Margin-Leak Audit

Guides · Returns

What a Shopify return really costs beyond the refund

When a customer returns an order, the refund is the number you see. It is rarely the only cost. This guide lists the other places a return takes money, and where in Shopify to find which products come back.

There is no returns report. There is a reversals report.

Per Shopify's Help Center, Shopify does not have a dedicated returns report. Returns appear inside "reversals", which the Orders and reversals by product report describes as including refunds, returns, cancellations and edits. To see which products come back most, open that report and compare each product's reversals against its units sold. A product with a high reversal rate and thin margin is the one to look at first. The reasons might be photos, sizing information, supplier quality or price; the report will not tell you which.

Because reversals include cancellations and edits, treat the numbers as a lead rather than a verdict, and check a handful of orders yourself.

Where a return costs more than the refund

The payment fee. Shopify's Help Center says that if you use Shopify Payments, credit card fees are not returned when you refund. For a third-party gateway where Shopify Payments is available in your country, transaction fees are not refunded either. Where Shopify Payments is not available, transaction fees are refunded in proportion to the amount refunded, if you refund through the Shopify admin. For many stores, then, a refunded order still carries the fee from the original sale. More on this in payment fees.

Outbound shipping. You already paid the label on the way out. Shopify says shipping fees can be refunded up to the amount charged, except where an order-level free shipping discount applied; if you refund shipping as a goodwill gesture, add it to the cost of the return. See shipping.

Return shipping. Shopify lets you create a return label in the admin, upload an existing one or offer none. Shopify-generated labels are available only when your primary location and the customer's address are both in the US. The Help Center page does not say who bears the cost of a label, so check your own settings and carrier invoice. Note that the shipping label reports exclude return labels, so these costs will not show up there.

Return and restocking fees. Return shipping and restocking fees appear based on your return rules and can be edited for a specific return. Restocking fees can be edited per return or per item; return shipping fees only per return. If you charge them, they offset part of the cost; if you waive them often, count the waived amounts.

Inventory. Restocking is optional when you refund. Make sure items that can be resold actually return to stock, and that items that cannot are written off rather than left on the books at full cost.

Hypothetical example

Invented numbers: a $40 product with a $22 cost ships with a $9 label and a payment fee of $1.50. If it is returned and fully refunded, with no restocking fee and the item resold, the order has cost you the $9 label and the $1.50 fee: a loss of $10.50 on an order that looked like $40 of revenue. If the item cannot be resold, add the $22.

A short routine

  1. Export Orders and reversals by product for 90 days.
  2. List the top five products by reversals and divide by units sold.
  3. For each, estimate the cost per return: fee not refunded + labels + any waived fees + unsellable stock.
  4. Compare with the product's margin from your profit report.
  5. Decide: fix the cause, change the return rules, or raise the price.

Not sure where to start? The free Margin Leak Self-Check has a returns worksheet. If you would rather hand it over, the Margin-Leak Audit ranks returns against the other five leaks for a fixed $199.

Sources

Help Center pages change. Check the current page before relying on a detail. Dollar figures above are invented examples.

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