Returns Margin Lab
Ecommerce Returns Cost Calculator and SKU Prioritization
To estimate total returns cost, multiply the number of returns by the average contribution loss per return. Compare SKUs over shipment cohorts with the same observation window. Investigate the variant with the largest total loss, then check volume and data quality before changing it.
Worked example
| Synthetic variant | Returns | Loss per return | Total loss |
|---|---|---|---|
| A | 20 | US$10 | US$200 |
| B | 8 | US$40 | US$320 |
Investigate B first. It costs US$120 more in total, despite having 12 fewer returns. Next, compare units shipped, fit reasons and the quality of the cost estimates.
How to run the check
- Choose shipment cohorts with comparable time to observe returns.
- Define loss consistently. Include the net refund, return label and handling costs, then deduct recovered value when those inputs apply.
- Leave unknown costs flagged. Use the same accounting basis across variants and avoid double counting inventory or fulfillment costs.
This is a prioritization estimate. Model exchanges, store credit, taxes and outbound costs separately when material. Use aggregate inputs and keep order records private.
When should I compare return rates instead?
Use rates alongside total loss when comparing customer experience or cohorts of different sizes. The loss calculation answers which problem costs more in the chosen period.
Try the free single SKU calculator
Reference: Shopify overview of ecommerce returns