Last update: August 16, 2024
In this article:
- Where does the industry stand?
- Online return fraud trivia for retailers
- The true costs of free ecommerce returns
- 14 best practices for returns management in 2025
What's happening in the ecommerce returns industry?
Soon, generous online returns will no longer be the industry standards we're all used to and for good reason. Amid ongoing economic turbulence, ecommerce businesses are struggling to break even with shipping costs. To increase net profit and ensure scalable growth in the years to come, your company might be exploring digital replatforming and SaaS automations.
On top of that, with rising consumer demand for convenience, brands that lack the technological capability to offer a seamless customer experience risk losing on customer satisfaction and brand loyalty points. Last but not least, the demand for conscious consumption keeps growing — 62% of Gen Z shoppers prefer to buy from sustainable brands, and an impressive 73% are even willing to spend extra for sustainable products.
In this context, optimizing your ecommerce returns management, sounds like a strategically smart move. Online returns present an excellent opportunity for brands to boost customer satisfaction, retain sales, lighten the load on a customer service team, and reduce the overall return rate.
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Fraudulent ecommerce returns trivia
Some shoppers, unfortunately, manipulate the returns process and engage in what's known as an ecommerce return fraud. Nine in 10 retailers experienced increased return fraud since August 2023. For every 100 euro worth of online orders returned, online stores are losing more than 10 euro.
Most commonly, consumers attempt to return ineligible items (51%), initiate fraudulent quality disputes (45%), and engage in 'wardrobing' (35%) by returning already worn online purchases. In 2023, Swedish online fashion retailer Boozt.com blocked 42,000 customers for returning too many orders. It's not the first online brand to do so, and many retailers are following suit.
Chronic returners
'Serial', or 'chronic', returners are shoppers who are habitually responsible for excessive returns, whether they have an honest intention to find the best-fitting pair of jeans or simply fraudulent intentions.
Wardrobing
Ecommerce wardrobing means ordering clothing to wear just once at some special occasion, with tags intact, and sending it back, forcing brands to process refunds.
Bracketing
Over 60% of ecommerce shoppers reported bracketing their purchases in 2022 by ordering multiple items in different sizes and colors only to keep one of them and send back everything else.
Bricking
Bricking typically occurs in the home electronics industry when a shopper removes valuable parts from a device for resale, then returns the item as defective or without even mentioning any issues, leaving it as useful as a brick.
Empty boxes
Empty box fraud occurs when consumers claim they received an empty box or never received anything at all, all while secretly keeping the item. Alternatively, they might return a box filled with something that simulates the product's weight, keeping the item for themselves. That's stolen merchandise, in essence.
Free ecommerce returns — free for whom?
Items purchased online often fail to meet people's expectations, whether it’s due to a bad fit, items looking different from their online images, wrong items shipped, buyer’s remorse, or return fraud. As a result, focusing on sustainability, boosting efficiency, mitigating the cost pressures of reverse logistics, and preventing future issues have become a priority for retailers.
Direct and hidden costs of an ecommerce returns
Until recently, free and unlimited returns, much like free shipping, were thought to make or break sales when consumers choose where to shop. That’s why, despite mounting expenses, retailers feared that discouraging returns discouraged shopping in the first place.
Today, we're seeing a gradual shift away from free online returns. The average ecommerce return rate stands at around 30%, and each return costs businesses anything from 20 to over 40 euro. Labor- and resource-intensive storing, inspecting, sorting, repackaging, rerouting, not to mention the reverse logistics process, consumes a large portion of total retail sales.
The environmental impact of (wasted) returns
Online shopping generates almost three times more returns than brick-and-mortar stores. Such volumes result in millions of metric tons of carbon dioxide emissions through reverse logistics and other hazardous emissions through waste incineration.
Only about half of all retail returns go back to store inventory, and those that do are not always resold at the original price. Returned items, even if they have no defects, are more likely to end up with resellers, liquidators or in landfills as a cost-cutting measure in a hyper-competitive industry.
Frustration and poor customer experience
Navigating ecommerce returns can be daunting for consumers, as they deal with complicated exchanges, return forms, shipping labels, packing slips, uncomfortable shipping options, customer support requests, and the list goes on. Delays in getting refunds only add to the uncertainty and confusion.
Industry research shows that many people avoid buying online due to a complicated return process, which makes them feel there’s a higher risk of an unsuccessful purchase. Nearly 80% of shoppers say they don’t want to make a repeat order after a poor post-purchase experience.
Best 2024 practices based on the industry's trends and successes
Good news. There are ways for your company to turn ecommerce returns into a competitive advantage and a source of shopping happiness without sacrificing profit margins. Consider these 14 future-proof strategies to reduce, simplify and automate your online returns management.
How can you optimize your ecommerce returns management?
- Provide accurate, in-context product information
- Position your returns process on product pages
- Communicate your environmental commitment
- Create a customer-centric returns process
- Introduce and A/B test online return pricing
- Offer store returns for an omnichannel CX
- Add gift cards as an alternative to refunds
- Automate your returns management process
- Convert customer returns to direct exchanges
- Increase customer personalization with AI
- Use returns data to prevent future issues
- Introduce a customer-to-customer returns process
- Integrate recommerce into your product catalog
- Convert your unsold returns to charity donations
Provide accurate, in-context product information
it’s best to start with the most impactful method — providing accurate sizing and dimension information. Best product page practices include high-quality, 360-view product visuals, detailed sizing information with international conversions, model measurements, user-generated content (UGC), and lifestyle images or VR experiences to showcase items like furniture and home decor in a real-life setting.
Position your returns process on product pages
Aside from including detailed product descriptions — such as colors, size guides, materials and so on — integrate available delivery options and returns policy into your product pages. In this way, you manage customer expectations before checkout, inform them of any additional costs, make an accurate delivery promise, and make your return policy clear from the start.
Communicate your environmental commitment
Ecommerce companies need to show online shoppers that there's no such thing as free return shipping— not to the environment, at any rate. Nudie Jeans, a Gothenburg-based denim brand, has implemented a return fee as part of their mission to reduce their environmental footprint. This initiative encourages customers to shop more consciously and aligns with their sustainability goals.
Create a customer-centric returns process
Customer expectations for ecommerce convenience are at an all-time high, so your returns aren’t just an operational detail. They are a vital part of the end-to-end customer journey, as 95% of consumers say the ease of returns is essential to their experience. Consider the ease of shipping, too. Nearly all regular online shoppers in Europe see the ability to drop off returns at a parcel shop or retailer's physical store as a basic requirement.
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Introduce and A/B test online return pricing
We're approaching the end of free shipping and returns. Consumers have grown used to free returns, but as retailers begin introducing fees, shoppers may soon need to dip into their wallets to send back the items they bought online. Start by setting a fixed fee for home collection or drop-off return methods and optimize your price points through A/B testing along the way.
Offer store returns for an omnichannel CX
Buy Online, Return In-Store (BORIS) enables customers to purchase goods online and make returns at a convenient brick-and-mortar store without any return labels and additional documents other than original tags and receipts. You can cut on your shipping costs, streamline the returns process, incentivize customers to visit your physical locations, and have them spend their refunds or store credit on the spot.
Add gift cards as an alternative to refunds
This cost optimization and customer satisfaction approach can help you retain revenue, secure future customers, and increase the original average order value (AOV) through upsell or cross-sell across the entire product catalog. It's best to offer a 10%-20% extra bonus to the original value of the refund to incentivize customer consent to a store credit. It should be up to your customers to decide though, so make sure to offer both options.
Automate your returns management process
Automated returns and exchanges are essential for efficient inventory management, capturing revenue, and achieving scalable business growth, especially amid the increasing, enterprise-level sales and return volumes. Consider upgrading your ecommerce tech stack with modern solutions for digitizing and streamlining your internal and customer-facing returns process with an all-in-one SaaS tool.
“We don’t even talk about returns at the office anymore, which means they run smoothly. For those of us who manage them daily, the workflow has become much easier. Ingrid Returns helped us strengthen both our internal operations and our customer experience."
— Aga Sajan, Return Specialist, Netthandelsgruppen, return rate cut from 15% to 4%
Convert customer returns to direct exchanges
While a return refund essentially results in deconversion, exchanges offer an opportunity to strengthen relationships with your customers and retain sales. If it’s only about the wrong size or color, each return and refund request can potentially become an exchange, though only if the experience is hassle-free. Rather than forcing customers to reorder the product or deal with customer support to request an exchange, you can integrate a seamless exchange automation directly into your digital platforms.
“When returning a fashion item, customers don't want to order the product all over again — unless they can easily exchange it in a couple of clicks.”
— Sebastian Schardl, COO, Hubso, 30% of returns converted to exchanges
Increase customer personalization with AI
Empower customers to choose exchange alternatives beyond size or color. Based on individual demand and market trends, advanced AI solutions for ecommerce can guide them in finding products that resonate with their needs. Research shows that half of all consumers trust AI to make accurate product recommendations to them, and the number will continue to climb as people's familiarity with AI-powered tools like ChatGPT increases.
Use returns data to prevent future issues
Traditionally, retailers deal with returns only once they happen. This reactive approach likely causes operational pressure, lost sales, and undesirable online reviews.
Understanding who makes returns, what causes returns, and which items are returned most often is crucial. Pinpointing and addressing common issues can help reduce future returns, support tickets, and associated costs. If some products keep getting returned to you, refine the product size chart, adjust the design, or discontinue production in favor of bestsellers.
Introduce a customer-to-customer returns process
You can cut operational costs and reduce your carbon footprint by building a circular capacity for your returns and exchanges. Have your customers ship their returns directly to the next shopper instead of your warehouses and distribution centers. Customer-to-customer (C2C) returns can help reduce transport distances by up to 95% per return and sell the items twelve times as fast, given the new buyers are incentivized with a discount.
Integrate recommerce into your product catalog
Recommerce, or reverse commerce, means the process of selling previously owned and possibly repaired or refurbished items to consumers seeking bargains on pre-loved items. If you operate in a resell-friendly industry — like fashion, home goods, electronics and books — consider blending your less-than-perfect returns with your brand's regular stock. This way, you emphasize your environmental responsibility and tap into the growing demand for cheaper pre-owned goods amid the rising cost of living.
Convert your unsold returns to charity donations
Remember, 44% of returned products are never resold. Identify which items can be integrated back to your inventory and if you cannot restock the rest of the returned bulk, consider donating it to those in need. You can partner with local grassroots non-profits to keep usable goods out of landfills and redirect them to vulnerable communities instead.
Welcome to the new era of online returns
Return management optimization is quite a challenge for online stores, but it opens many opportunities for increasing operational efficiency, securing customer loyalty, retaining revenue, and reducing your environmental impact. If you take a forward-thinking approach to your return process, the numbers are in your favor.
