Refund Rate
Refund rate is a measure of how many customers refunded a product that they previously purchased. The rate is calculated by dividing the number of refunds by the total number of sales orders during any specified timeframe. Refund rates are usually stated as a percentage.
The rate can sometimes be skewed and misleading as a merchant may offer a product free-trial period and customers refund the product at the end of this period. These may be customers who would never actually purchase the product but wanted to get to use it for free. Others may be unfair customers who purchase the product and immediately ask for their money back especially on digital products like e-books which often can’t be returned to the merchant.
Author: Kris Tabetando
Kris Tabetando provides mergers & acquisitions (M&A) advisory and brokerage services to Internet companies. He also partners with investors to acquire & manage Internet businesses.
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