Returns are inevitable in e-commerce, influenced by psychological and practical factors. For example, “bracketing” is a practical problem where customers intentionally purchase multiple versions of an item, such as different sizes or colors, with the explicit plan to return the ones that do not meet their needs. This practice, now common among ~60% of online shoppers, highlights a desire to recreate the confidence of in-store shopping.

Impulse purchases, another significant driver of returns, are more psychological. Stress-induced purchases often result in regret, with 1 in 4 shoppers admitting to returning items they either did not need or could not afford. Furthermore, buyer’s remorse can stem from discovering better deals after purchase, leading to returns driven by price sensitivity rather than product dissatisfaction. Social influence and seasonal considerations also contribute, as it’s not uncommon for returns to stem from peer pressure or unused seasonal items that won’t create any value until a future season.

Unlike brick-and-mortar stores, online shoppers cannot physically inspect products before purchasing, leading to a return rate of up to 30% in e-commerce, nearly three times that of physical stores. To address this issue, understanding the myriad reasons customers request returns for online purchases, identifying their root causes, and crafting the perfect ecommerce returns program is essential to the success of today’s e-commerce merchants.

The bad news is that no magic solution will do everything for you automatically. But, the good news is that strategies are available to resolve or mitigate the risk e-commerce returns pose to your business. If you put in the work, the revenue retained from doing so is often considerably more than the value of the time put in.

We’re setting aside anything related to customer returns fraud and abuse for this article.

Top E-Commerce Return Reasons

1. Product-Related Issues:
   • Fit and Sizing Problems: Particularly prevalent in fashion and footwear, fit-related issues account for 70% of returns in these categories.
   • Damage or Defects: Products that arrive in less-than-perfect condition are a significant motive for returns. An estimated 4 out of 5 consumers cite damage and/or defects as the reason for their return, often a result of manufacturing defects or insufficient protective packaging that lead to damage caused in transit.
   • Inaccurate Descriptions or Quality Issues: Discrepancies between the descriptions or images on a product listing and the actual product delivered erode trust and can lead to disappointment. For example, variations in color from what was displayed on the product details page can cause disappointment.
   • Incompatibility: Products that do not fit with existing items can prompt returns.
     
     
2. Customer Behavior:
   • Gift Returns: Recipients often return unwanted or unsuitable gifts.
   • Price Sensitivity: As mentioned earlier, customers may return items if they discover a more competitive price post-purchase.
   • Changed Mind or Customer Error: Customers may simply reconsider their purchase after the fact, or perhaps they purchased the wrong item.
     
     
3. Operational Factors:
   • Shipping and Handling Issues: Late shipments, carrier delivery delays, lost packages, and other issues often trigger returns, especially if the items were intended as gifts.
   • Order Fulfillment Errors: Shipping incorrect items or shipping the wrong size, color, flavor, scent, or quantity increases the likelihood of returns.
     
     

Leveraging Data to Reduce E-commerce Returns

If you’re not already… you should be capturing returns data, which is a gold mine of actionable insights. Analyzing patterns can reveal:

1. Misaligned Expectations: Products regularly returned for size discrepancies indicate inaccuracies in product descriptions. Providing detailed size charts and fit guides can significantly reduce size-related returns (and minimize bracketing), so put effort into creating detailed, brand-specific sizing charts. Frequent returns of specific products suggest a gap between marketing and reality. Ensure descriptions are clear, detailed, and honest to set proper expectations.
   
   
2. Quality Control Issues: Modify fulfillment protocols to ensure safe delivery of damage-sensitive products. High defect and damage rates indicate manufacturing or shipping problems. Implement strict quality control measures to minimize defective items and hold suppliers accountable.

Merchants can use customer feedback to refine product descriptions, enhance quality control, and optimize customer education to reduce mismatches between expectations and reality.

Strategies to Minimize E-commerce Returns

1. Improve Product Presentation
   • Detailed Descriptions: Provide comprehensive information about size, materials, and functionality and offer educational content to help customers make informed decisions. This is not a one-time set-it-and-forget-it task but a recurring priority that uses continuous customer feedback to improve product data more and more over time.
   • Rich Visual Content: Include high-quality images accurately representing products, 360-degree views, and videos demonstrating products in action.
   • Augmented Reality (AR) and Virtual Reality (VR): Offer virtual fitting rooms or placement tools to help customers visualize products in their space
     
     
2. Engage with Customers Pre-Purchase
   • Live Assistance: To reduce return rates, customers should have access to excellent customer service representatives during the shopping process. These representatives can assist with inquiries before purchases are completed.
   • User-Generated Content: Encourage reviews, photos, and videos from previous buyers to create social proof and help customers make informed decisions.
   • Comparison Tools: Allow customers to compare items directly during checkout, which can reduce bracketing and near-guaranteed returns.
     
     
3. Optimize Promotions
   • Thoughtful Discounts: Avoid promotions that encourage excessive purchases and subsequent returns. Customers are inclined to artificially increase their cart size to qualify for free shipping and/or discount tiers, which can lead to returns of items not wanted or needed from the order.
     
     
4. Streamline the Post-Purchase Experience
   • Post-Purchase Support: Send follow-up emails with product setup, care, and usage tips. And, turn post-purchase interactions into new sales opportunities.
     
     
5. Incentivize Exchanges
   • Instant Exchanges: Offer immediate replacements for different sizes or styles (e.g., ReShop.com). Or, offer incentives for customers to keep items, such as discounts on future purchases.
   • Bonus Credit: Provide higher-than-expected refunds in the form of store credit for customers who choose exchanges over refunds.
     
     
6. Tie Returns to Customer Loyalty Programs
   • Tiered Policies: Offer free returns as a benefit for loyal customers/members while charging non-VIPs a modest return fee. Develop loyalty programs that encourage repeat purchases and reduce return rates.
   • Feedback Incentives: Encourage returners to provide detailed feedback, which will help refine future offerings. Use data analytics to track return patterns and identify areas for improvement.
     
     

Balancing Returns Management and Customer Satisfaction

An efficient returns policy is not just a cost center but a strategic opportunity to build loyalty. It’s how large retailers such as Amazon and Nike have increased loyalty through simplicity and predictability. Retailers should:

1. Simplify for Customers: Offer multiple returns options that meet the target demographic where they are, including the communication channels they prefer. It’s no longer acceptable to hide behind a website. Customers want several contact points: phone, email, chat, text (SMS), or support ticket/form submission.
   
   
2. Communicate Clearly: Be transparent about return policies, processing times, refund statuses, and return or restocking fees. Communicate final sale policies on product pages to avoid confusion before checkout. Don’t bury return policies three clicks deep (or more!). Consider offering perks for selecting exchanges over returns for a full refund (which helps retain revenue).

Implementing these strategies can help merchants reduce e-commerce return rates while maintaining customer trust and satisfaction. This leads to repeat business, a long-term relationship, and higher customer lifetime value (LTV). The key is turning your customers’ experiences into actionable improvement plans while anticipating and addressing potential issues before they arise.

Summary

As technology advances, innovations like AR, VR, and AI will play an increasingly pivotal role in reducing returns by giving customers an online shopping experience closer to what they’re used to ‘in store.’ At the same time, retailers must focus on fostering trust and transparency to align customer expectations with reality. By understanding and addressing the root causes of returns and implementing creative solutions, e-commerce retailers and brands can turn this challenge into an opportunity to engage with customers and nurture a long-term relationship that benefits both parties.

Ecommerce returns are an unavoidable aspect of online retail, and return rates have been steadily rising (averaging 20-30% across the industry, compared to under 10% in brick-and-mortar stores). This results in a critical challenge for retailers and a complex consumer experience. What was once a simple transaction has transformed into a nuanced ecosystem of choice. As consumers become comfortable moving more and more of their purchases online to take advantage of the nearly infinite product selection, they likewise become comfortable returning those purchases.

Understanding the Impact of Returns on Online Sellers

The reasons behind returns are as diverse as the products being shipped back. Some returns stem from practical issues like incorrect apparel sizing, inaccurate product descriptions, or items that don’t match online imagery. Others are driven by more strategic consumer behaviors like “bracketing,” where shoppers intentionally order multiple variations of a product, planning to keep only one, or “wardrobing,” where items are worn and then returned (a form of returns fraud). These practices exacerbate returns rates, posing significant challenges for online retailers in terms of inventory management, customer service, and logistics.

Regardless of the reason for the ludicrous $500+ billion value of goods returned in the US in 2024, the cost of supporting them is increasing with no relief in sight. The cost of labor is rising every year. The costs from transportation, real estate and facility operations, returns processing, and loss of sellable inventory… go up yearly. But while ecommerce retailers and brands can’t afford to alienate customers and disincentivize returns, they likewise can’t ignore the increasing margin erosion. An exceptional returns process builds trust, improves customer satisfaction, and encourages repeat purchases. Numerous studies have found that ~92% of consumers will buy from a retailer again if the return process is easy.

Brands must balance the costs of supporting returns with the benefits of customer loyalty. Consumers want to know their options before buying to ensure a hassle-free experience. Sellers wish to encourage conversion because acquiring a customer can cost five times more than retaining one. Offering free or hassle-free returns can make a business more appealing but also comes with challenges, especially for smaller merchants. Some Sellers use innovative strategies like peer-to-peer return solutions, localized drop-off points, or charging restocking fees to manage costs. Some leverage help from third-party logistics (3PL) partners to outsource returns management to minimize operational overhead such as inspection, relisting, processing, and issuing refunds. The item can then be stored at the 3PL to fulfill a new order.

The most cost-effective reverse logistics strategy involves leveraging a centralized returns center with a dedicated location to handle returns and specially trained (highly efficient) staff. It also involves automating processes wherever possible, utilizing return-ready packaging that can be easily resealed and reused to eliminate repackaging costs, and analyzing return data to identify trends and proactively address common return reasons. Streamlining the returns process through technology and efficient management minimizes labor costs and optimizes inventory handling and tracking.

However, most of the costs associated with returned orders lay in the transportation. Sellers can certainly negotiate better shipping rates, but there’s a limit to what discounts can be achieved, and Sellers that fully outsource their fulfillment to 3PLs don’t even have control over that piece of the puzzle. So, how can you introduce a competitive ecommerce returns program that accommodates all different types of returns? Let’s take a look:

Strategies to Minimize Returns

The first step in implementing an exceptional returns program to encourage customer loyalty is to spend the time to avoid returns in the first place. Businesses should focus on the many aspects of the customer experience that lead to returns. Additionally, companies should invest in packaging and void fill sufficient to prevent damage in transit. Lastly, merchants can identify and address the root causes of returns by carefully monitoring return trends beyond these suggestions.

To minimize returns, online retailers can focus on providing clear and detailed product information. This includes providing accurate product information using high-quality images and comprehensive descriptions, implementing robust sizing guides, and encouraging customer reviews to help potential buyers. When customers have all the information they need to make informed purchasing decisions, they are less likely to return items. For example, in the apparel industry, providing detailed measurements and fit guides can help customers choose the right size, reducing the likelihood of returns due to sizing issues.

Additionally, offering virtual try-on tools, such as augmented reality (AR) and 3D models, can allow customers to see how a product fits and looks without having to physically try it on. These tools provide a more accurate representation of the product, helping to reduce the number of returns and improve customer satisfaction. By investing in these technologies, online retailers can enhance the online shopping experience and build customer loyalty.

Leveraging Technology to Improve Returns

Technology can play a significant role in improving the returns process for online retailers. Returns management systems can help track and manage returns, making it easier to identify areas for improvement. These systems can automate many aspects of the returns process, reducing the time and effort required to handle returns.

Additionally, data analytics can provide insights into return trends and patterns, allowing online retailers to make data-driven decisions to minimize returns. By analyzing return data, retailers can identify common reasons for returns and take proactive steps to address them. For example, if a particular product has a high return rate due to sizing issues, the retailer can update the product descriptions and sizing charts to provide more accurate information.

Returns via Small Parcel Shipping

Ecommerce returns by small parcel shipping (USPS, UPS, FedEx, etc.) offer convenience for customers by allowing them to simply repackage their order, print and affix a pre-paid shipping label, and then either schedule free carrier pickup (in most cases) or dropoff to a convenient carrier location or network store such as a UPS Store, FedEx Office, or the like. But this type of return comes with major drawbacks, including very high shipping costs, the potential for the package to be lost or damaged in return transit, shipping delays that prevent the inventory from being resold and fulfilled promptly, lengthier time to refund/credit which is beyond the customer’s expectations because item inspection naturally takes longer.

Customers may be happier with parcel shipping directly to the returns processing facility (maybe they’re in a more rural setting, and it’s more convenient to choose their preferred carrier). Still, the extra shipping is terrible for the planet. Merchants will likely use lower-cost shipping available, which could potentially lead to additional delays. Merchants could receive hundreds or thousands of small parcel deliveries at a time that must be opened, inspected, perhaps rebarcoded with the accurate SKU for the condition, put away, inventory tracked, item relisted for sale, and the cycle begins again.

Another huge disadvantage is the removal of checks and balances against returns fraud. Trusting Sellers (or those looking to build trust with their customers by quickly refunding) may receive the wrong item back, no item at all, or a box of rocks (true story). Returns fraud and abuse substantially increase the overall cost of returns.

Boxless Returns

Boxless returns have several advantages. Firstly, transportation is the largest cost in ecommerce reverse logistics (assuming high-value items were not damaged in transit and returns fraud and abuse are not a factor). Giving the customer the option to bring the items to a local returns desk (aka attended kiosk) allows for consolidating returns into larger shipments sent to a regional facility in groups, reducing transportation costs considerably. They can then be sorted en masse and further consolidated so that full truckloads containing tens of thousands of units from nationwide kiosks are delivered to the returns facilities at once and ready for bulk processing. This allows retailers to prioritize the processing and resale of higher-value items first, maximizing the value of the recaptured revenue. It also reduces time and cost for the items shipped directly to liquidators or donation centers, skipping wasteful transit and processing time and cost.

Another benefit of boxless returns is the real-time ‘inspection’ at the time of dropoff of the items at the attended kiosk. The attendant may not thoroughly inspect the item for authenticity, damage, etc., but at least the retailer knows that an item is coming back and that it’s not a box of rocks.

Finally, this returns process appeals to the eco-conscious consumer by reducing packaging waste, which translates into more savings for Sellers.

On the other hand, most retailers don’t have the infrastructure to support nationwide boxless returns, requiring an attended kiosk within 10 – 12 miles of each customer. So this usually requires fully outsourcing the reverse logistics, at least until the point of delivery at the returns processing facility. This adds a layer of complexity, which adds cost. Plus, returns need to accumulate at the kiosks to some extent to achieve the most benefit from consolidation before shipping to the second consolidation facilities for final sortation and consolidation. The result is inherently built-in delays. However, the transparency offered by the returns partner allows some visibility into what’s coming back and approximately when and allows Sellers to ‘pre-sell’ the incoming returned units, which recaptures revenue more quickly.

Merchants must ensure customers understand what is expected and provide sufficient guidance to avoid confusion regarding boxless return procedures.

Buy Online Return In Store (BORIS)

Retailers with physical stores may consider allowing ecommerce customers to return their items in person. This is called Buy Online, Return In Store (BORIS). The returned goods can then be inspected and sold to future in-person customers or shipped in bulk to a returns processing facility for the next steps.

This can be more convenient for customers who live nearby and may want to exchange the item(s) for different ones but want to touch the alternatives (e.g., different sizes or colors) before deciding. That gives them more confidence in future online purchase decisions because they know their size in that brand. It also entices customers to make alternate purchases (upsell/cross-sell) using in-store coupons or promotions.

Kohl’s and Staples are particularly good at this, both for their own ecommerce returns and those of their partners for whom they serve as attended kiosks for boxless returns. Returns fraud and abuse are also less likely in these cases, and for items that can be resold in the store, processing, and resale occurs much quicker than any other returns approach as items are inspected ‘on the spot.’

More in-store traffic, increased brand and location awareness, and opportunities to delight new customers with the in-store experience are all key benefits to BORIS. Exchange is also more likely than a refund, preserving revenue and lowering overall costs by eliminating transportation costs in most cases. As discussed earlier, this eliminates the likelihood of items being lost or damaged in transit.

It’s important to remember that this BORIS does not eliminate logistics costs. The transaction must still be tracked; employees must provide customer service, inventory updates, liquidation or donation, and tax implications if the items aren’t resellable. So, there’s still some complexity, but overall, it’s an excellent option for ecommerce customers.

Home Pickup

Home pickup for ecommerce returns can significantly increase customers’ convenience and satisfaction. However, it also comes with operational challenges, such as increased costs and logistics complexities, which require careful consideration of the pros and cons before implementing such a service. The service is flexible because it often leverages the gig economy or specialty couriers, so it can be applied regionally using lower-cost transportation methods, depending on volume.

Further, a home pickup option can be perceived as a customer-centric service, improving brand image and customer loyalty. Many of these hyper-local services can support box-free home pickup, which helps when customers don’t want to procure packaging for their return or simply appreciate the option of a zero-waste return.

Home pickup does make returns more accessible, however, so customers may be more likely to return items they no longer want, potentially leading to higher ecommerce return rates. And it’s not without complexity as a third-party partner(s) manages logistics to coordinate. If several returns cannot be collected during a single trip around an area, transportation costs can actually increase rather than provide relief. However, if a retailer’s products are in a category or serve a demographic that would endear customers – or if this option is reserved for VIP clients – it can be a big win to include it as part of a returns program.

Keep It (Returnless Refund)

Have you ever created an ecommerce returns request only to be surprised by the Seller telling you not to bother sending it back? Packaging it up and dropping it off at a kiosk or locker is unnecessary. Just keep it, donate it, toss it, whatever you want, and you still get your refund.

Some retailers offer customers the option to keep the item based on purchase history, lifetime value, and/or no previous patterns of return abuse. And there are several scenarios where the ‘Keep It’ approach makes the most sense. For example, transportation costs for low-value or low-margin items could easily spin out of control. For items with sanitary concerns that cannot be resold, such as undergarments or mattresses, eliminating the time and cost of customer service and managing the returns, shipping, and processing might make the most sense.

Keep-it policies also help reduce the impact of returns on excess stock, which can cost a merchant even more by way of storage costs, space congestion that limits the ability to stock new products, and processing costs. Excess inventory is not considered a favorable position, precisely because of such negative impacts on operational efficiency.

Summary

Ultimately, ecommerce returns are a trade-off: they hurt margins but are essential to compete in a market where convenience and customer-centric policies drive success, because there’s always another place to get the item. No retailer is irreplaceable, especially in ecommerce.

The source of the problem primarily stems from customers’ inability to physically inspect products before purchase, leading to returns due to sizing, description discrepancies, or even shipping damage. Crafting the perfect ecommerce returns program requires Sellers to understand their core customer demographic and meet them where they are, which means offering the options customers prefer while managing costs. As customers have amazing experiences shopping with your competitors or even across categories, they naturally seek out similar experiences for future purchases.

The most common approaches to a returns program are small parcel returns, boxless returns, buy online return in-store (BORIS), home pickup, and returnless refunds. Each method offers unique advantages and challenges, but despite the associated costs and complexities, an exceptional returns program is crucial to building customer trust and loyalty.

Ecommerce has matured to the point that expectations have already been set before checkout. Retailers who follow through on the unspoken social agreement and even delight customers by going above and beyond are rewarded with trust, loyalty, and repeat customers as a result. A retailer’s probability of selling to a returning customer is higher than selling to a new customer, and repeat customers spend more than brand-new shoppers. Instead of viewing a purchase as the end goal in a transaction, sellers should approach the entire post-purchase journey as the start of a customer relationship that needs to be nurtured for it to grow and flourish over time.

Frequently Asked Questions

How can I reduce my number of returns?

Reducing returns starts with clear product descriptions, high-quality images, and accurate sizing charts. Providing detailed specifications and addressing common customer concerns in FAQs can help set expectations, and ensuring quality control before shipping and offering responsive customer support can minimize unnecessary returns.

What should I do with returned items that can’t be resold as new?

Depending on the item’s condition, you might be able to refurbish, discount, or resell it as an “open box” item. Some sellers donate returns to charity or work with liquidation companies. If using FBA, Amazon may offer refurbishment services, but fees will apply.

What are the benefits of offering free returns?

Offering free returns can increase customer satisfaction and loyalty, leading to higher repeat purchase rates. It can also reduce the perceived risk of buying online, encouraging more customers to make a purchase. However, it’s important to balance the costs of free returns with the potential benefits.

Retail is under siege by a sophisticated form of economic sabotage that threatens the very foundation of online commerce as it silently erodes retail profitability. The rise of online shopping has a corresponding rise in online returns with a significant increase in return fraud, as the convenience of ecommerce has made it easier for fraudsters to exploit return policies. Returns fraud and refund fraud have transformed from a minor inconvenience into a multibillion-dollar crisis that undermines the entire ecommerce ecosystem. In 2022, an estimated $816 billion of merchandise was returned in the United States, with a staggering $84.9 billion classified as fraudulent (more than 10%). The problem has grown rapidly, initially fueled by the explosive ecommerce growth during the COVID pandemic, with retailers experiencing a 67% increase in return rates over the past five years.

What is Return Fraud?

Return fraud refers to the act of manipulating a retailer’s return policy for personal gain. This deceptive practice involves exploiting the return process to obtain a refund, exchange, or store credit under false pretenses. Return fraud can manifest in various forms, including receipt fraud, where fake or altered receipts are used to return items, and price switching, where barcodes or price tags are swapped to secure a higher refund. Wardrobing, another common tactic, involves purchasing items with the intention of using them temporarily before returning them. According to the National Retail Federation, return fraud costs retailers billions of dollars each year, posing a significant challenge for both online retailers and brick-and-mortar stores.

The Economic Impact of Refund Fraud

The scale of returns fraud is staggering, and the financial consequences extend far beyond simple refunds, encompassing a wide range of fraudulent activity. Processing a single return costs an average of 20% – 30% of the original order value. The total annual cost of retail fraud has ballooned to $101 billion, with holiday seasons seeing returns fraud account for nearly 20% of all returns.

Types of Fraudulent Returns

There are several types of fraudulent returns that retailers need to be aware of. These include:

• Receipt Fraud: This involves creating or altering receipts to return stolen merchandise or items purchased at a discount for a full refund. This intricate scheme targets both online and physical retail stores. To effectively combat these schemes, retailers must employ advanced tools and strategies to detect return fraud and protect their bottom line.
• Price Switching: A deliberate manipulation requiring careful execution whereby barcodes are altered, or price tags are swapped between two items with distinctly different prices to obtain larger refunds. For example, one might purchase a higher and lower-priced item, swap price tags between the two, and then return the lower-priced item for the higher refund amount. Or they may modify the barcode on an item to trigger a more favorable refund.
• Product Swapping: A type of return fraud where a new condition item is purchased and then an older, worn, or broken item is returned in the new product’s packaging. The business approves the refund, not knowing about the deception until the next customer has a bad purchase experience.
• Empty Box Fraud: The scammer reports that the box was delivered empty or missing some of the intended contents, requesting a refund or replacement without shipping anything back to the retailer.
• No Delivery Claim: Customers claim their order was not delivered and claim a full refund when the item(s) were indeed delivered; keeping both the item and the refund.
• Chargeback Fraud: Customers dispute legitimate charges with their credit card company, claiming the transaction(s) were not unauthorized or that they never received the product (similar to making a No Delivery claim with the Seller). This forces the retailer to prove the order’s validity or lose the value of both the product and the revenue.
• Wardrobing: This involves purchasing an item with the intention of only using it temporarily, and then returning it for a full refund, effectively “renting” the product for free. This is particularly common for luxury items that might be needed for one-time events or one-time use, such as parties, meetings, or to complete a non-recurring task, treating online retailers like free rental services.
• Employee Collusion: This involves dishonest employees collaborating with outside individuals to manipulate the return process or facilitate fraudulent returns.
• Cross-Retailer Return Fraud: This involves purchasing an item at a discount from one store and then returning it for its full retail value at another retailer.
• Bogus Product Defect: A customer falsely claims that a product was delivered damaged or otherwise defective to either secure a refund without returning the item or to receive a replacement and complete the transaction, having acquired two for the price of one. This involves fabricating or exaggerating product flaws to trigger the retailer’s return or replacement policy without genuine grounds for the claim.
• Store Credit Abuse: Store credit abuse is a type of return fraud that involves manipulating the return process to obtain store credit or refunds under false pretenses. This can include returning items that were not purchased or returning items that are not in their original condition. To prevent store credit abuse, retailers can implement strict return procedures, such as requiring receipts and identification for returns. Limiting the amount of store credit that can be issued for returns and monitoring transaction data to detect suspicious activity are also effective measures. By taking these steps, retailers can reduce the risk of store credit abuse and protect their business from fraudulent activities.
• Component Stripping: Primarily targeting high-end electronics; scammers purchase the devices, remove valuable components to sell them, and then return the items with the missing components. Often, retailers have no idea until the item is resold and doesn’t work for the next customer.
• Bracketing: A risk management shopping approach where customers intentionally order multiple variations of a product, knowing in advance that they will only be keeping one or a select few. The convenience of browsing online catalogs and knowing that the returns will be free allows consumers to “try it before they truly buy it.”

These fraudulent activities not only erode profitability but also complicate inventory management and customer service efforts.

Consequences of Return Fraud

The consequences of return fraud can be severe for retailers. According to the National Retail Federation, return fraud costs retailers an estimated $100 billion each year. Beyond the immediate financial losses, return fraud can damage a retailer’s reputation and erode customer trust. When customers perceive a retailer as vulnerable to fraud, they may question the integrity of the business, leading to a decline in customer loyalty. Additionally, return fraud can create significant inventory management issues, as retailers may not receive the items back that they think they have, further complicating stock control and forecasting.

Preventing Return Fraud

Preventing return fraud requires a multi-faceted approach. Retailers can start by implementing clear return policies and communicating them effectively to customers. Cutting down on legitimate return causes helps separate returns from return fraud. Utilizing digital tracking and online portals to record each customer’s return history can help detect fraud patterns. Advanced technologies like machine learning algorithms, artificial intelligence, and fraud detection software are invaluable tools in identifying and preventing fraudulent returns. Training employees to recognize and prevent return fraud is also crucial. By equipping staff with knowledge and tools to spot suspicious activities, retailers can significantly reduce the risk of fraudulent returns.

Summary of Refund and Returns Fraud

Returns fraud represents a complex economic challenge requiring continuous monitoring and adaptation. Retailers must remain vigilant and leverage the latest fraud detection tools and technology while designing a returns program that protects their bottom line while encouraging customer trust and loyalty. By employing technology, training employees to spot patterns, and consistently enforcing return policies, retailers can prevent systemic abuse and minimize the impact of fraudulent activity on profitability. The battle against returns fraud transcends simple loss prevention. The ability to detect, prevent, and mitigate fraudulent returns and refunds will separate successful retailers from vulnerable targets.

Frequently Asked Questions

How serious is return fraud?

Return and Refund fraud costs sellers $100 billion a year.

How to prevent return fraud?

The less anonymous people are when doing returns, the harder fraud becomes. Requiring customer ID or other details beyond just a receipt makes fraud harder.

Is return fraud hard to prove?

Yes. It’s hard to separate legitimate returns from return fraud.

In the highly competitive world of ecommerce, delivering an exceptional customer experience is the key to fostering long-term loyalty. While much focus is placed on the initial purchase journey, the often-overlooked return process can make or break a customer’s relationship with a brand. While many ecommerce businesses view returns as a painful but necessary evil, forward-thinking retailers are discovering their untapped potential for building customer loyalty. In today’s competitive marketplace, a positive returns experience can transform one-time shoppers into lifelong brand advocates, driving sustained growth and profitability.

The challenge lies in meeting the lofty expectations set by industry giants. Shoppers today demand frictionless, convenient returns, with 76% of consumers considering free returns a crucial factor in their purchasing decisions. Brands that fail to deliver on this expectation risk severe consequences, as 89% of customers are less likely to buy from a retailer after a poor returns experience. Conversely, those who prioritize seamless returns can reap significant benefits, with 97% of shoppers saying they’d buy again from a brand that offers a positive returns process.

The evolution of ecommerce has led to a rise of return rates (particularly in the fashion industry, where some apparel brands experience return rates as high as 40%!), has dramatically shifted customer expectations around returns. Modern shoppers demand easy, quick, and convenient return processes. Indeed, they demand flexibility and transparency throughout the entire purchase lifecycle – which includes returns and clear return and refund policies.

What is a Returns Policy?

A returns policy is a set of rules that outlines the conditions under which customers can return purchases. It provides details on how and when a return can be made, whether customers will receive a refund, exchange, or store credit, and any other necessary requirements. For online sellers, a clear and fair returns policy can help build customer trust, reduce disputes, and improve overall customer satisfaction.

Key Return Policy Terms

1. Return: When a customer sends back an item they purchased, whether due to defects, dissatisfaction, or other reasons.
2. Refund: The process of reimbursing the customer for the returned product. Refunds can be issued via the original payment method, store credit, or alternative methods.
3. Exchange: When a returned item is replaced with another of equal value, whether it be the same product (e.g., a different size or color) or a different product entirely.

Common Return Policy Elements

1. Time Frame:
   The number of days customers have to return an item. This period typically ranges from 15 to 30 days but may extend up to 90 days for certain products or special occasions.
2. Refund Information:
   How customers will receive their refund, whether through their original payment method, store credit, or another method.
3. Customer Support:
   Contact details for customer service, including email, phone, or live chat, so customers can get assistance with returns.
4. Return Instructions:
   Step-by-step guidelines on how customers should return an item, including options such as mailing it back, returning it in-store, or using a drop-off location.
5. Condition of Returned Items:
   Any conditions regarding the state of the product being returned, such as whether it must be unused, in original packaging, or accompanied by a receipt. Return policies often have specific rules on damages for items.
6. Return Shipping and Restocking Fees:
   If applicable, any fees customers may be required to pay for returning an item.
7. Exceptions and Restrictions:
   Details on which products are not eligible for return, such as final sale items, perishable goods, or digital downloads.

Legal Considerations

1. Compliance with Consumer Protection Laws:
   Online sellers must comply with regional and international laws related to consumer rights, such as the U.S. FTC regulations, EU Consumer Rights Directive, or other applicable legislation.
2. Refund Processing Time:
   Some jurisdictions require refunds to be processed within a certain number of days after receiving a returned product.
3. Transparency in Policy Terms:
   Sellers must be upfront about any conditions, fees, or exceptions to avoid misleading customers and potential legal disputes.
4. Privacy of Customer Data:
   Ensure that any customer data collected during the return process is handled in compliance with data protection laws such as GDPR or CCPA.

Return Policy Best Practices for Online Sellers

1. Ensure Accessibility:
   The return policy should be easy to find on the website, preferably linked in the footer, checkout page, and product descriptions.
2. Offer Free Return Shipping:
   Consider covering the cost of return shipping, especially during the holiday season, to encourage customer confidence and repeat business.
3. Provide a Hassle-Free Process:
   Simplify the return steps to enhance the customer experience and reduce friction.
4. Use Clear and Simple Language:
   Avoid complex legal jargon so that customers can easily understand their rights and responsibilities.
5. Request Customer Feedback:
   Collect feedback from customers on their return experiences to identify areas for improvement.
6. Analyze Return Data:
   Track return reasons and trends to make adjustments to product quality, descriptions, and return policies as needed.
7. Mitigate Return Fraud:
   Return Fraud is an inescapable part of providing returns, but the benefits of providing online returns can be maintained while still protecting against fraud.

A well-crafted return policy not only protects the business but also fosters customer loyalty by demonstrating fairness and transparency.

Understanding the Importance of a Returns Program

An effective and efficient returns program is a cornerstone of any successful online business; directly influencing customer satisfaction and reinforcing loyalty. When customers know they can return or exchange items with ease, it transforms potential frustration into a positive experience, encouraging repeat purchases and strengthening brand trust. This sense of security and flexibility is crucial in today’s competitive market, where customer expectations are higher than ever.

A poorly managed returns program can severely damage customer loyalty. When customers encounter difficulties returning or exchanging items, frustration and distrust can quickly set in. This negative experience can lead to unfavorable reviews, a decline in repeat business, and ultimately, a loss of customer loyalty.

Sustainability and Eco-Friendly Return Interest Rising

In addition, customers are becoming increasingly environmentally conscious; sustainability and environmental impact are becoming a deciding factor for more and more customers. Including sustainability into a returns program can capture this market segment’s interest and loyalty.

Create a Clear, Customer-Friendly Return Policy

Transparency is crucial when it comes to building trust and confidence. Make sure the refund policy is prominently displayed, written in plain language, and covers all the key details upfront. Having a purchase receipt is essential for returns, as it determines eligibility and the return window. Refunds will be processed back to the original payment method. Spell out exactly what’s eligible for return, the timeframe, any fees, and the available resolution options like refunds, exchanges, or store credit.

Different research studies report that between 60% and 80% of customers check the return policy before making a purchase. So a clear, easy-to-understand policy can be the difference between a lost sale and a prospective loyal customer. Setting reasonable expectations and making the process seamless will encourage shoppers to buy, knowing they can return items hassle-free. And remember, most online shoppers consider free returns a crucial factor in their purchasing decisions.

Benefits of a Customer-Centric Returns Program

Implementing a customer-centric returns program offers numerous advantages. These benefits include:

Offer Flexible Return Methods with Free Return Shipping

Convenience is king, especially when it comes to returns, and especially for those that spend the most online (30 – 60-year-olds). Items purchased with gift receipts often have more lenient return policies. For example, not all customers have easy access to packing materials or printers, so providing flexible return options – like including pre-paid labels with the purchase or offering boxless drop-off locations (aka ‘return bars’) – will ensure a seamless experience by meeting the customer where they are.

Generous policies play a crucial role in building trust and fostering long-term relationships. Extended returns windows, (even if only for unopened or unused items), signals to customers that their business is a top priority. Catering to different customer preferences, demonstrates commitment to the customer relationship, increasing the chances they’ll shop again in the future. Empowering shoppers to make informed decisions up front has also been shown to encourage larger purchases, more frequent shopping, and increased recommendations.

Building a VIP Loyalty Program Around Returns

If returns are just too expensive in categories with razor-thin margins, consider offering a loyalty program that caters specifically to the needs of high-value customers. By offering VIPs enhanced returns benefits such as free return shipping, expedited processing, or extended return windows, brands can demonstrate their commitment to their satisfaction, deepening their loyalty and encouraging them to shop more frequently, a point which is frequently confirmed by respondents in research studies. Such a VIP program helps build a moat around the returns process to prevent return scammers from abusing returns.

Incentivize Exchanges Over Refunds

While refunds are sometimes unavoidable, savvy retailers can leverage exchanges as a powerful tool for retaining revenue and strengthening customer bonds. Restocking fees can significantly impact the profitability of returns, making it crucial to manage these costs effectively. By incentivizing exchanges through exclusive discounts, coupons, free shipping, or even offering the option to exchange for a more expensive item, companies can encourage shoppers to stay within their ecosystem, transforming potential lost sales into loyal, repeat customers. Nearly all respondents across research studies say they’ll buy again if the returns experience is easy.

Process Customer Returns Quickly via Automation

Time is of the essence when it comes to returns. Speedily handling returns not only helps with customer satisfaction, but also brings inventory back into a sellable state as soon as possible.

Implementing an automated returns management system is perhaps the most impactful step brands can take to improve both the customer experience and inventory processing of returns. Clear return and refund policies are crucial in such a system, as they streamline the return process and enhance customer satisfaction. By streamlining the returns workflow through self-service portals, eligibility rules, and seamless integrations, businesses can resolve requests quickly and accurately – freeing up time to focus on higher-value tasks.

Efficient returns handling not only prevents customers from becoming frustrated, but more than half of customers say they’d be willing to spend more if they knew their refund would be processed quickly. Streamlining the returns workflow through automation can drastically reduce wait times, building trust and loyalty in the process.

Once returns arrive in the warehouse, automation also helps to streamline the receiving workflow to match the item to the customer’s order and bring the inventory back into the system for resale.

Collect Customer Feedback to Improve Customer Satisfaction

Regularly gathering data and feedback on returns and the returns process is crucial for continual improvement and reducing the cost of returns. Track key metrics like return rates, reasons for returns, along with customer satisfaction scores, to identify trends and pinpoint areas for optimization. This data-driven approach allows sellers to address pain points, fix underlying issues (which lowers cost), and tailor the returns experience to the customers’ evolving needs. By continuously improving the process based on their input, customers will see their satisfaction is a top priority.

Clearly Display Returns Policy for Customer Ease of Access

Displaying returns policies clearly and prominently is essential for building trust and confidence with customers. Here are some effective strategies for making the site’s returns policy easily accessible:

Website or App Footer for Easy Access

One of the most effective places to display the returns policy is in the footer of the website or app. This ensures that customers can easily find and reference it at any time. Additionally, consider including links to the returns policy on product pages, during the checkout process, and within the customer account dashboard. By making the returns policy readily available, businesses demonstrate transparency and commitment to customer satisfaction.

Summary

The returns process is a critical touchpoint that can either strengthen or undermine customer loyalty. Return shipping costs significantly impact a business’s finances when customers opt for refunds instead of exchanges. By prioritizing transparency, flexibility, speed, and automation, businesses can transform this often-overlooked aspect of the customer journey into a strategic advantage that keeps shoppers coming back. Just look at the success stories. It’s not hard to find companies that reduced their return rate from 15% to 4% or converted 30% of returns into exchanges. When the returns experience is seamless, customers are more likely to remain loyal, make repeat purchases, and even become brand advocates. It’s no secret that loyal customers are incredibly valuable.

So, don’t let returns be an afterthought. Embrace them as an opportunity to build trust, boost satisfaction, and cultivate a base of devoted, lifelong customers. They may be expensive in some cases, but they’re a part of doing business. And by investing in the returns process with a clear policy and convenient options presented to the customer, it becomes a differentiator, and brands will position themselves as industry leaders in customer satisfaction, which encourages loyalty and attracts new business.

Frequently Asked Questions

What is a Return Policy?

A return policy is a store’s rules on how customers can return unwanted or problematic products. Return policies can allow for refunds (either for cash or store credit), exchanges (the same item, or upsells), or both. There are usually time limits or specific product warranties, and often exceptions based on the kind of goods sold.

Do I Need a Return Policy?

In the US, consumer protection laws require retailers to uphold sales promises, which includes any return policy specified. However, not all states require a return policy for online retailers. Having a clear and easily accessible return policy helps prevent any ambiguity.

The rise of ecommerce has revolutionized the retail landscape, offering unparalleled convenience and putting an unlimited selection of products at consumers’ fingertips. However, this boom has also led to a significant increase in return rates, posing challenges for retailers. Returns have significant operational and financial implications for online retailers. High return rates burden ecommerce operations, increasing processing and restocking costs. Understanding the reasons behind this trend and identifying who is most likely to return online orders is crucial for developing effective strategies to mitigate returns.

What is a Return Policy in Ecommerce?

A return policy in ecommerce is a set of guidelines that outlines how customers can return products they are not satisfied with. It is a crucial component of building trust and ensuring customer satisfaction. A well-crafted return policy should clearly state which items are eligible for return, the steps to initiate a return, and what customers can expect during the return process. Additionally, it should specify any fees associated with returns, providing transparency and setting clear expectations. By having a comprehensive return policy, businesses can improve customer experience and foster long-term customer loyalty.

Understanding Ecommerce Returns

Ecommerce returns are an inevitable part of the online shopping experience. Understanding the intricacies of ecommerce returns is essential for businesses aiming to enhance customer satisfaction and streamline their returns process.

Average Return Rate for Ecommerce

The sheer popularity and ease of online shopping have led to a significant increase in the frequency of ecommerce returns. The average return rate for ecommerce varies across different industries and product categories. However, studies indicate that the average return rate for ecommerce hovers around 20-30%. This means that for every 100 products sold, 20-30 are returned. This return rate is at least double the rate observed in brick-and-mortar stores. Companies across industries are grappling with the financial impact of unsustainable return rates. Understanding this average return rate is crucial for ecommerce businesses to effectively plan and manage their returns process. By anticipating return volumes, businesses can allocate resources more efficiently, optimize their reverse logistics, and implement strategies to reduce return rates.

Why are Return Rates so High?

This can be attributed to several key factors. The inability to physically inspect products before purchase makes it more likely that items will not meet customer expectations. Product sizing, quality, and functionality are common pain points leading to returns. Inaccurate product descriptions, poor-quality imagery, and lack of detailed sizing information often result in receiving items that don’t meet customer expectations. Additionally, “wardrobing” – the practice of wearing an item and then returning it – and the similar practice of “bracketing” – where customers intentionally order multiple variations of a single product with the plan to return all but one – have become increasingly common, driven by the convenience of ecommerce.

Certain product categories are more susceptible to high return rates. Apparel, for instance, can see return rates as high as 40% or more as customers struggle to find the right fit without trying items on. Other segments like luxury goods, beauty, and electronics also tend to have elevated return volumes. Ultimately, the anonymity of online shopping compared to in-person experiences contributes significantly to the ecommerce return epidemic.

Fraudulent returns are another growing challenge, with many merchants reporting incidents of thieves taking advantage of lax policies that are meant to encourage customer loyalty by endeavoring to achieve customer satisfaction. This dynamic has forced retailers to implement stricter measures to validate legitimacy and protect profit margins. Meanwhile, consumer expectations around generous, hassle-free return policies remain high, creating a delicate balance for merchants to manage.

Besides dissatisfaction with product quality, appearance, functionality, or sizing or fit issues, some other key factors driving the high ecommerce return rates include customers receiving the wrong or damaged product(s), as well as changing one’s mind about the purchase, and buyer’s remorse.

Return Rate Demographics

Several research studies have been published on the demographics associated with high ecommerce return rates, and which groups are returning items most often.

• Wealthier Countries: Countries with higher economic strength, like the U.S., U.K., Switzerland, and Germany, have higher return rates. This is partly due to more lenient return policies and better consumer protection laws.
• Frequent Shoppers: Impulsive shoppers who are excited to explore new products tend to return items more frequently.
• Apparel Shoppers: Customers buying apparel have one of the highest return rates because they can’t try on clothing before purchasing online.

These insights suggest that understanding the demographics and behaviors of a brand’s customers can help retailers implement strategies specific to their business to reduce return rates.

Causes of Ecommerce Returns

Ecommerce returns can be driven by various factors, and understanding these causes is essential for businesses to implement effective strategies to minimize returns.

Some of the most common reasons include:

• The item did not fit as expected
• The item was not as described
• The customer received the wrong item
• The item was damaged or defective
• The customer changed their mind
• The item did not arrive on time

Understanding these reasons is vital for businesses to identify areas for improvement. By addressing issues such as inaccurate product descriptions, poor-quality imagery, and inadequate packaging, businesses can reduce the likelihood of returns and enhance the overall customer experience.

Broken or Damaged Products

Broken or damaged products are one of the most common reasons for ecommerce returns. This issue can arise due to poor packaging, mishandling, or shipping-related problems. To minimize the risk of damaged products, businesses should invest in high-quality packaging materials and ensure that products are handled with care throughout the shipping process. Additionally, offering shipping insurance can provide an extra layer of protection against losses.

Businesses can take several steps to prevent damage during shipping, including:

• Using sturdy and protective packaging materials
• Clearly labeling packages as “Fragile” or “Handle with Care”
• Providing detailed instructions on how to handle and care for the product
• Offering tracking and monitoring services to ensure timely delivery

By implementing these measures, businesses can reduce the risk of damaged products and minimize the number of returns due to this reason. This not only enhances customer satisfaction but also helps protect profit margins and improve overall operational efficiency.

Return Costs

Ecommerce returns are costly for retailers, ranging from 20-65% of the original item value in most cases when accounting for shipping, restocking, and potential loss in value, which doesn’t include the initial fulfillment cost of picking, packing, and delivery. Pure economic waste costs the industry hundreds of billions of dollars in profits each year. Industry estimates suggest cutting returns in half could boost profits by 25%. Effectively managing returns is thus essential for ecommerce profitability and sustainability and a well-designed returns program with a customer-friendly policy, streamlined process, and responsive communication can enhance customer satisfaction and loyalty leading to higher lifetime value and lower financial loss due to returns.

Minimizing Returns

Improving product descriptions, providing size guidance and high-quality visuals, and leveraging AI to offer virtual try-on tools as well as identify “serial returners” before orders are shipped, are some of the strategies companies are adopting to reduce return rates. The effort is worth the investment because effectively managing ecommerce returns is not just to improve the bottom line, but also to build a positive brand reputation, foster customer loyalty, and drive repeat business.

Integrating ecommerce returns management with sustainable commerce practices, like product refurbishment, donation, and resale programs, can also help minimize waste and environmental impact. As consumers become more conscious of sustainability, retailers that demonstrate responsible reverse logistics can enhance their brand reputation.

Customers shopping online are more prone to making impulse purchases, which coupled with the convenient and lenient return policies offered by many ecommerce brands, can inadvertently encourage higher return rates.

Frequent returns can also damage brand reputation and erode customer trust, leading to higher cart abandonment. Businesses must strike a balance between intentionally attracting high-value customers with customer-centric returns policies and limiting sales, and thus growth, by being too restrictive in this area.

Summary

Changes in consumer behavior, such as the preference for easy returns and free return shipping, are driving higher return rates, which has significant operational and financial implications for any ecommerce business, forcing them to tackle the problem head-on as it can no longer take a back seat.

The challenges and strategies associated with customer returns in ecommerce include managing the negative impact on profitability and enhancing customer experiences through effective return policies and streamlined processes.

A multi-pronged approach focused on enhancing customer experience, optimizing reverse logistics, and leveraging data-driven insights can transform this liability into a competitive advantage. Offering incentives like extended return windows, store credits, or free exchanges instead of refunds can encourage customers to retain their purchases and prevent revenue erosion.

By getting returns right with clear returns policies, demographic-tailored solutions that don’t compromise business objectives, and proactive customer support, retailers can build customer loyalty, improve profitability, and contribute to more sustainable commerce. If done well, customers will buy again. Done poorly, and they will never look back.

Actively gathering customer feedback through various channels, such as email and social media, is crucial for improving ecommerce practices. Understanding the customer journey in relation to minimizing return rates is also essential. This trend has significant operational and financial implications for online retailers. High return rates burden ecommerce operations, increasing processing and restocking costs. Keeping customers informed about the status of their returns through proactive communication methods, such as email updates, is crucial for maintaining customer satisfaction and loyalty.

Frequently Asked Questions

Who Pays for Return Shipping?

The Seller or the Customer can pay return shipping costs, based on the Return Policy specified by the Seller.

How are Refunds Provided to Customers?

Based on the Return Policy, sellers commonly refund the payment method used, or issue store credit.

How Much Does Returns Cost Sellers?

This depends on industry and product category but returns usually cost around 17% to 30% of the product price. Hence the need for sellers to optimize return processing.