Business
Model how much profit returns erode — lost profit per returned order, reverse shipping, and product value lost, scaled by order volume and return rate.
Results update as you type. No calculate button. All calculations run locally in your browser.
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Erosion counts three parts per return: the profit that order would have kept, the reverse-shipping cost, and the share of product value lost. Avoid double-counting costs already inside the profit figure.
The erosion bar is drawn against profit with no returns, so the share of profit lost is visible.
| Return rate | Profit eroded |
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Orders and per-return costs are held at the values above; only the return rate changes across rows.
Profit erosion = orders × return rate% × (profit per order + reverse shipping + returned value × loss%). Returned orders = orders × return rate%.
Orders 3,000, return rate 12%, profit per order $45, reverse shipping $18, returned value $120, loss 25%: returned orders = 3,000 × 0.12 = 360, erosion per return = $45 + $18 + $120 × 0.25 = $93, and total erosion = 360 × $93 = $33,480.
Includes foregone profit, reverse shipping, and product loss under your assumptions. Restocking fees recovered, resold returned stock, and fixed warehousing costs are not modeled. If your profit-per-order figure already nets off shipping or expected returns, adjust it first to avoid double-counting.
Profit erosion = orders × return rate% × (profit per order + reverse shipping + returned value × loss%). Each return costs the profit it would have kept, plus shipping it back, plus the share of product value written off.
The share of a returned product's value that cannot be recovered — damage, missing parts, or unsellable condition. A 25% loss on a $120 item is $30 per return.
Eroded profit divided by the profit all orders would have earned with no returns. At the example values it is $33,480 ÷ $135,000 = 24.80%.
Only if your profit-per-order figure already deducts reverse shipping. If it does, set reverse shipping to $0 or adjust the profit figure — the FAQ and scope note flag this.
Not modeled: a resold return recovers most of the product value, so the loss percentage for those units should be near zero. Use a blended loss rate across all returns.
The three levers are the return rate, reverse-shipping cost, and product loss rate. The scenario table shows how much each point of return rate costs at your volumes.
Results are estimates only and do not constitute professional advice.