Cost of Returns Calculator
The monthly cost of returns beyond the refund itself: return shipping, handling, and the goods that cannot be resold.
A refund gives the revenue back; the cost of a return is what you spend on top of that.
How the cost of returns calculator works
A refund gives the revenue back; the cost of a return is what you spend on top of that. Each return carries the shipping you pay to get it back, the labour to inspect and restock it, and — for the share that cannot go back on the shelf — the cost of the goods themselves.
The result is expressed per return, per month, and as a share of net revenue after refunds, which is the figure to watch: a return rate that looks tolerable can still consume a whole margin point.
Formula: returns = orders × rate; cost = returns × (return shipping + processing) + returns × (1 − resellable share) × AOV × cost-of-goods share
Worked examples
| Inputs | Cost of returns per month | Note |
|---|---|---|
| Apparel shop | $3,840.00 | 160 returns; 1,920 handling + 1,920 written off |
| Everything resold | $1,920.00 | only handling remains |
| High return rate | $5,700.00 | 250 returns; 3,000 handling + 2,700 written off |
FAQFrequently asked questions
Why is the refund not counted as a cost?
A refund returns revenue you had not earned; it does not leave you worse off than never making the sale. The costs of a return are what you spend on top of that — return postage, the labour to inspect and restock, and goods that cannot be resold as new. Those are what this calculator adds up.
What counts as an unsellable return?
Anything that cannot go back into stock at full price: worn, damaged, opened consumables, out-of-season lines. Its cost is the cost of the goods, not the retail price — the margin was never earned. Enter that as the cost-of-goods share.
What is a typical return rate for online orders?
It varies widely by category. Apparel and footwear commonly see 20–30%, electronics around 10%, and consumables far less. Compare against your own history rather than a benchmark, and watch the trend after changes to sizing guides or product photography.
How do I reduce the cost per return?
Three levers: fewer returns (better sizing and product information), a higher resellable share (faster inspection, protective packaging on the way back), and cheaper reverse logistics (consolidated returns, drop-off networks). The calculator shows which lever moves the total most.
Where these figures come from
- APICS / ASCM — inventory management terminology — the turnover, safety stock and reorder point definitions used here
- Australian Competition and Consumer Commission — the Australian consumer law regulator
Last checked: September 2026. These are standard retail and inventory-management definitions.