Returns are an inevitable part of e-commerce. But not all returns carry the same cost — and understanding the true cost of a return can make or break your margins. At FiveX, we believe in empowering sellers to make data-driven decisions, and that starts with clarity around returns.
Here's a simple framework to help calculate your return cost, with real-world examples.
Return Cost = Shipping Cost + Recovery Cost (if any)
Recovery cost is the loss incurred if the returned item cannot be resold.
Example 1: Selling Socks (Non-Resellable Item)
Let’s say you sell premium socks. A customer orders a pair, but decides to return them after opening the package.
Because socks are considered intimate items, once opened, they cannot be resold. Your return cost here is:
Purchase Cost (the cost you paid for the socks)
Shipping Cost (the cost you incurred to ship the item to the customer)
In this scenario, you absorb the full cost of the item, plus logistics.
Example 2: Selling Backpacks (Re-sellable Item)
Now imagine you sell backpacks. A customer returns a backpack in pristine condition, with tags intact.
Since the item is still re-sellable, your return cost is limited to:
Shipping Cost (the cost to send the item to the customer and/or the return shipping cost)
You can re-list the item, so you don’t lose the product’s value itself.
Why Understanding Return Cost Matters
Better Pricing Decisions — Knowing your potential loss on returns helps you price products more strategically.
Informed Return Policies — For high-return-cost items, you may opt for stricter return policies.
Optimised Inventory Planning — Understanding which items have higher recovery costs can influence procurement.
How FiveX Helps
FiveX provides the option to add return cost to every single product via import. Later this data translates into your dashboard thus giving you a clear understanding of P&L.
Returns don’t have to be a guessing game. With clear metrics and smart insights, you can turn returns management into a competitive advantage.
Ready to take control of your returns? Let FiveX show you how.