Returns should not be treated as a rare surprise outside the profit model. An expected loss can be distributed across every unit sold.
Estimate loss per returned unit
The loss may include unrecovered product cost, shipping, processing, removal, disposal, damage, and advertising already spent to acquire the order. Resellable inventory can reduce the net loss.
Convert the loss into an allowance
Multiply loss per return by the expected return rate. A $15 loss at a 6% return rate creates an expected cost of $0.90 per sale.
Find the sustainable limit
The maximum sustainable return rate is the point at which expected return losses consume the profit available before returns. A product operating near that limit has little safety margin.
Revisit the model after launch
Real return reasons and recovery rates are more useful than initial assumptions. Update the scenario when actual order data becomes available.