Understand the number before the decision
A refund does not recover every cost
Returned-order contribution equals retained collection minus unrecovered product cost, outbound shipping, packaging, reverse shipping/handling, retained fees and acquisition. Recovered inventory cost reduces the loss; it is not new sales revenue.
Worked example with a full refund
With collection 100, product cost 40, shipping 8, packaging 2, fees 3.30 and acquisition 5, a kept order contributes 41.70. A full refund, return shipping 6, 90% product-cost recovery and no fee refund give returned-order contribution of −28.30. At a 15% return rate, expected contribution is 31.20 per original paid order.
The threshold depends on your own costs
If all modeled outcomes remain non-negative, the ceiling is 100%. If a no-return order already loses money, the ceiling is unavailable. Income tax, rent and fixed payroll are excluded, and resale at your entered inventory recovery value is not guaranteed.
What is included?
Refusal calculations use dispatched orders; refund calculations use paid orders. Inventory and fee recovery values are your own assumptions. Cash-cycle estimates cover inventory cost only under steady activity. The explanations above identify formulas and exclusions. Currency is a label without conversion; unentered fixed costs and taxes are excluded.