The returnless refund break-even, with the formula

The scale, side by side

Take one returned item worth V dollars at landed cost. When the item ships back, you pay to move it and inspect it, and you win back whatever you can resell it for. When the shopper keeps it, the freight and the bay disappear — and instead of refunding the price you owed anyway, you issue slightly more than the item’s value in store credit, some of which comes back as revenue. The two sides of the scale:

The label and the labor are the ordinary domestic numbers the industry plans around (we walked the full cost of a return, including the ones that never reach an invoice, in what a return actually costs). r is your restock rate — the fraction of the item’s value you recover when a returned unit actually comes back and resells. It is the number operators routinely overestimate.

The break-even item value

Keeping is cheaper than shipping back when the extra credit is less than the freight-and-handling minus the recovery you forgo. Rearranged, the break-even item value is:

V < (label + receiving) ÷ (0.10 + r)

The interesting part is how much the answer moves with r. Using the $7.20 label and $3.50 of handling:

The spread is the point. For goods that resell near full value, the break-even collapses toward the handling cost itself — at r = 0.7, an item over about $13.38 is worth the label. For goods that never come back to shelf, a returned unit is a write-off, and keep-it wins all the way to $107.00. Most apparel sits in between, which is why a blanket “keep it under $25.00” rule is not obviously wrong — and not obviously right. At ordinary recovery it sits just above the break-even; for a store that overestimates its own restock rate, it sits well above, and the rule quietly ships back items worth less than the trip. The arithmetic alone cannot pick the line for you.

Why your real threshold belongs below the break-even

The formula prices an ordinary return. It does not price a shopper who has learned that your store converts wardrobed purchases into free credit. The cost of a policy is not the average return; it is the return distribution after the policy has been discovered. That is why a static SKU rule leaves money on both sides no matter where you set it: set it low and you overpay for freight on goods worth the trip; set it high and you fund the same items cycling across every store in the category.

The practical threshold, then, is the break-even value discounted by the shopper’s own return behaviour — their return rate, their reason mix, whether the photo they sent matches the item on the order line. A first-time shopper with a fit complaint and a clear photo can safely take a resolution above $21.40. A serial returner on their sixth label this month should not get one at $12.00. Deciding that per item and per shopper is how Verifund resolves a return, and the cross-store signal behind it is the part a single-tenant portal cannot copy. The merchant keeps the dials: every plan sets its own label cost, handling cost and threshold, and the engine works the formula per return, with its reasoning in the audit log.

Run your own numbers

Put your monthly volume, landed costs and label rate into the returns leak calculator and it estimates what keep-it resolutions would have saved last month — the freight-and-handling share of your returns spend that never buys anything. If you would rather see the engine decide on your own returns before paying anyone anything, the portal runs in test mode first: replay last month’s returns report.