Business
Profit loss when customers return products
Model how returns dey reduce profit through lost profit, return shipping and product loss.
Add to workspaceYour numbers
Result dey update as you type; no Calculate button dey. All calculation dey run inside your browser.
Profit wey returns reduce
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How the result break down
| Amount |
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We count three parts for each return: profit wey that order for keep, return-shipping cost and the product value wey you lose. No count costs twice if dem already dey inside the profit figure.
Quick look at the result
We draw the erosion bar against profit with no returns, so you fit see the share of profit wey you lose.
Profit reduction for different return rates
| Return rate | Profit wey returns reduce |
|---|
Orders and cost per return stay at the values above; na only return rate dey change from row to row.
Formula
Profit erosion = orders × return rate% × (profit per order + reverse shipping + returned value × loss%). Returned orders = orders × return rate%.
Example wey show the calculation
Orders 3,000, return rate 12%, profit per order $45, reverse shipping $18, returned value $120, loss 25%: orders wey come back = 3,000 × 0.12 = 360, loss per return = $45 + $18 + $120 × 0.25 = $93, and total loss = 360 × $93 = $33,480.
Where e fit work and limits
We include profit wey you for earn, return shipping and product loss, based on your assumptions. We no model restocking fees wey you recover, returned stock wey you resell or fixed warehouse costs. If your profit-per-order figure don already deduct shipping or expected returns, adjust am first so you no count dem twice.
Questions wey people dey ask often
How una calculate am?
Profit erosion = orders × return rate% × (profit per order + reverse shipping + returned value × loss%). Each return cost the profit wey the order for keep, plus shipping am back, plus the share of product value wey you write off.
Wetin the loss percentage mean?
Na the share of returned product value wey you no fit recover because of damage, missing parts or condition wey no allow sale. A 25% loss on $120 item na $30 per return.
Wetin erosion share mean?
Profit wey you lose divided by profit wey all orders for earn if no returns dey. For the example, na $33,480 ÷ $135,000 = 24.80%.
This one count shipping twice?
Na only if your profit-per-order figure don already deduct return shipping. If e don do so, set reverse shipping to $0 or adjust the profit figure — the FAQ and scope note dey point this out.
What about returned products wey I sell again?
We no model resale: return wey you resell dey recover most of the product value, so the loss percentage for those units suppose near zero. Use an average loss rate wey reflect all your returns.
How I fit reduce the profit loss?
The three things wey you fit change na return rate, return-shipping cost and product loss rate. The scenario table dey show how much every percentage point of return rate cost for your order volume.
Other tools wey relate to dis
- Calculator for profit — net profit after all costs
- Calculator for gross margin — profit margin for each dollar of revenue
- Calculator for discount — how discounts dey reduce margin
Results na estimates; dem no replace advice from qualified professional.