Retail and consumer goods
Return rate
The share of items sold that customers send back.
Last reviewedWhat does Return rate mean?
Return rate is the share of items, or of sales value, that customers return. It is much higher online than in stores, and highest in fashion, where people often order several sizes and keep one. Each return costs reverse shipping, handling and checking, and some items cannot be sold again at full price. Example: an online fashion store ships 100 items at 50 each and 30 come back, so the return rate is 30 percent and net sales are 3,500. If each return costs 8 to process, returns cost 240, about 7 percent of net sales. Free returns raise conversion but also raise return rates.
Where does it come up in case interview prep?
- How e-commerce and marketplaces make moneyLesson in E-commerce, marketplaces, and quick commerce
- Order economics: last mile, dark stores, and returnsLesson in E-commerce, marketplaces, and quick commerce
- E-commerce players, trends, and how to crack the casesLesson in E-commerce, marketplaces, and quick commerce
Related terms
- Gross merchandise value (GMV)The total value of goods or services sold through a platform.
- AOV (average order value)Revenue divided by the number of orders.
- Contribution marginRevenue minus all variable costs, as an amount or a percent of revenue.
- Last mileThe final step of delivery, from a local hub to the customer's door.
- Like-for-like sales (LFL)Sales growth from stores open in both periods, leaving out new and closed stores.
- Sales per square metreStore sales divided by selling space: how productive the space is.
- Shrink (shrinkage)Inventory lost to theft, damage, errors or spoilage.
- MarkdownA lasting price cut to clear stock that is not selling.