Sales Return Ratio

Sales Return Ratio is calculated as (value of goods returned ÷ total sales value) × 100 over a period. In Indian FMCG and dairy distribution, returns are an accepted reality — retailers return unsold stock that has expired, been damaged, or been over-ordered. A healthy sales return ratio for dry FMCG is 1-3%; for dairy and perishables, 3-7% is typical due to shelf-life constraints.

High returns erode margins at every level. The distributor loses handling and logistics costs. The brand absorbs the product cost and often the GST credit reversal. In dairy, returned milk pouches and curd cannot be resold — they are pure waste. The root causes are usually over-ordering by DSRs chasing secondary sales targets, poor FEFO discipline at the retail shelf, or cold-chain failures that accelerate spoilage.

Distribution platforms track returns at the SKU, outlet, and DSR level via analytics dashboards. A DSR with a 10% return ratio while peers average 3% is likely over-loading outlets. An outlet with consistently high returns may need a reduced delivery frequency or smaller order sizes — intelligence that feeds directly into order management guardrails.