Returns and RTO are margin costs
Returns and Return to Origin can create reverse logistics, handling, damage and inventory delay costs. Treating them as occasional surprises makes product margins look stronger than they are.
Return reserve per order = Historical return and RTO losses ÷ total orders
Reserve rate = Return reserve per order ÷ average selling price × 100
Use your own account history
Group products with similar price, category and return behaviour. A single site-wide percentage can hide products that generate unusually high RTO or return losses.
What to include in return losses
- Forward and reverse logistics not recovered
- Damaged or unsellable inventory
- Packaging and handling
- Discounts required to resell returned stock
- Working capital delay
How reserve changes break-even price
A higher expected return rate raises the selling price required to break even. Test several scenarios before launching a low-margin product.
Test your return-rate scenarios
Enter a reserve percentage and see the impact on profit and break-even price.
Open Meesho Profit CalculatorWays to reduce avoidable returns
Improve product descriptions, sizing information, images, quality control and packaging. Track return reasons by SKU so the highest-impact problems can be fixed first.
Frequently Asked Questions
What is RTO?
Return to Origin occurs when an order cannot be delivered and is sent back to the seller or origin point.
How do I estimate return cost per order?
Divide total historical return and RTO losses by the number of orders in the same period.
Should return reserve be a percentage?
A percentage of selling price is useful for planning, but actual cost per order from account data is more accurate.