Ecommerce returns have a dual reality for retailers and customers. For a business, they can make your predictive sales and profit tracking feel unpredictable. For customers, they're a necessity.
But the real cost driver is that many customers buy with an explicit plan to immediately return some or all of their items.
In response, businesses are adding workers, increasing warehouse space, and establishing separate departments to handle reverse logistics. Returns are the new normal and are central to the customer experience. But they don’t have to be a plague.
In fact, how you deal with ecommerce store returns—before and after purchase—can differentiate your brand, create a competitive advantage, and even make you more profitable.
Table of contents
- What is the average return rate for ecommerce?
- How much do returns cost ecommerce brands?
- Return policies in ecommerce
- Why do people return items?
- The impact of ecommerce returns
- How to manage returns
- Best software for handling ecommerce returns
- Ecommerce returns best practices
- Ecommerce returns FAQ
What is the average return rate for ecommerce?
The average return rate for ecommerce was 16.9% in 2024, according to a report by the National Retail Federation (NRF) and Happy Returns. This means that for every 100 products sold, nearly 17 were returned. Factors contributing to a high return rate can include customer dissatisfaction, incorrect sizing, or the product not matching its online description.
The average return rate can range up to 30% for some retailers. Rates are often higher during the holiday shopping season. Products that require a specific fit, like clothing or shoes, often have higher return rates as well.
How much do returns cost ecommerce brands?
Collectively, consumers returned products worth a staggering $890 billion in 2024, according to the NRF report. Returns can be costly for retailers due to shipping, restocking, and loss of value. The cost to process a return can be anywhere from 20%–65% of the item's original value.
There are also hidden costs associated with ecommerce returns. A big part of this problem comes from "bracketing," which is when shoppers buy multiple sizes or colors of the same item, planning to return what doesn't work. This is common with younger shoppers. Reports show that half of Gen Z does this when buying clothes and shoes, while only a quarter of baby boomers do the same.
To fight back against rising costs, many stores have started charging for returns. Two-thirds of retailers introduced return fees last year, mainly because operations and shipping got more expensive. While this helped some stores reduce returns and increase exchanges, it also led to fewer sales and lost customers.
Return policies in ecommerce
An ecommerce return occurs when a customer sends back something they bought online. It can happen for a variety of reasons, like dissatisfaction with the product, getting the wrong item, or the item being damaged. It usually involves the customer requesting a return, shipping the item back, and then getting a refund or exchange.
A return policy is a written set of rules that state what a store allows in terms of accepting returns. For example, Wayfair’s return policy is as follows:
- Returns can be made within 30 days of purchase.
- The product must be undamaged, disassembled, and in its original packaging.
- Wayfair also lists certain items that are nonreturnable no matter what.
Having a return policy can help protect your business from too many returns, especially if products are used or damaged. It’s also important during holiday seasons, with 59% of consumers saying they are more likely to consider retailer return policies before making a purchase during the holidays.
Why do people return items?
When asked why they returned items, DealNews found that 65% of online shoppers said they have returned items that didn’t fit. Other reasons consumers returned items include:
- Item was damaged or defective (56%)
- Didn’t like the item (44%)
- Item didn’t match the description (31%)
- Found a better price somewhere else (13%)
- No longer needed the item (12%)
- Buyer’s remorse (11%)
- Ordered the wrong item (11%)
The impact of ecommerce returns
Retail as an industry is grappling with the rise in returns. The NRF report found that return rates have more than doubled since 2019, climbing from 8.1% to 16.9%. Brands are facing mounting pressure to address this challenge while keeping folks happy.
The issue lies in consumer expectations and business operations. Shoppers feel a generous return policy is a major factor in their purchasing decision, with 76% considering free returns essential when choosing where to shop.
But returns cost businesses money, logistical support, and staffing. Too many at once can easily impact revenue and supply chain operations. Yet, retailers are stuck because 67% of customers indicate they would avoid future purchases from a business after a negative return experience.
Looking ahead, returns are becoming a bigger focus for retailers. Two out of three say they plan to make returns easier in the next six months. They know they need to do two main things: make returns smoother for customers while also trying to have fewer returns overall.
How to manage returns
Having a clear-cut process to manage returns can make them less costly to your business. Keep these options in mind to help you build a better, more efficient process.
1. Customers post items back to your warehouse
This is the most popular returns process for ecommerce-only brands that don’t also have a brick-and-mortar store. When a customer wants to return an item they’ve bought online, they post it back to your warehouse or fulfillment center. From there, the merchandising department inspects the product and confirms it’s eligible for a refund.
Retailers can save time on manual returns with return management apps. They speed up the process, give customers the status of their return, and update your inventory management system automatically (more on that later).
2. Customers return items to your store
If you have a retail store, consider allowing ecommerce customers to visit it to return their items in-store. This is known as buy online, return in-store ( BORIS). The returned goods can then be inspected and put back on the shelf for future customers.
Not only are store returns more convenient, but enticing customers to enter a store could prevent future returns. If a customer is returning a t-shirt that doesn’t fit, for example, they’ll have the opportunity to try on other sizes during their visit. That gives them more confidence in future purchase decisions—both online and offline—because they know their size.
3. Outsource reverse logistics
Returns management is a time-consuming process. But it’s one you don’t have to handle in-house. Third-party logistics (3PL) partners can handle the entire order fulfillment process—including returns. A provider offering reverse logistics stores a retailer’s returned inventory in a third-party warehouse.
When customers return an item the 3PL has previously shipped, it arrives back at their warehouse. Their team inspects the item and processes a refund. The approved returned item is then put back on the shelf to be picked for another order.
Best software for handling ecommerce returns
Brands can handle ecommerce returns by using one of the many returns and exchange apps available in the Shopify App Store. These apps track and fulfill orders, get your products out the door, and protect your business from risky transactions.
Across all Shopify businesses, 65% of refunds are performed manually, and the remaining 35% via apps. Here are three of the most popular apps.
Happy Returns
Happy Returns is an online returns management software used by retailers like Rothy’s, Everlane, and Andie. Sanaz Hajizadeh, Happy Returns’ director of product management, says, “Happy Returns offers box-free returns for online merchants through a combination of software and reverse logistics—pioneering in-person, aggregated returns that can help dramatically reduce shipping costs and the impact on the planet.
“Happy Returns covers all aspects of post-purchase: from tracking orders as they are fulfilled to providing flexible return options for merchants, no matter where their warehouse and shoppers are located.”
In addition to its returns software, Happy Returns also provides online buy-and-return, in-store, and mail-return services for hundreds of leading merchants. It maintains a network of more than 2,600 Return Bar locations where online shoppers can drop off their returns in person.
“Every merchant should focus on selling and increasing revenue,” says Sanaz. “By using tools that automate the post-purchase process, they can reduce operational headaches. Of course, merchants can use one tool for each task, but combining them in one powerful tool makes it easier to gather data, manage their return policy, and keep everything seamless and on-brand.”
💡Get Happy Returns in the Shopify App Store
Loop
Loop is another customer returns management tool for Shopify retailers. With Loop, customers submitting a return are incentivized to exchange the item rather than return it. They can exchange an item for another size or color in one click in their own returns portal.
Should a customer still want a refund for their purchase, Loop helps retailers streamline their returns process. It uses data from a returns form and your returns policy to automatically approve or deny requests.
"We like Loop because it is incredibly user-friendly, so it’s super easy for customers to return items,” says Lanai Moliterno, founder of Sozy. “We like this because it makes us look good and lets the customer leave with a positive experience. Because of the way that it’s set up, it makes it easy to swap out returns for other products in our shop, which helps keep the customer and the money.”
💡Get Loop in the Shopify App Store
AfterShip
AfterShip has its own Shopify app to assist with any post-purchase needs, including returns. Its main goal is to help businesses improve post-purchase retention, offering features such as tracking, returns, warranties, and more.
Shopify merchants interested in using AfterShip can access it in the Shopify App Store. While customers can take advantage of a number of great features, the returns management software offers a 50% reduction in returns processing time and a 50% increase in revenue retention by offering exchanges.
💡Get AfterShip in the Shopify App Store
Ecommerce returns best practices
Now that we know the process for handling ecommerce returns and the options available to you, there are still things you can do to reduce the number of returns you’re handling. That’s the end goal, after all—fewer returns mean happier customers and more revenue.
Here are seven ecommerce returns best practices to boost efficiency and cut costs.
Create a comprehensive return policy
One way to make returns easier for your customers is by creating a comprehensive return policy that is easy to find. Your return policy should include information like:
- How long customers have to make a return
- The condition items must be in
- How and where customers can make a return
- Items that can be returned vs. exchanged
- What items can be exchanged for (full refund, store credit, etc.)
Utilize our return policy template to get started writing your own return policy. Make sure you link your return policy in the footer of your website as well as in prominent areas during the checkout process so that your customers can easily find it.
For example, Rothy’s highlights their return policy on each product page to increase conversions and reduce returns.
Make product information accurate and easy to find
It's standard practice to check that all public-facing content—including product descriptions—is accurate and detailed. If the product arrives differently than expected, there's a high chance it'll be returned.
To reduce returns and improve conversions, make sure the following information is included on every product page across your ecommerce site:
- Product weight and dimensions
- Materials used to make the product
- Size guides, including the size a model is wearing (if applicable)
- Your return policy
Take Supplement Warehouse, for example. They ship 300 supplement packages daily from their warehouse, all of which are ordered through their ecommerce store. Their former marketing manager, Brian Anderson, explains that most customers who return their items do so because they didn’t notice that their product contained a specific ingredient.
“Because we sell vitamins and supplements, many people order the product and wait until they have it in hand to review all of the ingredients,” says Brian. “Some are allergic, or their doctor tells them not to take it, so they end up returning it. We have made sure that all product labels are large and visible on product pages. This makes it easier for potential customers to read the label before they purchase."
Automation helps solve most of these issues. Use plug-ins like Low Stock Alert to see when items are running low. This prevents you from selling an item that isn’t available—and shipping the wrong item in its place.
According to Josh Wayne, VP of commerce products at TrueCommerce, “A lot of brands try to manage all their product information manually, and with ecommerce channels growing so rapidly, it’s just not feasible to avoid mistakes that way.
“What ends up happening is, a customer orders a product, and when it arrives, it’s the wrong color or size or compatibility, because there was incorrect or missing information online. It’s an immediate return, and can also result in low ratings and reviews, which impact future sales.”
Use 3D/AR on your ecommerce website
Shopping in-store naturally has some advantages over shopping online. Amongst the biggest is the customer’s ability to see, try on, and interact with products before they decide to buy them.
Augmented reality (AR) technology helps online shoppers experience the same thing. Customers can use it to see what products look like when they are tried on or placed in their home, or view next to an item they own for a size comparison.
Gunner Kennels, for example, uses augmented reality and 3D technology in their ecommerce store. They knew it would be difficult for customers to see the size of a dog crate and determine whether their pet would fit inside it—which would inevitably lead to returns.
With the help of Shopify, Gunner Kennels developed 3D models of their crates. “With this technology, buyers can now use their device to place the crate right next to their dogs to confirm sizing, decreasing our return rate by 5%,” says Macey Benton, VP of marketing at Gunner Kennels. “We would like to use this feature on future products and other accessories moving forward.”
The retailer’s investment in 3D and AR technology has paid dividends:
- Return rate reduced by 5%
- Cart conversion rate increased by 3%
- Order conversion rate increased by 40%
📚Learn more: Augmented Reality in Ecommerce: How AR, VR, and 3D Are Changing Online Shopping
Pack and ship items securely
It's easy to think that once an item has left your warehouse, it's off your plate. The truth is that some items are returned because they arrived faulty or damaged. But you wouldn't ship them in that state—something went wrong in transit.
Granted, your delivery carrier plays a big role in this. But there are steps you can take to minimize the chances of an item breaking or becoming defective through shipping—and therefore, being returned:
- Inspect every item of clothing before it’s dispatched to a customer
- Use protective material, such as bubble wrap, with a delicate item
- Add “Fragile” labels to parcels with easily breakable items inside (like glass)
- Use the correct parcel size so items don’t jolt around in transit
Make your return process sustainable
Most companies’ return processes don’t meet sustainability standards. In fact, the transport of goods and people is among the top contributors to global carbon emissions.
Preventing the likelihood of returns helps to reduce your ecommerce brand’s carbon footprint. The fewer packages that come your way, the less fuel and resources you use.
Unfortunately, you’ll still have to deal with returns. Make sure your ecommerce return policy is more sustainable by ditching the prepackaged free-return labels in your parcels. Printing those labels—even for customers who don’t need them—is wasteful. Instead, ask customers to go online and print their own labels when needed.
Keep customers informed about the status of their return
The most important question to ask when assessing your reverse logistics process is whether you’re designing and optimizing the experience for the customer or for your business—ideally, it’s a mix of both.
When in doubt, default to the customer. First, keep them up to speed on the returns process while in the flow, either by email or, preferably, via Facebook Messenger or SMS. If your OMS facilitates this, that’s great. . Second, get feedback and ratings on the returns process itself—that’s where you’ll find gold nuggets to set yourself apart from the competition.
Find a shipping carrier that supplies tracking information. Most offer tracking numbers for customers to see the location of their returned parcel. Once it arrives at your warehouse, send the customer an automated message to confirm you’ve got it. Give them an ETA on how long they should expect to wait for a refund.
Protect your business against ecommerce return fraud
Fraudulent return requests cause the biggest losses for 15% of all retailers, which is why tackling return fraud has become more of a priority for retailers.
It’s crucial to separate the types of returners and track them automatically. A tool like Shopify Flow can help. Establish refund thresholds based on per-order dollar values or the number of returned items. Second, use that threshold to automatically:
- Tag customers who exceed the threshold for identification and segmentation
- Notify your customer service team via email or Slack to investigate those cases
- Add those customers as a segment within an onsite personalization tool to exclude them from free shipping and/or full-refund offers
- Exclude them from free shipping at checkout by creating a shipping script based on one or more of your customer tags
Some retailers—including Amazon and ASOS—are reportedly updating their returns policy to blacklist serial returners. While extreme, such actions are often necessitated by the worst type of habitual returner.
If blacklisting customers isn’t an option for your ecommerce business, there are other things you can do to prevent return fraud:
- Choose a delivery carrier that supplies tracking numbers or proof of delivery. For example, a photo of the delivered package inside a customer’s open doorway.
- Offer only exchanges or store credit instead of cash refunds. There’s less incentive for someone to try to return a stolen item if they’re getting a like-for-like back.
- Offer an exchange window that’s longer than your refund window. This ensures your customer still has ample time to return, but makes an exchange more likely.
- Ditch free return shipping to make it harder for fraudsters to push their luck with return fraud.
- Only process returns if the item comes with a receipt or proof of purchase. This prevents people from returning stolen merchandise or items purchased from another retailer. You’ll also see the exact amount they paid for the item in case you do need to process a refund.
- Don’t accept returned items of clothing without the original tag or protective seal. This prevents wardrobing, which is when a customer wears an item and returns it as if it were new.
Adopt a unified approach
Most stores use multiple systems: one for online orders, another for in-store sales, and often a separate one for returns. This can lead to confusion, delayed refunds, and lost items.
Unified commerce solves this by using a single system where all sales channels (online store, physical stores, social media, and marketplaces) share live data. It collects information on what customers buy, like, and return so that you can use that data to combat returns. For example, if a customer normally buys multiple sizes with the plan to return those that don’t fit (bracketing), you can use their data to make better product suggestions around sizing.
The unified system shows real-time stock levels, so customers know exactly what's available and where. When items are returned, they're immediately added back to inventory, whether at a warehouse or local store. Combining all your sales and returns data uncovers different patterns, like which products get returned most and why, so you can better prepare and prevent future returns.
Unified commerce makes operations more efficient and improves your customers’ experience, turning returns from a problem into a business advantage.
Ecommerce returns are inevitable, but manageable
With almost a quarter of all online purchases eventually diverting back toward the retailer’s warehouse, ecommerce returns aren’t something you can ignore.
Do everything you can to prevent returns—from writing accurate product descriptions to picking and packing items securely.
Remember that a certain number of returns is inevitable. When it happens, keep customers informed about the status of their return. Choose sustainable options. Prevent return fraud by offering online store credit instead of cash refunds. Consider outsourcing reverse logistics if it’s becoming too time-consuming to handle in-house.
The returns process might be the final part in a first-time customer’s journey with you. But it’s still just as important as the first part.
Looking for a returns management platform that works seamlessly with your Shopify site? Check out our partners.
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Ecommerce returns FAQ
How do I avoid returns in ecommerce?
While you can never fully avoid ecommerce returns, there are a few tips to keep in mind to help minimize the number of returns you get:
- Offer 3D tours, AR try-ons, or videos to showcase every aspect of your products.
- Provide all relevant product information up front.
- Pack and ship your items securely so they always arrive intact.
- Charge for returns or for shipping returns.
How important are returns in ecommerce?
Ecommerce returns build trust and customer satisfaction. Customers will be more loyal and more likely to be repeat customers if you have a flexible and hassle-free return policy. Meanwhile, a complicated or strict return policy might keep customers away.
What is a normal return rate for ecommerce?
The average ecommerce return rate is 16.9%.
How does an ecommerce return work?
In most cases, customers are given a specific time period to send back their returned items. Stores' return time limits range from 30 to 60 days.
How do you calculate an ecommerce return rate?
To calculate an ecommerce return rate, divide the total number of items returned by the total number of items sold, then multiply by 100 to get the percentage. For example, if you sold 1,000 items and 150 were returned, your return rate would be 15% (150 ÷ 1,000 × 100 = 15%).