step-by-Step Examples

Example 1

Apparel-Level Returns

5,000 orders, AOV 92, 18% return rate, COGS 40%, shipping 8.50, processing 4.00, 70% resold.

Gross revenue = 460,000, returns = 900 orders
Net revenue = 4,100 × 92 = 377,200
Kept COGS = 4,100 × 36.80 = 150,880
Unsellable = 900 × 0.30 × 36.80 = 9,936
Return handling = 900 × 12.50 = 11,250
Net = 377,200 − 150,880 − 9,936 − 11,250 = 205,134 = 44.59%

✓ 44.59% vs 60.0% without returns

Example 2

Low Return Category

5,000 orders, AOV 92, 3% return rate, COGS 40%, same costs, 90% resold.

Returns = 150 orders
Return handling = 1,875, unsellable = 552
Effective margin lands close to the 60% baseline

✓ Minimal margin erosion

Example 3

High Return, Low Resale

3,000 orders, AOV 120, 30% return rate, COGS 45%, shipping 14, processing 6, only 40% resold.

Returns = 900 orders
Unsellable = 900 × 0.60 × 54 = 29,160
Return handling = 900 × 20 = 18,000
Returns consume a large share of remaining margin

✓ Returns dominate the economics

Real-World Applications

👕

Category Reality

Apparel and footwear routinely see return rates of 20 to 40%, which fundamentally changes the margin maths versus low-return categories.

💸

True Cost of Free Returns

Free returns drive conversion but carry real cost in shipping, processing, and unsellable inventory.

📏

Sizing and Description

Better product information reduces returns, which is usually cheaper than absorbing them.

📊

Pricing Input

Categories with structurally high returns need that cost priced in from the start.

Common Mistakes to Avoid

⚠️

Treating returns as only lost revenue

The order also incurs outbound shipping, return shipping, processing, and often a partial write-down on the goods. The cost exceeds the lost sale.

⚠️

Assuming all returns are resellable at full price

Opened, worn, or damaged goods sell at a discount or not at all. The resale rate materially changes the economics.

⚠️

Ignoring returns when setting prices

In high-return categories, prices set on gross margin without a returns allowance systematically undershoot the required margin.

Frequently Asked Questions

How do returns affect margin? ▾

Through lost revenue on the returned order, return shipping and processing costs, and write-downs on goods that cannot be resold at full price.

What is a typical ecommerce return rate? ▾

It varies enormously — low single digits in some categories, and 20 to 40% in apparel and footwear where fit drives returns.

Should I offer free returns? ▾

Free returns generally lift conversion but cost real money. The right answer depends on whether the conversion gain exceeds the handling cost in your category.

How do I reduce return rates? ▾

Better sizing guidance, more detailed photography and specifications, accurate descriptions, and customer reviews that mention fit all reduce returns.

Should returns be priced into products? ▾

In high-return categories, yes. Setting price on gross margin alone without a returns allowance leaves the actual margin well short of target.