Return Rate - Brief Definition
The return rate, often referred to as the return ratio, measures the percentage of sold items or shipped orders that are sent back by customers.
It is one of the key performance indicators in e-commerce and fulfillment. The return rate helps companies evaluate return volumes, calculate costs more accurately, and identify potential issues with products, product information, or shipping processes.
In short: The return rate shows what percentage of your sales comes back as returns.
Why is the return rate important?
Returns generate additional costs and impact the profitability of an online shop. Every return must be transported, received, inspected, and potentially refurbished before the product can be sold again.
A high return rate can therefore strain margins while tying up warehouse capacity and personnel resources.
The return rate plays a particularly important role in fashion e-commerce. Different sizes, fits, colors, and materials can lead to customers ordering multiple variations and sending back part of the order.
The return rate helps to make such trends visible. However, it should not be viewed in isolation. Only in combination with reasons for return can you identify why products are being returned and which measures make sense.
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How is the return rate measured?
The return rate is typically calculated as the percentage of returned items or orders.
One possible formula at the item level is:
Return rate = Returned items ÷ Sold items × 100
Example: If 200 out of 1,000 sold items are returned, the return rate is 20%.
Alternatively, the return rate can be calculated at the order level. This determines how many orders included at least one returned item.
The following data is typically used for the analysis:
- Orders and sales from the shop or OMS
- Return receipts in the WMS
- Number of returned items
- Standardized return reasons
- Item numbers, sizes, and variants
- Time of order and return
It is important to have a consistent basis for calculation. An item-based return rate is not directly comparable to an order-based return rate.
Furthermore, returns should be chronologically matched to the original sales. Otherwise, returns from the previous month, for example, could distort the current month's rate.
What role do return reason codes play?
The return rate shows how many products are sent back. Return reason codes explain why a return is taking place.
These are standardized details that are recorded when registering or processing a return .
Typical reasons for returns include:
- Item too large or too small
- Fit does not meet expectations
- Color or material differs from expectations
- Product not as expected
- Incorrect item delivered
- Damaged or defective item
- Quality does not meet expectations
- Order arrived too late
Systematic tracking allows brands to identify whether returns are caused by, for example, product features, inaccurate product descriptions or fulfillment errors .
The combination of return rates and reasons for returns provides key insights for product development, marketing, customer service, and logistics.
What is a good return rate?
There is no universally ideal return rate. It depends heavily on the product category, target audience, business model, and purchasing behavior. In fashion e-commerce in particular, returns are a key component of operational planning.
The average return rate in the German online fashion retail sector is cited in various industry publications as being approximately 50% . Statistically speaking, this means that roughly every second item of clothing or pair of shoes purchased online is returned. However, actual figures can vary significantly depending on the survey, product category, and calculation method.
Large fashion platforms also record high return rates. Zalando states that, across all markets served, an average of 50% of ordered items are returned. This figure refers to Zalando and is not a general average for the German fashion market. Source: Zalando
A study by the EHI Retail Institute from 2023 reports average return rates of 26% to 50% for fashion and accessories, and in individual cases, even up to 75%. The results refer to the online retailers surveyed in Germany, Austria, and Switzerland.
Common reasons for returns include incorrect sizes, poor fit, quality defects, and so-called "selection purchases," where customers order multiple sizes or variations and subsequently return a portion of them.
For fashion brands, therefore, the goal is not simply to achieve the lowest possible return rate. It is important to regularly analyze your own metrics, track the reasons for returns, and take targeted action to reduce avoidable returns. At the same time, return processing should be organized so that returned items can be quickly inspected, refurbished, and made available for sale again.
Typical causes of a high return rate
A high return rate can have various causes. The problem does not always lie with the product itself.
Common reasons include:
- inaccurate product descriptions
- missing or unclear sizing information
- product images that do not realistically represent color or material
- inconsistent fits within a product range
- quality defects
- goods damaged due to inadequate packaging
- incorrectly picked items
- delayed deliveries
- multiple orders of different sizes or variants
It is particularly important to distinguish between product-related returns and returns caused by errors in order processing.
For example, if the wrong size is sent out regularly, the cause may not be the size chart in the shop, but rather the picking process or item labeling in the warehouse.
How can the return rate be improved?
To sustainably reduce the return rate, brands should first analyze their return data. Blanket measures are often less effective than targeted optimization of individual products or processes.
Key measures include:
- precise product descriptions and realistic product images
- clear size and fit information
- standardized recording of return reasons
- regular analysis by SKU, size and variant
- Quality checks upon receipt of goods and before shipment
- unique item identification and barcode scanning
- suitable packaging to protect the goods
- reliable shipping processes and transparent delivery information
- Communicating recurring return reasons to product development and purchasing
However, a low return rate should not be achieved by making returns unnecessarily complicated for customers. A transparent and customer-friendly returns process remains an important part of the shopping experience.
Return rate in fulfillment
In fulfillment, the return rate affects both operational planning and profitability.
The more products that are returned, the higher the effort required for receiving, identification, quality control, processing, and restocking.
Especially for fashion, beauty and lifestyle products, it is crucial to determine the condition in which they are returned and whether they can be resold.
Professional returns management therefore involves more than just accepting the goods. Depending on the product, additional services may be required, which MOODJA offers, for example:
- Inspection for damage and signs of wear
- Cleaning or steaming of garments
- Repackaging and labeling
- Assembling sets and accessories
- Restocking of sellable items
- Separate logging of damaged or unsellable goods
In addition to the return rate, companies should therefore also measure how quickly returns are processed and what percentage of returned products are put back on sale.
