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Return rate

Return rate is the share of orders, or of items, that customers send back. It cuts the real margin of what the ads sold.

Stock photos and example labels, not customers.

Definition

Return rate is the share of orders, or of items, that customers send back. It cuts the real margin of what the ads sold.

FormulaReturn rate = returned orders / all orders

Example with made-up numbers: Of 500 orders, 60 are returned. Return rate = 60 / 500 = 12 percent.

How to use it

A product with a high return rate can look strong in a ROAS report and weak in profit. Include expected returns when you calculate contribution margin.

Track it by product group and by acquisition source, because it differs between them.

Related terms

Contribution margin Gross margin AOV

Go deeper

Contribution margin for ecommerce ads

Revenue pays for nothing until the costs of the order are taken away. Contribution margin is the number that tells you how much room the ads have.

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