What Is Refund Rate?
Refund rate measures the percentage of orders that are returned or refunded. High rates destroy margin — here's how to track and reduce them.
Key Takeaways
- Refund rate = Number of Refunds ÷ Total Orders × 100.
- UK eCommerce average return rates are 20–30%; fashion runs higher at 40–50%.
- High refund rates destroy margin — each refund typically costs the original delivery cost plus return processing.
Why refund rate matters
A refund costs you the original fulfilment cost plus the reverse logistics cost, often totalling £5–15 per returned item, before you've lost the sale revenue. At a 25% refund rate on 1,000 orders, that's 250 refunds. At £10 each, £2,500 per month in pure cost — on top of lost revenue and the time to process them.
Causes of high refund rates
Inaccurate product descriptions or images (customers receive what they see, not what they expected). Sizing or specification mismatch. Quality issues. Damaged goods in transit. Fraudulent returns. Understanding which cause drives your refunds is essential — the fix is different for each.
How to reduce it
Improve product photography and descriptions to set accurate expectations. Add size guides and customer reviews. Improve packaging to reduce transit damage. For fashion, virtual try-on tools and detailed measurements reduce size-related returns. Analyse returns by product SKU — the worst offenders are usually a small subset of your catalogue.
Monitoring refund rate
Track refund rate weekly, broken down by product category, fulfilment method, and acquisition channel. A sudden spike in refund rate on a specific SKU often signals a quality control issue with a production batch. AskBiz flags refund rate anomalies automatically by product and channel.