KPIs for Product Managers

KPIs for Product Managers: ecommerce return rate

In this article, we'll explore the key performance indicators (KPIs) that every product manager should track to measure the success of their ecommerce strategy.

As a product manager, keeping track of your eCommerce return rate is crucial. Even a slight increase in the number of products being returned can have a significant impact on customer satisfaction, profitability and overall growth. In this article, we’ll take a closer look at the importance of return rates in eCommerce, key factors that influence them, and strategies for reducing them.

Understanding the Importance of Return Rate in eCommerce

Return rates are a critical metric for eCommerce businesses to track. A high return rate can be an indication of product quality issues, poor customer experience, or inaccurate product descriptions. On the other hand, a low return rate can indicate high-quality products and positive customer experience. However, there are other factors that can influence return rates as well.

The impact of return rate on customer satisfaction

Customers who have more than one negative experience with returns are less likely to purchase from that retailer again. By monitoring your return rate, you have an opportunity to improve your customers’ experience with your brand. Additionally, addressing the cause of returns can lead to product improvements, which in turn can drive customer satisfaction. This can help build loyalty among your customers, which can result in repeat business and positive word-of-mouth advertising.

Moreover, a low return rate can be a signal to potential customers that your products are of high quality and that your customer service is excellent. This can help attract new customers who are looking for a reliable and trustworthy eCommerce business.

How return rate affects profitability and growth

Returns can be a major expense for eCommerce businesses. They can directly reduce profits by increasing costs associated with shipping and restocking, or can indirectly reduce profits when products can’t be sold again and must be written off as waste. By minimising returns, businesses can improve their bottom line.

Furthermore, reducing return rates can also lead to increased growth opportunities for eCommerce businesses. With fewer returns to handle, businesses can focus on expanding their product lines or investing in new marketing strategies. This can help drive sales and revenue, which can contribute to long-term growth and success.

The role of return rate in product management decisions

Return rates are an essential tool for product managers to use in determining which products to continue offering and which ones are not meeting customers’ expectations. By analysing return rates, businesses can identify patterns and trends that can inform product management decisions. For example, if a particular product has a consistently high return rate, it may be an indication that there are quality issues that need to be addressed.

Return rates can also inform pricing decisions. If a product has a high return rate despite being priced competitively, it may be an indication that customers perceive the product as low quality. In this case, businesses may need to re-evaluate their pricing strategy to ensure that they are offering products that meet customers’ expectations.

In conclusion, return rates are a critical metric for eCommerce businesses to monitor. By understanding the impact of return rates on customer satisfaction, profitability, and product management decisions, businesses can make informed decisions that can help drive growth and success.

Key Factors Influencing eCommerce Return Rates

A high eCommerce return rate can be caused by a variety of factors. While returns are a natural part of any eCommerce business, it’s important to understand the reasons behind them and take steps to reduce them. Here are some of the most common factors that can contribute to high return rates:

Product quality and customer expectations

The most common reason for returns is due to quality issues. Customers expect high-quality products, and when those expectations aren’t met, they’ll return the product. Quality issues can range from defects in the product itself to poor packaging or shipping practices that result in damage. To reduce returns based on product quality, it’s important to have thorough quality control processes in place and to ensure suppliers meet your standards. It’s also important to set realistic customer expectations by providing accurate product descriptions and images.

Shipping and delivery issues

The second most common reason for returns is shipping and delivery issues. Customers expect timely delivery and accurate tracking information. When there are delays or the delivery is incorrect, customers are more likely to return the product. To reduce returns based on shipping and delivery issues, it’s important to work with reliable shipping partners and provide customers with accurate tracking information. You may also want to consider offering expedited shipping options for customers who need their products quickly.

Sizing and fit discrepancies

One of the most challenging issues to address is sizing and fit discrepancies between what customers expect and what is delivered. To minimise this, make sure you have accurate sizing charts and images, and if appropriate, provide options for free returns on size exchanges or adjustments. It’s also important to provide detailed information on the fit of the product, such as whether it runs small or large, to help customers make informed decisions.

Inaccurate product descriptions and images

Customers expect accurate product descriptions and images. When descriptions or images don’t match the product delivered, customers may feel misled and return the product. To ensure accurate product descriptions, use real photos and provide detailed information on materials, dimensions, and other relevant features. It’s also important to regularly review product descriptions and images to ensure they are up-to-date and accurate.

By addressing these key factors, you can help reduce your eCommerce return rate and improve customer satisfaction. While returns are inevitable, taking steps to minimise them can help improve your bottom line and build a loyal customer base.

Setting the Right Return Rate KPI for Your Business

Establishing a reasonable and achievable return rate KPI is critical to informing product decisions, pricing strategies, and improving customer satisfaction. A return rate KPI is a metric used to measure the percentage of products that are returned by customers after a purchase. A high return rate can be indicative of issues with product quality, customer service, or pricing. On the other hand, a low return rate can be an indication of customer satisfaction and a healthy eCommerce business.

Industry benchmarks and best practices

As a benchmark, look to the average return rate of businesses in your industry. This can give you an idea of what is considered a healthy return rate for your business. For example, the average return rate for the fashion industry is around 30%, while the average return rate for electronics is around 10%. Use this information to set a target return rate KPI that is in line with industry standards.

Analyzing your current return rate

Start by analyzing your current return rate. Look for patterns and focus on the products or issues that are driving the returns. Are there particular products that are being returned more frequently than others? Are there common issues that customers are experiencing? By identifying these patterns, you can take steps to address the root causes of returns and improve your return rate KPI.

One way to reduce returns is to improve product descriptions and images. Providing accurate and detailed information about your products can help customers make informed purchasing decisions and reduce the likelihood of returns due to mismatched expectations. Another way to reduce returns is to offer customer support and assistance throughout the purchasing process. This can help customers feel confident in their purchases and reduce the likelihood of returns due to confusion or dissatisfaction.

Establishing realistic and achievable goals

When setting KPIs, be realistic about what you can achieve. Consider factors such as lead times, QC processes, and supplier agreements. Setting achievable goals will help drive progress towards a healthy eCommerce business. For example, if your current return rate is 20%, setting a goal to reduce it to 5% within a month may not be realistic. Instead, consider setting a goal to reduce it to 15% within a month, and then gradually work towards reducing it further over time.

In conclusion, setting the right return rate KPI is critical to the success of your eCommerce business. By looking to industry benchmarks, analyzing your current return rate, and setting realistic and achievable goals, you can improve your return rate KPI and drive progress towards a healthy and successful eCommerce business.

Strategies for Reducing eCommerce Return Rates

Reducing eCommerce return rates is crucial for any online business. High return rates can lead to decreased profits, decreased customer satisfaction, and increased operational costs. Here are some strategies for reducing your return rate:

Improving product quality and consistency

Improving product quality means investing in the people, processes, and technology that are needed to ensure consistency. Put quality control processes in place to ensure that every product is made to your specifications and that suppliers meet your standards. Consistency is key to building customer trust and loyalty. When customers know that they can rely on your products, they are less likely to return them.

Another way to improve product quality is to conduct regular testing and quality checks. This can help you catch any issues before they become bigger problems. You can also gather feedback from customers to identify areas for improvement and make changes accordingly.

Enhancing product descriptions and visuals

Clear and accurate product descriptions and visuals can help customers better understand what they are buying. A variety of visual formats can also help customers get a better sense of the product – with apparel, lookbooks, photos and videos of shoes in use can be extremely helpful, for example.

When creating product descriptions, be sure to include all relevant information such as size, dimensions, materials, and care instructions. This can help customers make informed decisions and reduce the likelihood of returns due to incorrect sizing or other issues.

Visuals are also important. High-quality images and videos can help customers see the product in more detail and get a better sense of how it looks and functions. Consider using 360-degree views or interactive product images to give customers an even better sense of the product.

Implementing effective customer support and communication

Effective customer support improves the customer experience and can help resolve issues before they lead to returns. Use chatbots, customer service hotlines, email, and social media to stay in touch with your customers and offer them support where needed.

When customers have questions or concerns, it's important to respond quickly and professionally. This can help build trust and loyalty and reduce the likelihood of returns. You can also use customer feedback to identify areas for improvement in your products or processes.

Streamlining the returns process

Using a returns management system can help streamline the process for customers and also improve your returns management workflow, reducing operational costs. An efficient and timely process can also lead to faster refunds and exchanges, ultimately building customer trust.

When designing your returns process, consider the customer experience. Make it easy for customers to initiate a return and provide clear instructions on how to do so. You can also offer incentives such as free returns or exchanges to encourage customers to shop with you again.

Finally, be sure to track and analyze your returns data. This can help you identify patterns and make changes to reduce returns in the future.


By monitoring your eCommerce return rate, understanding the key factors that contribute to it and implementing strategies to reduce it, you can improve customer satisfaction, growth, and profitability. Focus on improving quality control processes, strengthening customer communication and support, and streamlining the returns process to succeed in this critical KPI.