The real profitability killer in e-commerce

The real growth metric in 2025 isn’t sales, it’s profit after returns.
And the real profitability killer in e-commerce? It’s not returns themselves, it’s how you handle them.

For too long, returns have been treated as a small operational detail. In reality, poor return management is one of the fastest ways to drain EBITDA.The math is clear: cut your return rate by just 1% and EBITDA can jump by as much as 40%. Yet many retailers still celebrate topline growth while quietly leaking profit through inefficient return flows.
It’s time to move the conversation from revenue to true profitability.

Why net sales isn’t the full story

On paper, net sales look reassuring. In accounting, that number already deducts refunds from returns.
But here’s the catch: refunds are only the beginning.
Net sales don’t include the hidden costs that stack up behind every return:

• Reverse logistics: shipping, restocking, inspection
• Operational overhead: manual handling, admin time
• Margin erosion: markdowns, write-offs, resale delays
• Frozen stock: limiting availability of product in season
• Customer churn: shoppers who never come back after a poor experience

So while your numbers might suggest stability, the reality is that returns are still silently eating into your profitability.

The formula for True Profitability

True profitability isn’t complicated it’s just rarely calculated.
True Profitability = Net Sales – (cost of returns + handling costs + lost margin + indirect costs)
Apply this formula and you’ll quickly see how much of your apparent “growth” is actually margin leakage caused by mismanaged returns.

From profitability killer to profit driver

Returns don’t have to be the enemy of your bottom line. Managed the right way, they can become a driver of profit and loyalty:

• Automation cuts handling time and labor costs
• Freight optimization reduces reverse logistics spend
• Faster refunds build loyalty and repeat purchases
• Exchanges retain money and cut payment fees
• Analytics reveal the products and customers driving losses

The point is simple: the problem isn’t returns… It’s poor return management.

The new KPI for 2025 and beyond

The winners in the next era of retail won’t be those who grow revenue fastest. They’ll be those who turn returns from a profitability killer into a profitability driver.
That means boardrooms need to stop obsessing over topline vanity metrics and start focusing on true profitability after returns.
Because at the end of the day, e-commerce success isn’t about what you sell, it’s about what you keep.

👉 Curious about your own numbers? Let us calculate your true profitability and see how much EBITDA you’re really keeping.