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Return Rate
The percentage of orders returned by customers, measuring product satisfaction and description accuracy.
Formula
Return Rate = Number of Returns ÷ Number of Orders × 100
Can also calculate by revenue: Revenue Returned ÷ Total Revenue × 100
Definition
What is Return Rate?
Return rate is the percentage of orders that customers send back. It measures product satisfaction, description accuracy, and fulfillment quality. High returns eat into margins and create operational costs.
Return rates vary dramatically by category. Apparel averages 20-30% due to fit issues. Electronics might be 5-10%. Home goods fall somewhere between.
Why Return Rate Matters
Returns are expensive. Beyond refunding the purchase, you pay return shipping, inspection, restocking, and potential inventory write-offs. A product with 30% returns and 40% margin might actually lose money.
Returns also signal product-market fit issues. High returns might indicate misleading product descriptions, quality problems, or incorrect sizing information.
Reducing Return Rate
Improve product descriptions and photos. Add size guides and fit tools. Show customer reviews highlighting fit. Implement quality control. Analyze return reasons to identify patterns. Consider charging for returns on serial returners.
Example
Monthly return analysis:
- Orders shipped: 2,000
- Orders returned: 180
Return Rate = 180 ÷ 2,000 × 100 = 9%
A 9% return rate is average for apparel ecommerce. If higher, investigate sizing issues, product quality, or misleading descriptions.
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