Returns Cost
The full cost of returns including shipping, labor, product loss, and related overhead.
Definition
Returns cost is the sum of expenses associated with returns: reverse logistics, warehouse or agent processing time, nonrecoverable product value, and other attributable costs. Return rate alone understates impact when per-return costs are high.
Separating wrong-fit from defective and unwanted returns helps prioritize prevention work such as compatibility data quality.
Key points
- Rate × volume × cost per return is a useful planning model.
- Wrong-fit returns are often preventable with better catalog data.
- Scenario models of lower rates should use merchant-supplied averages.
- Return rate alone understates impact when per-return cost is high.