Calculating true shipping costs and returns into your margin (calculation guide)
Outbound shipping is only part of the logistics costs. This guide uses a clearly labelled worked example to show how return labels, handling and loss of value can be included.
In short: the logistics costs per order can include, besides packaging and outbound shipping, a share of return costs, handling and loss of value. Which items are relevant depends on your contract, your category and your process. So use your own actual data instead of general industry values.
The cost types that belong in the shipping/returns calculation
- Packaging material (box, filler, label) per order.
- Outbound shipping costs (your carrier price, not the customer price).
- Return label / return postage that you bear.
- Handling: restocking, inspection, cleaning/refurbishing per return.
- Loss of value: goods that are B-grade, discounted or not resaleable at all.
- Payment fees that are partly not refunded on a refund.
Step 1: the real shipping costs per order
Do not calculate the shipping the customer pays but your actual costs. The following numerical example is purely illustrative:
- Packaging: €0.80
- Outbound shipping (carrier): €4.20
- Real outbound shipping costs: €5.00 per shipped order
Step 2: spreading returns as a share of costs
For an expected-value-based calculation, return costs can be spread across all orders. Illustrative example with a freely assumed return rate of 20 percent:
- Cost per actual return: return label €4.20 + handling/restocking €3.00 + loss-of-value allowance €5.00 = €12.20
- Return rate: 20% → 100 orders produce 20 returns.
- Total return costs: 20 × €12.20 = €244
- Spread across all 100 orders: €244 / 100 = €2.44 return costs per order
The loss of value can vary strongly by category and condition. The €5.00 used in the example is not a benchmark; derive your allowance from resale prices and condition classes.
Step 3: shipping + returns together in the margin
- Real outbound shipping costs: €5.00 (step 1)
- Share of return costs: €2.44 (step 2)
- Total logistics costs per order: €7.44
- At a net selling price of €60 that alone is 12.4%, before COGS, payment fees and ad spend have even been deducted.
A time lag can arise between sale, return and refund. Show actual returns and expected return costs separately so that estimates do not look like facts already booked.
The three most common mistakes
- Using the customer's shipping price instead of your own carrier price (free shipping does not mean no costs).
- Booking returns only as a revenue reduction but ignoring handling and loss-of-value costs.
- Assigning return costs only to the returned orders instead of spreading them across all orders, which makes every single order look more profitable than the average is.
Per SKU instead of flat
Return rates can differ per SKU. Use sufficient case numbers, show the observation period and separate actual from estimated costs. A product view can help; automated results remain dependent on data quality and allocation.