Reverse logistics cost opacity for e-commerce returns preventing accurate product-level profitability analysis and enabling margin-destroying SKUs to persist in catalogs

E-commerce retailers processing high return volumes (20-40% return rate for apparel) cannot accurately allocate reverse logistics costs — return shipping labels, inspection labor, repackaging materials, restocking time, liquidation channel fees, and disposal costs — to individual SKUs because their accounting systems track returns as an aggregate line item against total revenue rather than attributing costs at the product level. So what? Without product-level return cost data, the merchandising team continues to promote and reorder SKUs that appear profitable based on gross margin but are actually margin-negative when fully-loaded reverse logistics costs are included — a $30 dress with a 60% gross margin and a 45% return rate may actually lose $2-$5 per unit sold after return processing costs. So what? These margin-destroying SKUs consume warehouse space, labor hours, and working capital that could be allocated to genuinely profitable products, dragging down overall company profitability by 2-5 percentage points. So what? The company cannot identify which specific product attributes drive returns — is it the sizing, the fabric, the product photos, or the description? — because the return reason codes captured at the customer level ('didn't fit,' 'not as expected') are too vague to map to actionable product design or merchandising changes. So what? Competitors who have solved this attribution problem can price more aggressively on their genuinely low-return SKUs while the company maintains higher prices across the board to cover the blended return cost, losing market share on their best products. So what? The company enters a death spiral where marketing spend is partially wasted acquiring customers who buy and return high-return-rate SKUs, CAC (customer acquisition cost) appears to rise, and the business looks increasingly unviable even though the core product offering contains profitable items. This persists because the reverse logistics process spans multiple systems — the e-commerce platform captures the return initiation, the carrier handles return shipping, the warehouse management system processes the physical return, and the ERP handles the financial credit — and none of these systems share a unified cost-per-unit-returned data model that attributes all costs back to the original SKU.