Your Returns Rate Is Destroying Your Google Ads Profitability — And You Are Not Measuring It

The Revenue That Comes Back

You reported £100,000 in Google Ads revenue last month. Your ROAS was 4.5x. Leadership is happy. Then the returns come in.

£28,000 back. Refunded. Your actual revenue was £72,000. Your actual ROAS was 3.2x. And nobody adjusted the bidding.

The Scale of the Problem

Average ecommerce return rates by category:

• Fashion & Apparel: 25-40%
• Footwear: 20-35%
• Electronics: 10-20%
• Home & Garden: 8-15%
• Health & Beauty: 5-10%

If you are in fashion and your Google Ads strategy does not account for returns, you are optimising on numbers that are 25-40% inflated.

Why This Creates a Compounding Error

Smart Bidding learns from conversion data. If you report £100 in conversions but £30 comes back, Smart Bidding has learned that this keyword/audience/product combination is worth £100. It will bid accordingly.

The result: your bidding algorithm systematically overpays for customers who return products.

Returns are not a fulfilment problem. They are a bidding problem. Every return that is not fed back into your conversion data makes your next bid less accurate.

Products With the Highest Return Rates Get the Most Spend

This is the cruel irony. Products that are returned most frequently often have the highest initial conversion rates. Size-dependent clothing, impulse purchases, BNPL-funded orders — they convert fast and return faster.

Without return rate data in your feed, Google will pour budget into exactly these products.

How to Fix It

1. Calculate product-level return rates — not category averages, actual SKU-level data
2. Adjust your conversion values — report net revenue (post-returns) not gross revenue
3. Create return-risk custom labels — segment products by return propensity
4. Implement value adjustments — Google Ads allows conversion value adjustments within 55 days of the original conversion
5. Set different targets for high-return categories — a 4x ROAS target for a 30% return category needs to actually be 5.7x to break even

The POAS Connection

This is exactly why POAS (Profit on Ad Spend) exists. ROAS ignores returns, shipping costs, and COGS. POAS accounts for all three. The transition from ROAS to POAS starts with honest return data.

What Your Finance Team Already Knows

Your CFO sees the return rate. Your Google Ads reports do not. This disconnect is the single most common reason that "great Google Ads performance" does not translate to "great business performance". Close the gap.