How Small Retail Brands Can Use the Pareto Principle (80/20 Rule) to Reduce Return Orders and Boost Sales
- Hieu Do
- Mar 29
- 3 min read
Returns are one of the hidden killers of profit for small retail businesses. While it’s tempting to treat every return as an isolated case, most of the time, just a few root causes are responsible for the majority of your issues.
Enter the Pareto Principle, also known as the 80/20 rule — a simple yet powerful concept that can help small business owners, entrepreneurs, and retail operators make smarter decisions and grow faster.
I. Understanding the Pareto Principle — and Why It Matters for Small Business
The Pareto Principle, named after Italian economist Vilfredo Pareto, is based on a simple observation: roughly 80% of effects come from 20% of causes.
Originally used to describe wealth distribution (20% of people held 80% of the land), the rule has since proven useful across business, operations, marketing, and inventory management.
🔍 Why It Matters for Retailers:
20% of products drive 80% of sales
20% of customers generate 80% of profits
20% of problems cause 80% of returns
If you're running a lean retail business with a small team, this is a game-changer.
Instead of trying to fix everything, you focus on the few issues that matter most. That means faster results, smarter operations, and better customer satisfaction — all without burning out your team or budget.
II. Applying the 80/20 Rule to Understand Why Return Orders Are Rising
Let’s look at a practical example:
A men’s sport shoe brand for runners based in Ho Chi Minh City, selling via Shopee, TikTokShop, and their own outlet inside a shopping mall.
The Problem: Sales Dropped 25% in One Month
The founder noticed a decline in revenue.
While marketing spend and ad reach remained steady, sales performance dropped across all channels, with the biggest hit coming from their physical outlet.
Here’s the breakdown:
Channel | February Sales (VND) | March Sales (VND) | % Change |
Shopee | 240,000,000 | 210,000,000 | -12.5% |
TikTokShop | 160,000,000 | 140,000,000 | -12.5% |
Physical Store | 320,000,000 | 180,000,000 | -43.7% |
Total | 720,000,000 | 530,000,000 | -25% |
(Source: Pexel)
Return Orders Breakdown by Reason – March
After checking customer chats, return requests from Shopee & Tiktokshop, and reviews, the team categorized the top reasons behind product returns:
Return Reason | No. of Returns | % of Total | Cumulative % |
Size didn’t fit | 56 | 30.43% | 30.43% |
Color didn’t match expectations | 38 | 20.65% | 51.09% |
Product quality not as expected | 30 | 16.30% | 67.39% |
Uncomfortable for running | 18 | 9.78% | 77.17% |
Received different item | 14 | 7.61% | 84.78% |
Found better price elsewhere | 10 | 5.43% | 90.22% |
Changed mind after ordering | 8 | 4.35% | 94.57% |
Other (unspecified) | 10 | 5.43% | 100.00% |
Total Returns | 184 |
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The 80/20 Insight: Focus on What Moves the Needle
By applying the Pareto Principle to this data, it becomes clear that just three return reasons account for nearly 70% of all returns:
Size didn’t fit (30.4%)
Color didn’t match expectations (20.7%)
Product quality not as expected (16.3%)
These are the critical few issues — and fixing them could significantly reduce returns, improve customer satisfaction, and directly support the brand’s revenue recovery.
✍️ Key Takeaway for Business Owners
The 80/20 Rule isn’t just a theory — it’s a tool that helps you make better decisions fast. Instead of guessing what’s wrong or wasting time on low-impact fixes, you can focus on the high-impact issues that truly affect your sales and brand reputation.
In this case, identifying and tracking return reasons using a simple Pareto analysis helped the business see clearly what needed urgent attention — and set the stage for actionable improvements.
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At SOSP Consulting Group, we help FDI retail and F&B brands adapt, optimize, and scale profitably in Vietnam market.
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