Gain Better Control Over Your Return Process with Smart Metrics

You have probably return rate of your shop calculated at some point. This useful metric provides insight into the portion of all sales that are returned by the customer.

Metrics, such as the return rate, are an ideal way to bring order to the chaos of orders and returns. They make figures clear and easy to compare across different periods, products, or customers. 

What is a metric?

A metric is a quantitative measurement of a specific activity. Within the e-commerce world, there are endless metrics to calculate, such as webshop performance, conversion rates, the number of abandoned shopping carts, and the well-known return rate. 

Metrics often go hand in hand with KPIs (Key Performance Indicators). KPIs are indicators of a company's planned success or progress. By setting a KPI like the following, for example, the metric used (the return rate) becomes even more useful: 

‍“By January 1, 2022, the return rate must have decreased by 10%.”

6 metrics to make the return process measurable 

Although most people probably think of the return rate immediately when they hear "return process," there are many more useful metrics to calculate that can help with optimizing the return process.

The following six metrics are easy to calculate and offer insights that almost every webshop can benefit from: 

1. Return rate 

In this article, we will cover some smart but 'lesser-known' metrics, but we simply cannot leave the return rate out of the list. It provides a good overall view of the number of returned products relative to the number of products sold over a specific period. 

The return rate is easy to calculate by dividing the number of returned orders in a given period by the total number of orders in that same period. 

This value is particularly useful for comparing multiple time periods. For example, if you calculate the return rate every month and it is consistently trending upward, it likely means that further investigation and potential improvements to your return or sales processes are needed.

Unfortunately, the return rate has one drawback: it is a very general metric. A return is not necessarily a negative thing. Some returns result in exchanges, sometimes even for items of higher value than the initial purchase. These details are unfortunately not captured by the return rate. 

2. Exchange rate

To address the issue mentioned above, various metrics can be calculated to provide additional insight into how a return occurs. 

An example of this is the exchange rate. This is calculated by dividing the number of exchanged items over a specific period by the number of returned items in the same period. 

A high exchange rate can mean several things. First, an exchange is better than a refund request, so a higher exchange rate can be a positive sign. However, when it relates to a specific product, it usually points to a problem. For example, the sizing might be off, leading customers to frequently order the wrong size.

3. Refund rate 

If you haven't managed to convert a return into an exchange, the customer is likely requesting a refund. 

A high refund rate usually means that a product is disappointing. For instance, it may have been damaged, of poor quality, did not look like the photo, or simply failed to meet expectations.

A high number of refunds for a specific product is often a reason for online stores to reconsider selling that product or to change their approach. 

The refund rate is calculated by dividing the number of refunded orders in a given period by the total number of orders in that same period. 

4. Retention rate

The goal of return process optimization is simple: to retain as many satisfied customers and as much revenue as possible.

Many online stores therefore choose to offer a special incentive when a return is registered. This could be a credit that can be used to purchase a new product immediately, even before the original product has been received back by the store.

A great way to calculate how effective such actions are is by calculating the retention rate. 

The retention rate is calculated by dividing all return requests that result in a new sale by the total number of returned orders in the same period. 

Is the retention rate going up? This means that more customers are choosing to make a purchase instead of requesting a refund. 

5. Perfect order rate 

A common reason for a return is an error during the ordering process. A shipping delay, for example, or a defect in the product sent. 

The more errors, the greater the chance of dissatisfied customers and returns. 

To measure how many errors occur within a certain period, it can be useful to track the perfect order rate to calculate. This metric shows how smoothly the ordering process is running. Is this rate increasing? Then it is likely time for some improvements. 

You calculate the perfect order rate by dividing the number of order-related errors by the total number of orders over the same period. 

6. The no fault found rate

Not all returned products can be resold at the original price. If a product is damaged or shows signs of having been unpacked, the next customer will not appreciate receiving it. 

Many returned products are therefore sold at a discount, donated, or end up as waste. Unfortunately, this often results in a loss for the seller. 

The no fault found rate indicates the extent to which returned items are received in perfect condition, allowing them to be resold at the original price. 

The no fault found rate is calculated by dividing the number of faultless returns received over a certain period by the total number of returns received over the same period. 

Do you notice that the number of faultless shipments is decreasing? You could try improving the packaging or adding special instructions for the customer, for example. 

The data dashboard 

The metrics above might seem difficult to track, but fortunately, that is not the case. More and more webshops are using smart return software. With this software, returns are registered directly online by the customer, after which all details regarding the shipment end up in a data dashboard . Think, for example, of return volumes, the number of exchanges, the number of customers who take advantage of special offers such as credits, and any errors during orders or returns. All the data you need to calculate the metrics above, in other words. And in most cases, the dashboard can even calculate the metrics for you.

Interested?

Are you interested in using convenient return software with a complete data dashboard? Or would you like to brainstorm about using the metrics above? Then you have come to the right place at Returnista. 

With Returnista's software, returns are no longer a pain point. Increase customer satisfaction and lower your costs with the help of a great return portal and a complete data dashboard. Do you want a beautiful portal in the style of your webshop, just like Decathlon, Loavies, and Asos? Then request one immediately a demo on our website.