A holiday sale does not finish when an order is shipped. It finishes when the customer keeps the product or the business processes the return and its costs. That is why a December revenue record can overstate how much contribution remains available in January.
NRF and Happy Returns estimated that 19.3% of online sales would be returned in 2025, based on their industry research. They also reported that 82% of consumers considered free returns important when shopping online 1. These are broad retail findings. A cosmetics refill, custom-made item and size-sensitive apparel product will not share one return rate.
Model the order that comes back
Consider an illustrative $120 holiday order with $45 product cost, $12 outbound fulfillment, $4 processing and $25 acquisition. Without a return, contribution after these modeled costs is $34. Now consider an eligible return that leads to a full $120 refund. The merchant may recover saleable inventory worth some amount, but outbound shipping, handling, payment-fee treatment and return logistics can remain as losses.
Do not calculate returned order loss by automatically treating the entire product COGS as permanently lost. Inspect recoverable inventory value, restocking, refund deductions, damaged merchandise and the retailer's actual payment processing terms.
Three separate return metrics
Return incidence: share of orders with any returned item. Refunded value rate: refunded merchandise value divided by original merchandise revenue. Return cost per unit: reverse logistics, inspection, repackaging, write-offs and unrecovered fees. These are different and should be reported separately.
A 15% returned-order rate may translate into a different share of refunded revenue if expensive items are more likely to come back. Use SKU and category cohorts rather than a whole-store blended figure for offer decisions.
Why aggressive discounting can worsen the surprise
Discounts reduce realized revenue while many costs remain. If discounting also changes the mix toward gift purchases, unfamiliar categories or difficult sizes, return behavior may differ. That is a hypothesis to test, not a proven effect for every merchant.
Build a return-adjusted contribution forecast: revenue after discount, variable order costs, acquisition expense, expected refund value, expected product recovery value and reverse-logistics cost. Show a best case and a conservative case. Keep refund dates separate from order dates for cash forecasting.
Operational changes before launch
Review fit information and accurate product imagery, shipping promises, return eligibility, exchange workflows and defect handling. These reduce uncertainty and make policies transparent. Avoid hiding return terms to improve checkout conversion. That tactic can transfer the problem into chargebacks, poor customer experience and costly disputes.
Run the Return-Adjusted Profit Calculator: evaluate whether a promotion still supports required contribution after a realistic range of returns. See the calculator below.
Run the numbers for your store
The values below are an example. Replace them with your own. Nothing you type leaves your browser, no sign-up is needed, and taxes are excluded.
Sources
- NRF/Happy Returns, 2025 Retail Returns Landscape, October 15, 2025 nrf.com
- Adobe, 2025 Holiday Shopping Results news.adobe.com
Nenad Vasic
Founder and CEO of Fenix Network Media. His work focuses on the economics behind customer acquisition, conversion, measurement and profitable growth. Calculations in this article are original; third-party figures belong to their publishers and are credited in the sources.
Calculate return-adjusted contribution
Use your own numbers, then bring the result to a conversation if you want a second set of eyes on the plan.
