How do I cover the cost of returns in my selling price?
Turn returns into an average per order and add it to fixed fees. If 10% of orders come back and each return costs you 40, every order carries 4. A product costing 60 with shipping of 15, 5% fees and a 20% margin is then priced at 105.33 instead of 100.
Why an average and not the full return cost
A return does not happen on every order, but it happens on some of them regularly. Load the full cost of a return onto every order and you overprice. Ignore it and you pay it out of your margin. The accurate middle ground is the average: what a return costs you multiplied by how often it happens.
Work out the cost of one return
- Return shipping, if you pay it.
- The original shipping, if it was free to the customer or you refund it.
- The item's value if it comes back damaged or cannot be resold, multiplied by the share of returns that arrive that way.
- Fees that are not refunded: some payment providers or platforms keep their fee on a refund. Check your provider's terms.
Say these lines add up to 40 per return on average. That figure varies a lot from store to store, so work it out from your own returns rather than a general guess.
Enter it in the calculator
- Multiply the return rate by the cost of a return: 10% × 40 = 4.
- Add the result to fixed fees in the Selling-price calculator, along with any other fixed fee.
- Enter the other inputs as usual and read the price.
Returns not counted: cost 60, shipping 15, fees 5%, margin 20%: price 100.
Returns at 10%, costing 40 each (4 per order): price 105.33.
Returns at 20% at the same cost (8 per order): price 110.67.
Stay at 100 with 10% returns, and profit after the returns share is 16 instead of 20, a 16% margin.
Products do not come back at the same rate
Sized clothing may come back far more often than accessories, and a product whose photos do not match reality returns more than others. If you have enough data, work out the return rate per category and add its share only to that category's prices. That is fairer than loading one average onto everything.
Remember too that cutting returns is often cheaper than pricing them in: a clearer size chart or more accurate photos may lower the rate, and then you solve again with the new figure. To track your real margin after returns, enter the true costs in the Profit margin calculator.
Common questions
My returns are very low. Should I bother?
If they are rare, the effect on price is small, but work it out once so you know its size as a number rather than a feeling.
Do I count a return that I resell?
Not the item itself, but shipping both ways and any repacking are real costs that belong in the average.