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Return rate cost calculator

A return costs more than the refund. Enter your sales, return rate and costs to see what returns take each month and each year.

Gross sales without VAT, before refunds.

Used to count returned orders.

Share of orders sent back for a refund.

Sales minus product cost, as a % of sales.

Return postage you pay, outbound shipping you do not get back, inspection, repacking, support time.

Damaged, used or out of season. Empty means every return goes back into stock.

Result

Fill in sales per month, before returns, average order value, return rate, gross margin, cost to handle one return to see the result.

How it works

A refund gives back the sale, and with it the gross profit you had counted on. On top of that you pay to handle the return: postage, inspection, repacking, support. And some returned items never sell again. The calculator adds the three, per month and per year, and shows the share of your gross profit they take.

returned orders = sales
  ÷ order value × return rate

gross profit lost = sales
  × return rate × gross margin
handling = returned orders
  × cost per return
stock written off = sales × return rate
  × (1 - gross margin) × unsellable share

cost of returns = the three added
share of gross profit =
  cost of returns ÷ (sales × margin)

What each term means

Sales before returns
Gross sales for the month, without VAT, before any refunds.
Return rate
The share of orders sent back for a refund.
Gross margin
Sales minus product cost, as a share of sales. See profit margin.
Cost to handle one return
Return postage you pay, outbound shipping you do not charge back, inspection, repacking and customer service time.
Unsellable share
The share of returns that never sell again: damaged, used or out of season. Left empty, it counts as none.
Rate that erases gross profit
The return rate at which returns would take all of your gross profit, before ads and fixed costs.

What it assumes: a returned order is an average order, and a resold item goes back into stock at its cost. If returned items only sell again at a markdown, count the value they lose in the unsellable share.

Source: Shopify, Ecommerce Returns: Rates and Best Practices (the return rate formula and the direct and indirect costs) (read 26 September 2026).

Worked example

Example numbers, round on purpose, not a real store:

Sales per month, before returns
€50,000
Average order value
€80
Return rate
20%
Gross margin
55%
Cost to handle one return
€12
Share of returns you cannot resell
10%
  1. 1Returned orders: €50,000 ÷ €80 × 20% = 125
  2. 2Gross profit lost: €50,000 × 20% × 55% = €5,500
  3. 3Handling: 125 × €12 = €1,500
  4. 4Stock written off: €10,000 refunded × 45% × 10% = €450
  5. 5Cost of returns: €5,500 + €1,500 + €450 = €7,450 a month, €89,400 a year
  6. 6Share of gross profit: €7,450 ÷ €27,500 = 27.1%

In this example each point of return rate is worth about €372 a month: bringing returns from 20% to 18% would keep about €745 a month.

Frequently asked questions

  • How do I calculate my return rate?
    Divide the orders (or items) returned by the orders (or items) sold over the same period, and multiply by 100. Here the rate is per order, to match the average order value. Use a period long enough for returns to have come back.
  • What does a return really cost?
    Three things. The gross profit on the refunded sale, which you had counted on. The cost of handling it: return postage you pay, outbound shipping you do not get back, inspection, repacking and support time. And the product cost of items that cannot be sold again.
  • Why count lost gross profit and not the whole refund?
    Because the goods come back. If you can resell them at full price, what you lose is the margin on the sale, not its full value. Items you cannot resell lose their product cost too, which is what the unsellable share adds.
  • What is a normal return rate?
    It varies too much by category, price and returns policy for one figure to be useful, and published averages rarely say how they were measured. Compare your rate with your own past months, and by product and return reason, to find where returns come from.
  • How do I lower the cost of returns?
    Fewer returns and cheaper ones. Fewer, with accurate sizing, photos and descriptions, and by finding which products and reasons drive them. Cheaper, by handling returns faster so more items go back on sale at full price, and by checking what each return costs you to process.

In the glossary: profit margin.

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