How to use the ecommerce return rate cost calculator
- Enter your orders per month and your average order value.
- Enter the return rate as a share of orders. Use your own count of returned orders divided by all orders.
- Enter what each return costs: the return shipping you pay and the handling labor to receive, inspect and restock it.
- Enter the share of returns you cannot resell and your product cost as a share of the price. Read the monthly and yearly cost and the table of where it comes from.
Formula
Returns = orders x return rate
Shipping and handling = returns x (return shipping + handling)
Goods written off = returns x share not resold x (order value x product cost %)
Total cost = shipping + handling + goods written off
Refunded sales are shown separately and are not added to the cost, because a returned item that is resold recovers its sale. Only the extra money you spend and the goods you lose are counted.
2,000 orders a month at a 12% return rate
With a $60 average order, 12% of 2,000 orders is 240 returns a month. Return shipping of $6.50 each costs $1,560 and handling of $3 each costs $720. If 15% of returns cannot be resold and the goods cost 45% of the price, each lost item costs $27, so 240 x 0.15 x $27 = $972 of goods are written off.
The total is 1,560 + 720 + 972 = $3,252 a month, or $39,024 a year. That is $13.55 per returned order, $1.63 per order shipped and 2.71% of sales. Another $14,400 of sales is refunded each month on top of this.
Where the cost hides
Returns cost more than postage. Someone has to receive the parcel, check it, repackage it and update stock, and some items come back damaged or too late to sell at full price. Putting a number on each part shows which lever matters: cheaper shipping, faster handling, better product pages that set expectations, or stricter conditions for resale.
Using the result
Compare the monthly cost with your profit on a single sale to see how many extra sales it takes to pay for the returns. The Ecommerce Seller Profit Calculator shows margin per product, and the Sell-Through Rate Calculator shows whether stock is moving.
Payment processing fees that are not refunded, restocking fees you charge customers and marketplace return rules vary. If they apply to you, add them to the handling amount so the total reflects your real costs.
Assumptions and limits
- The return rate, order value and costs are the same for every order.
- Return shipping and handling are paid for every return, including those you resell.
- Goods written off are valued at your cost, not the selling price.
- Nothing is uploaded. Calculations run in your browser.
Frequently asked questions
Why is refunded revenue not part of the cost?
If you resell the returned item, you recover the sale. The cost is the extra money you spend handling the return plus the goods you cannot resell. The refund amount is shown so you can still see how much cash goes back to customers.
How do I find my return rate?
Divide the number of returned orders by the number of orders in the same period. Use the same period for both, and count a partial return as one return if the order came back at all.
What if customers pay for return shipping?
Enter 0 for return shipping. If they pay only part of it, enter the part you cover. The handling and written-off goods still cost you.
What does the share I cannot resell mean?
It is the part of returned orders that are damaged, opened, out of season or otherwise not sellable at full price. Those goods are valued at your product cost and counted as a loss.