SlackReturn rate is returns divided by orders or units in a period. It is easy to read and easy to misread, because returns arrive weeks after the sale. The first question is which orders the returns belong to.
Check in this order
- First, the lag. Are returns counted by the month of the order or the month of the return? A recent sales spike makes the latest return rate look low, and it rises later.
- Second, the measurement. Do returns come from the store, a returns tool or refunds? A partial return counted as a full one, or a refund with no return, changes the rate.
- Third, the mix. A bigger share of one product group, size range or colour can raise the blend, even when each product is steady.
- Fourth, the buyers. A campaign that brings first-time buyers at a new price point or from a new audience can bring a different return pattern. Check where those orders came from.
- Fifth, the delivery and the product. A shipping delay, a stock change or a supplier change shows up as more returns in the affected products only.
Read it with the money
- A return usually costs more than the sale it undid. Shipping, handling and restocking all add to the cost. Read return rate next to contribution margin by product group.
- A lower return rate bought with a stricter policy can cost sales. Read it next to the conversion rate before you call it a win.
Writing it up
- Name the order month, the measurement source, the lag used and the product groups that moved.
Made-up scenario: return rate rose from 9 to 15 percent in one month. Most of the rise came from orders placed two months earlier, when a discount campaign brought in a new group of buyers. Returns on the other products stayed flat. The team split the rate by order month and product group, and wrote the finding up as a campaign effect, not a product fault.
