Two online products with identical margins can produce very different results, and the variable is usually how often each comes back. Returns are a cost of the category as much as of the retailer.
The cost of a return exceeds the refund
A returned item incurs return shipping, handling, inspection, repackaging and often a reduction in the price it can be sold for afterwards.
The original outbound shipping and payment processing costs are already spent and are not recovered by the return.
So a return does not merely cancel a sale. It costs more than the sale would have earned, which is why high-return categories can be unprofitable at margins that look comfortable.
Uncertainty about fit drives the rate
Categories where the customer cannot assess the product without physical contact produce the highest return rates, since ordering is the only way to evaluate it.
Clothing is the familiar example, where buyers may order several variants intending to keep one, and the retailer bears the cost of the others.
Products with objective specifications return far less, because the buyer knows before ordering whether it will suit.
Better information reduces returns more than policy does
Detailed measurements, clear photography and specific descriptions reduce the mismatch between expectation and delivery, which is the source of most returns.
Reviews contribute the same way, particularly where reviewers describe how the product compared with what they expected.
Restricting the returns policy reduces returns and also reduces sales, since a generous policy is what gives buyers the confidence to order in the first place.
Returns concentrate in a small group of customers
Return behaviour is uneven, with a minority of buyers responsible for a disproportionate share of the volume.
Where retailers measure profitability per customer rather than per order, some customers cost more than they contribute across a year.
Handling that without penalising ordinary buyers is difficult, and most retailers accept the cost rather than introduce restrictions that would deter everyone.
The resale route determines the final loss
What happens to returned stock decides how much of the value survives, and options range from returning it to inventory to selling it at a discount or disposing of it.
Products that cannot be resold as new lose most of their value on the first return, which changes the arithmetic completely.
Retailers who understand their recovery rate by category can price and merchandise accordingly, while those who treat returns as a single overhead cannot see which products are causing the loss.