Return Rate

What is product return rate?

Your product return rate is the percentage of sales orders that get a product returned. It helps you understand what percentage of the products sold on your eCommerce portal or website were returned. You can use the product return rate to analyze product returns and gain insights into sales order performance.

Essentially, the return rate is an eCommerce metric that highlights the frequency at which customers return their online orders. Your eCommerce return rate is a critical metric because it has a tremendous impact on customer satisfaction, revenue, and profits.

Why should businesses calculate their return rate?

There are several reasons why businesses need to calculate their return rate. Some of these reasons are:

• To determine order accuracy
• To understand the reasons behind product returns
• To take corrective action
• To reduce their eCommerce product returns
• To measure and increase customer satisfaction levels.

What is the average return rate for eCommerce?

The average return rate for eCommerce products is between 20% and 30%, but this depends based on the industry and the type of product that is sold.

How do you calculate your eCommerce return rate?

Here is a formula that you can use to calculate your eCommerce return rate for a specific period of time:

Return rate = (Number of units returned / Total number of units sold) x 100

What are the reasons behind high eCommerce return rates?

There are many reasons why customers could return their online purchases. Some of these reasons are:

They received a damaged product

The product that was delivered to them could have been delivered before or during the shipping process.

The product was described inaccurately

The product that the customer received does not match the description displayed on your eCommerce portal, either in style or color.

They received the wrong product

There was a mix-up and your customer received another product instead of the one which they ordered.

They picked the wrong size

The product that they received does not fit the customer.

The product does not work

The product that was delivered to your customers is malfunctioning or just does not work properly as expected.

The product was delivered too late

The product was delivered so late that the customer has no use or need for it anymore.

The customer changed their mind

This is when the customer simply changed their mind and decided that they don’t need the product anymore, they don’t like it anymore, or they simply don’t want it.

The customer committed returns fraud

The customer bought the product in the first place with the intention of returning it all along.

What are the benefits of lowering your return rate?

Here are some of the most significant benefits of reducing your product return rate:

Less lost sales and unhappy customers

When your product return rate is quite low, it means that your customers are satisfied with their orders and do not feel any need to initiate a return. This means that they’re happy doing business with you. If they ended up receiving a damaged product or the wrong product and had to return it, they might move away to your competitors and never do business with you again.

Reduction in the costs associated with returns

When your eCommerce store gets returns, you’re going to lose out on the revenue that your earned from that sale, but you’ll still have to bear costs like return shipping, the cost of conducting quality checks, the refurbishment costs, and the costs for repackaging and restocking of the product. When you reduce your eCommerce product return rate, your online store will not have to bear these costs to an extent as great as it was before you reduced your return rate, which leaves more revenue for your business.

Increases your customer loyalty, customer lifetime value, and improves your brand image

If your customers need to return their products, it’s very likely that they’ve had a bad experience with your eCommerce store. Most customers would not want to repeat that experience, so they’re just going to stop doing business with you right then and there. If you put in the work to reduce your return rate, you can avoid these negative experiences and get your customers to stay loyal to you for longer, thus increasing your customer lifetime value. 

Another major factor is that if your customers have had a bad experience with your business which caused them to return their purchases, it’s very likely that they’re going to talk about this experience and tell the people in their circles all about it, or even post about this experience on their social media. This could cause substantial damage to your brand reputation and image, but reducing your return rate could help you prevent that.

How do you reduce your return rate?

Make your return policy more lenient

This may seem counterintuitive, but wait. When you have a strict, time-bound return policy, you’re creating urgency and making your customers aware that if they want to return their orders, they need to act fast. But with a longer time limit on your return policy, you’re doing away with this urgency. Only 5% of customers return their orders after 30 days, so a longer return policy might actually help your reduce your return rate.

Improve your product display

Have high-quality pictures of your products displayed on your eCommerce portal and let your customers zoom in and look at the details. This allows them to examine the product in a better way and reduces their chances of making a misinformed purchase decision.

Write better product descriptions

Make your product descriptions more detailed and informative so that your customers can understand your product better and do not get disappointed when they actually receive it.

Improve your support

Use chatbots and live chat to instantly answer questions that your customers might have about your products, especially if they can’t find those answers directly on the product page.