Return rate
Return rate is the share of parcels that came back to the merchant unpaid out of all parcels shipped in the same period. This includes customer rejection at the door, inability to reach the customer, and storage-period expiry at the depot. Every returned parcel costs two-way shipping with zero revenue.
Also calledreturned parcels rateparcel return ratereturn percentage
The formula
Return rate = (Returned parcels ÷ Shipped parcels) × 100
- Numerator—Returned parcels: parcels that came back to the merchant unpaid, whatever the reason.
- Denominator—Shipped parcels: every parcel that actually left for the delivery company in that same period.
- Same denominator: Return rate + Delivery rate = 100% (excluding parcels still in transit).
Worked example
The true cost of returns in Morocco
- 1Shipped parcels: 140. Returned: 42.
- 2Return rate: 42 ÷ 140 = 0.30 → 30%.
- 3Delivered: 98, or delivery rate 70%, total 100%.
- 4Cost per returned parcel: 22 MAD forward + 12 MAD return = 34 MAD.
- 5Total return cost: 42 × 34 = 1,428 MAD.
- 6Burden per delivered order: 1,428 ÷ 98 = 14.6 MAD.
Takeaway: Returns aren't a separate line item—they're a 14.6-MAD tax that comes out of the profit of every successful order. Subtract them from your margin before you call a product profitable.
What it means in practice
Spread return cost over delivered orders, not shipped parcels, because only delivered orders generate revenue to deduct it from. Dividing by shipped parcels gives a smaller number that looks manageable and hides the fact that every successful order carries the entire cost of every failed parcel.
The most treatable cause of returns is unmet expectations: exaggerated photos, unspecified sizes, colors that differ from ads, or a final price mentioned only at the door. State specs, price, and delivery fees clearly on your landing page before the order form.
Inspect each returned parcel when it arrives and get it back to inventory in resalable condition. Returned parcels left in a corner become dead inventory and a double loss: shipping paid and product value frozen with no second sale.
Common mistakes
- Mixing up the denominator: dividing returned parcels by forms submitted instead of parcels shipped, which makes your ratio look much better than it is.
- Counting only outbound shipping and forgetting return fees, which understates return loss by more than half.
- Spreading return cost over shipped parcels instead of delivered parcels, which makes your margin look wider than it really is.
- Treating returns as purely a delivery company problem when a large chunk is created by your landing page and confirmation calls.
Questions and answers
What's the difference between return rate and confirmation rate?
An unconfirmed order never left your warehouse, so it only costs ad spend. A returned parcel shipped out, got rejected, and came back, so it costs ads plus packaging plus two-way shipping. The first is measured on incoming orders before shipping; the second on shipped parcels after.
How do I lower my return rate?
State the final price, delivery fees, and estimated delivery time before the form, re-confirm the address and total in your confirmation call, and send a message before the parcel ships and another on delivery day. Shorten delivery time as much as possible: a long wait creates a buyer who changed their mind.
Should I bake return costs into my product price?
Yes, explicitly. Calculate total return cost for the month, divide by delivered orders, and add the result to your cost per order before pricing. Anyone pricing assuming full delivery is selling at a phantom margin that evaporates the first time you look at a payment report.
Does return rate vary by region?
Usually yes, and significantly. Remote areas mean longer delivery time and higher rejection odds. Measure your return rate by region or province separately, then address the worst ones with higher shipping fees, a different delivery partner, or exclusion from your ad targeting.