Product Return Rate

The Product Return Rate is a key performance indicator (KPI) used to measure the percentage of products customers return to a business after purchase.

It is a critical metric for assessing customer satisfaction, product quality, and the effectiveness of the sales process.1

How Is the Product Return Rate Calculated?

product return rate formula


The product return rate is expressed as a percentage and calculated by dividing the number of returned products by the total number of products sold and multiplying the result by 100.

The formula for product return rate is:

Product Return Rate = (number of Returned Products / Number of Products Sold) x 100


If a company sells 1,000 products in a month and receives 50 returned products during the same period, the Product Return Rate would be:

product return rate calculation example


  • Customer Satisfaction: A high return rate might mean customers are unhappy with the product. This could be due to poor quality, the product not meeting their expectations or other issues.
  • Product Quality: Tracking return rates helps find defects or problems in the manufacturing process.
  • Cost Management: Handling returns can be expensive due to restocking, shipping, and processing. Knowing your return rate helps you manage these costs better.
  • Inventory Management: High return rates can affect the amount of stock needed and may require adjustments in inventory management.
  • Sales Performance: Looking at return rates can reveal how well your marketing and sales strategies are working.2

Factors Influencing Product Return Rate:

  • Product Quality: Defective or low-quality products are more likely to be returned.
  • Customer Expectations: Misalignment between the product description and the actual product can lead to returns.
  • Shipping and Handling: Damaged products due to poor packaging or handling often result in returns.
  • Customer Service: Poor post-purchase support can increase return rates.
  • Return Policies: Lenient return policies might encourage more returns, whereas strict policies might deter them.3

Related Terms


1. Das, D., & Dutta, P. (2022). Product return management through promotional offers: The role of consumers’ loss aversion. International Journal of Production Economics, 251, 108520.

2. Enisa. (2022, April 17). The return metrics you need to know beyond return rate. Loop Returns. 

3. Brace, R., & Meyer, M. (2022, December 6). How to calculate your e-commerce store’s product return rate. BeProfit.

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