According to the National Retail Federation (NRF), the total amount of retail returns in 2024 was $890 billion. Although in-store retailers can simply take a returned product and reshelve it, the process is far more complex for eCommerce businesses. While eCommerce has revolutionized shopping convenience, the rise in online purchases has also led to a surge in return rates, eating into retailers’ profit margins. From refunds and restocking to reverse logistics, businesses are being forced to absorb mounting costs, putting pressure on their bottom line.
Many businesses focus solely on the direct costs of returns, but hidden expenses—including supply chain disruptions, and customer dissatisfaction—can be just as damaging. Offering free return shipping may help attract online shoppers and reduce customer disappointment, but for businesses it translates to skyrocketing expenses that threaten long-term sustainability.
This post will break down the true financial impact of eCommerce returns, explore strategies to improve the returns experience, and highlight ways to optimize the returns process so that retailers can stay competitive.
Online Returns: What Customers Expect
Today’s shoppers expect more convenience than ever, especially when it comes to online returns. Thanks to Amazon, Walmart, and other major retailers, customers have grown accustomed to streamlined refunds, hassle-free return policies, and in many cases, free return shipping.
A smooth return experience has become just as important as the initial checkout process. Shoppers now assume they’ll be able to return online purchases just as easily as making them. In fact, for 76 percent of consumers, free returns are a deciding factor when choosing where to shop, and 67 percent say a negative returns experience will deter them from returning as a customer at all. Whether it’s an enclosed return label, instant store credit, or the ability to drop off returned items in-store, convenience is non-negotiable.
However, these evolving expectations place a significant burden on retailers. The cost of offering an effortless returns process goes beyond covering refunds; it includes logistics, repackaging, and restocking costs, and even the potential loss of resale value. What’s more, companies that fail to meet consumers’ high expectations regarding the returns process can lose loyalty and customers over the long term as well as money in the short term.
The Up-front Cost of Returns
The logistics of processing returned items comes with significant costs, from return shipping fees to restocking expenses, all of which eat into profit margins.
Every returned good goes through multiple steps, including:
- Shipping – Especially when there is free shipping, businesses ultimately bear the cost of moving products back and forth.
- Labor – Employees must inspect, sort, and process eCommerce returns, increasing payroll costs.
- Storage and restocking – Returned goods take up warehouse space and typically require repackaging and inventory adjustments.
These challenges make efficient returns management essential to preventing unnecessary revenue loss.
The Hidden Costs of Returns
In addition to the up-front costs of processing returns, businesses face hidden expenses that quietly erode profitability and strain operations.
1. Increased Customer Expectations and Costly Free Returns
Free returns are becoming more common, but they come at a significant cost. While flexible return policies can drive sales, they also contribute to a higher return rate, which can lead to:
- Rising logistics costs for shipping, processing, and reselling returned items.
- Lost revenue from refunds.
- Supply chain disruptions caused by excessive returns.
2. Financial Impact of Returned Goods
While some returns are unopened and in pristine condition, many come back damaged, used, missing original packaging, or out of season—making immediate resale impossible. In fact, less than 48% of all returned items are able to be resold at full price, forcing retailers to take additional steps to recover losses.
When products can’t go directly back on shelves, retailers often face:
- Discounted resales – Many returned items must be marked down to move inventory, cutting into profitability.
- Liquidation losses – Some products are sold at a loss through liquidation companies, generating only a fraction of their original value.
- Waste and disposal costs – Products that can’t be resold due to damage, hygiene concerns, or obsolescence often end up as waste, increasing environmental impact and operational costs.
3. Returns Fraud and Abuse
The NRF estimates that fraudulent returns cost retailers billions annually. Common schemes include:
- Wardrobing – Wearing an item once before returning it.
- Counterfeit swaps – Replacing genuine products with fake ones before returning them.
- Abusing returnless options – When a retailer or marketplace is known to issue a refund and keep-it return option, and the consumer exploits this.
4. Operational Bottlenecks and Customer Service Costs
Processing returns requires significant resources, impacting retailers through:
- Labor costs – Extra warehouse staff is needed to inspect and process returned goods, instead of spending time packing new sales.
- Customer service expenses – Poor return experiences lead to more disputes and complaints.
Tips to Stay Profitable Despite Rising Return Costs
Retailers must accept that returns are an unavoidable part of doing business—especially in eCommerce. While the costs can quickly add up, a well-thought-out strategy can help minimize financial losses and even turn returns into an opportunity for customer retention.
The key is to stop treating returns as an afterthought. Instead of reacting to returns, businesses should proactively integrate returns management into their overall strategy so that policies, logistics, and customer experience are aligned for both profitability and efficiency.
1. Implement a Reverse Logistics Framework
An effective reverse logistics framework starts with a comprehensive audit of your current returns process. Identifying inefficiencies in shipping, restocking, and inventory management is key to reducing unnecessary costs and streamlining operations. By optimizing the way returned items are handled, businesses can improve efficiency and protect profit margins.
Key post-audit strategies often include:
- Establishing regional return centers to lower shipping expenses and speed up restocking.
- Ensuring proper customs documentation to prevent international return delays.
- Adopting sustainable practices, such as refurbishing and reselling returned goods.
2. Optimize Return Policies Without Hurting Sales
While flexible return policies improve the customer experience, they can also encourage returns, fraud, and refunds. Small adjustments can help minimize unnecessary returns:
- Shortening return windows discourages impulse purchases that customers return later.
- Encouraging store credit instead of refunds helps retain revenue. Unlike refunds, store credit keeps money in the business.
- Implementing stricter guidelines for high-return-rate customers can deter serial returners without penalizing loyal customers.
3. Leverage Technology and Data Analytics
Investing in returns management technology helps retailers streamline operations and detect costly trends:
- AI-powered analytics can flag suspicious return behaviors, reducing returns fraud.
- Shipping software optimizes reverse logistics, lowering handling and transportation costs.
- eCommerce integrations allow businesses to track customer returns and predict future return rates.
4. Improve Product Descriptions
One of the most preventable causes of online returns is misleading or incomplete product descriptions. Online shoppers often return items due to incorrect sizing, unexpected fit, or inaccurate images. Retailers can lower return rates by:
- Providing detailed sizing guides and fit recommendations.
- Including real customer reviews with images and testimonials.
- Offering virtual try-ons for clothing and accessories to reduce sizing guesswork.
- Enhancing the checkout experience with AI-powered sizing tools.
5. Strengthen Reverse Logistics with a Reliable Partner
Handling returned items internally can be costly and time-consuming. Instead, partnering with an expert in reverse logistics can:
- Optimize the return process, reducing shipping and handling costs.
- Improve the supply chain, ensuring faster and more efficient processing of returned goods.
- Lower international return expenses, making cross-border eCommerce returns more manageable.
Reverse Logistics with ePost Global
Managing product returns, especially across international markets, can be a complex and costly challenge. ePost Global simplifies reverse logistics with a global network designed to improve efficiency, lower costs, and enhance customer satisfaction. Our tailored returns management solutions help businesses optimize their return processes, ensuring a smooth experience for retailers and consumers alike.
A well-structured reverse logistics framework not only reduces operational strain but also enhances customer retention by providing a hassle-free returns experience. Whether handling high volumes of returns from multiple regions or looking for cost-effective ways to process returned goods, our solutions adapt to your business needs.
How ePost Global helps:
- A branded, self-service return portal that enhances customer experience and loyalty, with multi-lingual support for a seamless global experience.
- Local return options to improve routing, reduce transit delays, and minimize costs, tailored to country-specific return preferences.
- Real-time return status updates via email or SMS for improved transparency.
- Flexible return payment methods, including shipper paid, consumer paid, and refund deductions, with region-specific payment options.
- Direct-to-merchant and consolidated return options to balance speed and affordability.
With ePost Global’s expertise, businesses can implement a scalable, cost-effective reverse logistics framework that minimizes waste, prevents unnecessary losses, and streamlines the returns experience. Whether you need faster returns processing or a more economical approach to international returns, ePost Global is here to support your business every step of the way.
Contact us today to learn how we can help optimize your reverse logistics operations and keep your eCommerce business profitable.
