Originally posted June 3, 2025, updated February 4, 2026.
Returns are often a merchant’s least favorite part of ecommerce. Not only does a return equal lost revenue, but there’s also the cost of the ecommerce returns management process itself. Over the past decade, return rates have risen alongside the adoption of ecommerce. That said, return rates held steady in 2025, similar to those in 2024.
According to Capital One Shopping Research, the average retail returns rate was:
- 24.5% for ecommerce
- 8.72% for in-store purchases
Overall, consumers returned $849.9 billion in merchandise, doubling the total value of returns between 2020 and 2025.
The takeaway? Effective ecommerce returns management is a non-negotiable in today’s world if a brand expects to stay profitable and keep customer satisfaction high.
Handling returns in 2026
“Handling” returns requires a multi-faceted approach. And, because of rising logistics costs, prevention is obviously the optimal goal.
Unfortunately, returns will happen, especially in ecommerce. Meaning brands must assess their returns and develop a strategy that minimizes the impact. This will look different depending on numerous factors. For example, if a brand has brick-and-mortar locations, the size of the product, the ability to resell the item, industry return rate, and the return fraud rate.
So, what does effective ecommerce returns management look like as brands head further into 2026? Read on to find out.
Putting together an effective returns management strategy
Brands must balance the customer experience with a returns strategy that doesn’t break the bank. While the returns management process has become an integral part of offering a positive customer experience in ecommerce, it is also one of the costliest aspects of retail.
Today’s reverse logistics must meet customer expectations for flexible return options and easy refunds or exchanges. On the other hand, brands must look at the overall cost of each returned item and put forth policies that safeguard margins.
Because of the increasing costs of returns management, more brands are moving away from free returns. A report published by the National Retail Federation found that 72% of merchants charged for at least some return options in 2025, up from 66% in 2024.
Looking at both the customer experience and costs, brands must create a strategy that assesses the data, provides clear policies, supports a positive shopping experiences, protects revenue, and prevents retail fraud.
Here’s how:
Creating a fair, balanced return and refund policy
As ecommerce has grown, return policies from online merchants have grown more generous to gain a competitive advantage. However, as no-questions-asked return policies became the norm, it spawned a range of additional challenges for brands.
Although they might help encourage sales, unlimited returns policies impact other areas of operation. Constant ecommerce returns and exchanges can easily throw inventory levels out of whack, making inventory management more challenging. SKUs can swing between stockouts and excess levels, especially if units of returned merchandise and replenishments arrive in tandem.
For this reason, many ecommerce brands are taking a more measured approach to returns management. This includes shortening return windows, increasing restrictions on returns, or introducing restocking fees in a bid to rein in the more destructive return behaviors.
At the same time, a more disciplined approach to returns does not mean eliminating flexibility altogether. The goal is balance: protecting margins and inventory accuracy while still meeting customer expectations. Clear, well-structured return policies help set boundaries without eroding trust, especially when they are transparent, easy to understand, and paired with reasonable exceptions for loyal customers or special circumstances.
A strong return policy should remove ambiguity for customers and internal teams, while aligning returns behavior with operational realities across inventory, fulfillment, and customer service.
Key elements every effective return policy should include:
| Policy component | What it defines | Why it matters |
| Return window | How long customers have to initiate a return | Prevents aged inventory from re-entering stock and distorting demand signals |
| Eligible items | Which products can and cannot be returned | Protects high-risk, perishable, or custom SKUs |
| Condition requirements | Acceptable condition for returned items | Reduces write-offs and resale issues |
| Return method | Mail-in, drop-off, in-store, or carrier pickup | Aligns customer convenience with processing capacity |
| Fees or deductions | Restocking fees or return shipping responsibility | Discourages abusive behavior and offsets processing costs |
| Refund type | Original payment, store credit, or exchange | Helps control cash flow and retention |
| Processing timeline | How long refunds take to issue | Sets expectations and reduces support tickets |
| Exceptions and escalations | Loyalty tiers or case-by-case reviews | Preserves goodwill without opening the floodgates |
When designed thoughtfully, return policies become a tool for shaping customer behavior, improving inventory accuracy, and maintaining service levels—rather than a constant source of operational disruption.
Implement a streamlined process to get inventory back on the shelf
Managing ecommerce returns is far more than approving a return request and issuing a refund. If returned merchandise cannot be resold promptly, your business is looking down the barrel of higher inventory holding costs, not to mention lost sales.
The key reason why ecommerce businesses struggle to resell returned inventory is that they don’t have a robust workflow to inspect and recondition returned merchandise. At the very least, an item may require repackaging or relabeling, or even repair or maintenance, depending on the return reason. If this can’t be accomplished quickly, the returned inventory quickly piles up.
And, if the season comes to an end without being able to shift those returned units, resale opportunities may dry up completely. Over time, this seriously undermines profitability and bogs down warehouses with dead stock that needs to be liquidated or donated.
Ecommerce returns must enter an efficient workflow the moment they arrive at your return processing center. This includes inspection, repackaging, reconditioning (if needed), and re-entering into inventory so that levels remain accurate. This way, returned inventory is ready for resale as quickly as possible, so your business can retain more revenue.
The steps to process returned merchandise and get it back into play should look something like this:
- Inspect returned item for damage or use
- Test item (if applicable) to ensure functionality
- Repackage with correct labeling and materials
- Update inventory in the warehouse management system
- Restock in the appropriate location for resale
Analyze your ecommerce returns data closely
Returns data holds the key to understanding return behavior and how to tweak your management approach for better cost and efficiency.
The key to success? Ensuring that you collect the right data in the first place. When customers make return requests, make sure you are gathering relevant insights that help with returns fulfillment more effectively. This includes:
- Personal details (e.g., email or account information)
- Order number
- Reason for returning
Tracking customer details allows your business to see whether that customer has a track record of problematic returns behavior, so your business can take action if necessary.
Moreover, tracking the reasons for returns (i.e. wrong size or color, a product defect, or arriving too late for use) gives you actionable intel to refine both the returns fulfillment process and the broader shopping experience.
For example, if a particular garment is seeing a high return rate due to incorrect sizing, you may need to update the product page with more comprehensive information about the fit.
Combat retail return fraud
The phrase ‘return fraud’ often brings to mind nefarious practices, like making return requests and keeping the merchandise, or returning stolen items to a brick-and-mortar store for a ‘refund’. But the truth is, the vast majority of return fraud is more benign in appearance.
Practices like ‘wardrobing’, where consumers wear an item once and then return it, or ‘bracketing’, where a consumer buys multiple versions of an item to test out and then return, occur at incredibly high rates. According to Loop, nearly 40% of U.S. shoppers say that they or someone they know had engaged in return policy abuse or fraud in the past 12 months.
These habits have become common because consumers don’t see themselves as doing anything harmful. After all, wardrobing and bracketing are not outright theft. Yet this only makes it more difficult for ecommerce businesses to manage. These incidences of return fraud are hard to spot until they’ve already happened, leaving brands to deal with the messy aftermath.
Rather than penalizing customers who engage in these behaviors, try using positive reinforcement to encourage options that don’t bog down the returns process.
For example, offer free exchanges for different colors or sizes –but charge restocking fees on outright returns. This encourages customers to pursue exchanges instead of engaging in bracketing or wardrobing. Likewise, implement a discount or extra loyalty points when customers accept store credit to provide a more appealing alternative to a refund.
Nevertheless, brands should stay aware of other types of return fraud. It’s not just wardrobing and bracketing; empty box scams, price switching, returning stolen merchandise, and receipt fraud make frequent appearances.
Ultimately, return fraud is not trending in the right direction: In 2025, an NRF report found that report found 9% of all returns are fraudulent. This means brands must address the complexities and challenges through up-to-date strategies and clear, firm return policies.
Utilize digital tools for fraud detection
Returns fraud is a costly problem for retailers, which means retail support businesses and developers have been working on solutions.
Emerging technologies allow brands to better detect fraudulent activity and identify suspicious patterns and sources of fraud. Brands that experience a high number of fraudulent ecommerce returns can use these tools can make a difference. The key is finding the right solutions. Look for software with:
- AI pattern detection for spotting suspicious behavior
- Customer return history tracking
- Flagging high-risk items or SKUs
- Geo/IP monitoring for mismatched orders
- Integration with POS and ecommerce platforms
- Real-time alerts and fraud scoring
Avoid these most common return challenges
We sat down with Loop Returns’ Director of Partnerships, Marco De Paulis, to unpack how retailers and 3PLs can stay resilient in the post-peak season, and beyond.
What are the biggest returns challenges during peak season, and how can brands mitigate them?
- Returns volume spikes faster than most operations can react. Peak season compresses timelines, overwhelms warehouse labor, and exposes gaps between order fulfillment and reverse logistics.
- Visibility breaks down at the worst possible moment. Without real-time insight into what’s coming back, where it’s headed, and how quickly it can be processed, returns turn into stranded inventory and margin leakage.
- Returns need to be treated as a revenue lever. When reverse logistics is integrated into a fulfillment strategy, brands recover inventory faster, reduce write-offs, and protect customer experience during the most demanding season of the year.
👉 Read the full Q&A for deeper insights on peak-season returns strategy and operational planning.
How 3PLs and brands team up to tackle ecommerce returns
There’s a reason for the catchphrase “stronger together.” When brands and retail partners collaborate to combat a problem, there is a higher likelihood of success.
Brands can team up with payment processors, other retailers, and 3PL providers to share information about fraud trends, individuals, tactics, and what workflows and return policies work for them. Joining forces goes a long way in creating better returns management strategies.
Effective ecommerce returns management in 2026 is about understanding how returns and exchanges have become a critical strategy for CX management and maintaining profitability.
This requires a proactive approach to increase customer satisfaction and reduce the operational and opportunity costs associated with returns. Efforts such as disincentivizing retail return fraud, optimizing reverse logistics, analyzing return data to understand the underlying causes, and refining return policies to strike a fair balance between convenience and cost will go a long way toward turning returns into an asset for your business.
Don’t let ecommerce returns pile up and profits slip away. Connect with a Kase specialist to turn your returns process into a streamlined, revenue-saving operation.
