Returns rate is the share of items sold that customers send back, usually shown as a percentage: units returned divided by units sold over the same period. Some businesses measure it by value instead, which shows how much revenue is handed back as refunds.
How returns rate works
The basic formula is units returned ÷ units sold × 100. If a shop sold 2,000 units in March and 260 of them came back, its returns rate for March is 13%. Two refinements make the figure far more useful. First, match each return to the month the item was sold, not the month it arrived back, or a busy December will make January look dreadful. Second, record a reason for every return: wrong size, not as described, arrived damaged, changed mind, or ordered several to choose between.
In the UK the rate is shaped by law as well as by the product. Under the Consumer Contracts Regulations 2013, someone who buys online can cancel for any reason within 14 days of receiving the goods, and then has a further 14 days to send them back. The seller must refund within 14 days of getting the goods back, or of receiving evidence that they have been sent, whichever is sooner, including the standard delivery charge the customer originally paid. Faulty goods are a separate matter, covered by the Consumer Rights Act 2015. So part of any returns rate is a legal right you have to plan for, not a failure to be stamped out.
Why it matters
Every return costs money twice: the refund itself and the handling, which can include return postage, inspection, repackaging and sometimes writing the item off. A product line that looks profitable on sales figures can lose money once its returns are counted.
Returns also distort marketing reports. Google Ads and Meta count a purchase when the order is placed, so return on ad spend is worked out on revenue you may later refund. A campaign selling dresses that are often sent back can look stronger in the ad platform than one selling homeware nobody returns, when the opposite is true for profit. That is why I prefer to judge ecommerce campaigns on revenue after returns wherever the data allows.
A high rate on a single product is also a message about its page. If “not as described” or “smaller than expected” dominates the reasons, the photos, measurements or description are setting the wrong expectation.
Common mistakes
- Tracking one overall figure. The useful view is by product, category, size, channel and campaign.
- Making returns deliberately awkward. It may lower the rate, but it tends to hurt conversion and reviews, and it cannot remove the statutory 14-day right.
- Failing to tell customers about their cancellation right. If you do not give that information, the cancellation period can be extended by up to 12 months.
- Leaving returns out of advertising reports, so budget keeps flowing to the products customers send back.
- Recording no reason codes, which leaves you guessing at the cause.
How to act on it
Start by putting returns in the same report as sales: returns rate and refund value by product and by marketing channel, for the last six to twelve months. Then take the ten products with the highest returned value and read the reasons customers gave.
Most fixes are on the product page: real measurements and a size guide, photos that show scale and true colour, honest descriptions of fabric or finish, and answers to the questions that keep appearing in reviews. That product-page work is part of my ecommerce SEO service, because the pages that set accurate expectations are the same pages that need to answer shoppers’ search questions.
On the advertising side, feed refunds back where the platform allows it. Google Ads supports conversion adjustments that retract or restate the value of purchases after the event. Set your return policy in Google Merchant Center too, so Shopping listings can show it. Where a product’s returns rate stays high after the page has been fixed, lower its ad budget or take it out of Shopping campaigns.