Returns aren't just refunds. Reverse logistics, restocking, damaged inventory — they pile up fast. This calculator shows the true annual cost of your return policy and what you'd save by lowering the rate by even one point.
Total orders in a typical month.
% of orders returned. Apparel: 25-40%. Beauty: 5-15%.
Reverse shipping + restocking labor. Typically $5-12.
Of returned items, % that cannot be resold (damaged, used).
Cost of goods as a % of selling price.
Total logistics + lost product cost over 12 months.
Pieces processed monthly.
Returns cost as a slice of annual revenue.
Annual savings if return rate dropped one full point.
Returns are costing you $18,180 per year — that's 2.5% of revenue. Cut your return rate by just one percentage point (e.g. via better size guides or PDPs) and you save $1,212 annually. That's pure margin — no extra ad spend, no new customers needed.
When a customer returns an item, the obvious cost is the refund — but you'd be paying that anyway since the sale didn't 'stick'. The real costs are the ones that pile up *around* the refund: reverse shipping you absorb, restocking labor (inspection, repackaging, re-photographing), inventory holding cost, and — biggest of all — the % of returned product that can't be resold at full price. That last one alone can wipe out the margin on the next sale.
Most stores estimate cost per return at $4-5 and call it done. That's the carrier-only cost. The real number is closer to $8-12 once you count: prepaid return labels, inbound carrier fees, warehouse restocking labor (typically 10-15 minutes per item), QA/inspection, repackaging, and the cost of any item that has to be discounted, rerouted to outlet, or written off entirely.
Return rates of 25-40% are routine in apparel — driven by sizing, fit, and 'bracketing' (customers ordering multiple sizes intending to return all but one). At those rates, returns frequently cost more than ad spend. Brands that ignore this cost optimize their CAC while bleeding profit out of fulfillment. The fix isn't always 'reduce returns' — sometimes it's 'price returns into the unit economics' and treat the rate as fixed.
Better size guides (with model height/weight + true-to-size feedback), better PDPs (more photos, video, fit reviews), product-page sizing recommendations based on past customer data, and post-purchase exchange flows (so a return becomes an exchange, not a refund). Each of these typically moves the rate 1-3 points. The calculator above shows what that's worth in dollars.
Loose return policies often *increase* conversion enough to offset the higher return cost — that's the whole logic behind '90-day free returns' brands. Whether it works depends on your category margin and your repeat rate. Run the math both ways: lifetime value with high return rate + high conversion vs. low return rate + lower conversion. Most brands haven't actually tested this.
Returns & Exchanges by Ecombone automates the entire flow — exchange-first prompts, smart return rules, restocking workflows — so the cost goes down and the experience goes up.