Returns rate is the proportion of orders or units returned over a period, measured by units, by order or by value. The rate itself is nearly useless without the reasons behind it, because the same percentage can mean a healthy generous policy or a specific product describing itself inaccurately.
In more detail
The instinct on seeing a high figure is to tighten the returns policy, which is usually the wrong response. A generous policy drives conversion; the returns it causes are a cost of that, not a fault.
The number worth acting on is concentration. Returns spread evenly across the catalogue are a policy characteristic. Returns concentrated in three products are a product-page problem, and fixing a description or a sizing chart is cheaper and better than tightening terms for everybody.
Measure by value as well as by unit. A store with a low unit returns rate concentrated in its highest-value items has a bigger problem than the headline suggests.
How it is calculated
Returns rate = (returned units ÷ units sold) × 100
Worked example
You sold 1,200 units last month and 84 came back, a 7 per cent returns rate.
Split by reason it looks different. If 60 of the 84 are one shirt returned for sizing, your store does not have a 7 per cent returns problem, it has one product with a wrong size guide and an otherwise 2 per cent rate.
The figures above are invented to make the arithmetic legible. They are not a benchmark and should not be cited as one.
Where people get it wrong
- Tightening the policy in response to the rate without checking the reasons.
- Measuring by unit only, which hides concentration in high-value lines.
- Not separating faulty from unwanted, which are completely different problems.
- Comparing your rate to a category benchmark instead of to your own trend.
Common questions
How do I calculate returns rate?
Returned units divided by units sold in the same period, times 100. Also calculate it by value, because concentration in expensive lines is invisible in a unit-based figure.
Is a high returns rate always bad?
No. A generous returns policy drives conversion and the returns are part of that cost. What matters is whether returns are spread across the catalogue or concentrated in a few products.
What is the most common fixable cause?
Product page information: inaccurate description, missing or wrong sizing guidance, or images that misrepresent colour or scale. These are cheap to fix and keep generating returns until somebody does.