Ecommerce returns have become a $890 billion problem. That’s 17% of all merchandise sales in 2024—up from 14.5% in 2023.
While that may seem like a big bad problem, there are ways you can manage and reduce online product returns. And if you manage it well, it can even improve brand loyalty and increase conversions.
This guide tells you how to handle customer returns in ways that reduce cost or fraud, while improving the customer shopping experience.
Common Reasons for Ecommerce Returns
Since the pandemic, shopping had shifted online–physical stores turn to ecommerce, and consumers embrace digital shopping. As these stores keep optimizing for the digital shopping experience, shoppers also grown increasingly comfortable making purchases online.
Today, ecommerce has become a $6 trillion industry, bringing with it issues that arise from online shopping—one of it being ecommerce returns.
There are multiple fraud cases:
- Wardrobing, where customers return worn items
- Bracketing, where customers buy the same item in multiple colors and sizes, then returning the ones that don’t fit
- Sending back a different item from what they’ve initiated a return request for
- Sending stolen items back with fake receipts
Then there are legitimate reasons like:
- Defective or wrong product
- Sizing or fit issues
- Item doesn’t match description
- Product quality
It’s inevitable. But with awareness and having the right tools, returns can be managed such that it doesn’t mess up your operations or eat into a chunk of your margins.
Cost of Consumer Returns for Ecommerce
An increase in returns leads to monetary costs like:
- Lower expected revenue since the returns might turn stale post-season and will have to resell at a heavily discounted rate
- Additional labor costs for processing returns, some brands even hire staff dedicated to this
- Shipping costs for moving the returns around
- Cost of replacements since brands have to send a new piece (even if they may not be able to resell the returned item)
It’s almost like doubling the operational costs, sometimes even more to check the items before deciding the next step.
Besides obvious monetary costs incurred, there are also secondary costs that are equally painful, not just for the brand but for the Earth.
It may hurt the brand if items that are clearly worn slip through the cracks and get sold to the next customer. A poor returns experience will also impact brand perception.
Carbon emissions from the extra transportation of returned goods add stress to the environment. Repackaging creates more material waste. Disposing returns that brands can no longer resell contributes further to the carbon footprint.
With the costs associated with product returns, ecommerce brands are actively coming up with strategies to reduce returns and handle it well for better operational and customer experience.
Statistics for Ecommerce Returns
Ecommerce returns
- The average ecommerce return rate is estimated to be 20–30%, which means 2 to 3 items out of 10 are returned [1]
- Customer returns cost $25 to $30 on average [2]
- For every $100 in returns, $13.70 goes to fraud [3]
- 69% of shoppers admit to wardrobing in 2024, up from 30% in 2023 [4]
- 82% of shoppers say that the returns policy influence their purchase decisions [5]
Ecommerce returns by industry
The numbers by industry coincide with the reasons we shared above.
Clothing and shoes have the highest returns. Not surprising, given that items in this category can be subjective, sizes may vary and fit depends on individuals. Plus, people buy clothes—a lot.
Handling Ecommerce Returns for a Better CRX
How you handle ecommerce returns can determine if customers return or not (pun intended). A good customer returns experience (CRX) can reduce friction and increase your net customer lifetime value.
Having a proper ecommerce returns management process can also make your (or your team’s) life smoother while reducing costs.
Here are some ecommerce returns best practices with examples.
Buy Online, Return In-Store (BORIS)
Implementing BORIS allows customers to purchase items online and return them at physical store locations. This convenience fits seamlessly into their daily routines, for instance, they can easily drop the return parcel at the store on the way home from work.
It also reassures them that they will receive the refund, because parcels might get lost during delivery.
Activating BORIS may create a line in store and get in the way of shoppers who’re there to buy, but it also helps ensure that the item is real and in reselling condition. Brands like Bloomingdale’s, The Home Depot and Nordstorm have great BORIS policies that make shopping a breeze.
Allowing drop-off at a third-party point
Partnering with third-party locations offers customers additional convenience for returns. This is particularly beneficial for ecommerce brands with no physical stores.
The third-party stores stand to gain by having more foot traffic, which often leads to purchases (or at least brand awareness).
Many ecommerce brands have partnered with Happy Returns, an ecommerce returns solution acquired by UPS, that allows them to access third-party locations that accept returns. These locations are called a Return Bar®. There are nearly 8,000 of them, including Staples and Ulta Beauty.
Home pick-ups
Offering home pick-up services for returns adds a layer of convenience, particularly appealing to busy customers or those unable to visit drop-off locations.
For instance, Bloomingdale's offers a Return Pickup service, providing customers with the convenience of having their returns collected directly from their location. This service is available in select U.S. cities, including Chicago, Los Angeles, and San Francisco.
There’s a flat-rate fee of $6.95. But busy shoppers are likely willing to pay for the convenience since a trip to the store or post office would take hours of their precious time.
Keep the item
In some cases, allowing customers to keep the item while still receiving a refund can be more cost-effective than processing a return.
Retailers like Amazon and Walmart have implemented "returnless refunds" for low-cost or bulky items.
This reduces return shipping costs and enhances customer satisfaction by resolving issues swiftly. Brands may offer this but are unlikely to publicize it to prevent fraud. Additionally, there are measures they can take to ensure this is only offered to real shoppers.
Reducing Ecommerce Return Rates
Getting to the root of the problem is still key to managing ecommerce return rates.
Earlier, we discussed the common reasons of online product returns like defective products, items not matching description, or style doesn’t fit. There are multiple ways brands can tackle this issue.
Enhancing product data
Providing accurate and comprehensive product information helps set clear customer expectations, reducing the chances of returns due to misunderstandings.
Detailed specifications, such as dimensions, materials, and functionalities, enable customers to make informed purchasing decisions.
For instance, including precise measurements and material details for a piece of furniture allows customers to assess its suitability for their space, minimizing returns. Telling customers the clothing material and sizing also helps shoppers make a more informed decision.
Hypotenuse AI’s product data enrichment software helps ecommerce brands clean up their data and ensure accuracy through AI checks. On top of that, the AI also crawls the web and other sources to enrich your ecommerce product data.
Use informative product descriptions
Product descriptions aren’t just there for SEO. They also help convert and filter out shoppers that may not need the product or are actually looking for something else in your store.
Crafting clear and detailed product descriptions gives customers a better understanding of the product’s use case, features and benefits.
This clarity helps shoppers make confident choices without resorting to bracketing (buying items in multiple colors and sizes). By providing straightforward information, customers can accurately determine the best option for their needs.
Hypotenuse’s AI product description generator helps ecommerce brands create SEO-optimized, detail-rich product descriptions in bulk, and in your unique brand voice. This cuts down the time required to produce descriptions, while ensuring that each one of them is compelling and accurate.
Provide high-resolution product images
Product images are crucial, especially in industries like fashion and apparel and furniture. These help shoppers visualize how the item would look when they’re using it.
Therefore, it’s important that brands use high-quality images that showcase products from multiple angles and in various settings.
This visual clarity helps set realistic expectations, reducing the likelihood of returns due to the product appearing different from what was anticipated. For example, displaying a dress on models of different body types and in various environments can provide a comprehensive understanding of its appearance and fit.
Hypotenuse’s AI picture editor supports ecommerce brands in product image batch editing. It can edit your images in many ways such as removing backgrounds, generating studio-quality ones to match your product, and increasing the resolution of blurry images.
Pack and ship items securely
Returns due to defects and damage is a common cause. Ecommerce brands should invest in appropriate packaging materials and methods tailored to the specific product type to protect the items. Costly but necessary.
For instance, fragile items should be bubble-wrapped. Electronics may require anti-static packaging to maintain their integrity upon arrival. Shipping labels like “fragile” or “this side-up” also help inform carriers to handle the package with extra care.
Managing return frauds
Having a good returns policy can reduce friction and increase customer satisfaction. But how do you balance creating a positive experience and ensuring you don’t get taken advantage of?
Offer exchanges or store credits
Instead of providing cash refunds, consider offering exchanges or store credit.
This approach keeps the value within your store and can deter those looking to exploit return policies for quick cash. Plus, it encourages customers to find something else they might love from your offerings.
Reduce the return window
Shortening the time frame for returns can help minimize fraudulent activities. A tighter return window means less opportunity for misuse, while still accommodating genuine customers.
A typical return window for fashion and apparel is 30 days, with brands like Adidas, Zara and Mango adopting similar windows. Same for other industries like home and living and industrial supplies.
For seasonal collections, it can help to reduce this return window to ensure that returns can be resold within the same season.
Identify high-risk shoppers
Identifying high-risk shoppers is essential for ecommerce businesses to prevent return fraud and policy abuse.
Platforms like Loop offer advanced fraud detection tools that utilize machine learning to evaluate returns in real time, flagging those with a high risk of fraud.
By analyzing customer behavior and return patterns, Loop enables retailers to customize their return policies, implement necessary controls, and maintain a seamless experience for legitimate customers.
Conclusion
Managing ecommerce returns is vital for maintaining customer satisfaction, conversions and operational efficiency.
While we want to improve the customer returns experience through strategies like flexible return options, we must also make sure that shoppers don’t take advantage of it.
Balancing the strategies laid out in this article is key to winning in this area, allowing you to streamline your returns process, minimize losses, and foster customer loyalty.
