The state of retail returns

Retailers’ ability to offer customers many happy returns is becoming more difficult and costly.

Total returns in retail amounted to $743 billion in 2023, according to a report from the National Retail Federation. That equates to $145 million in merchandise returns for every $1 billion in sales. This year, shoppers are expected to return $890 billion in merchandise, which represents nearly 17% of retailers’ annual sales, according to a recent NRF report.

Faced with the escalating challenge of returns, retailers are taking diverging approaches to dealing with the issue. And while not all returns involve fraud, that is one of the issues retailers are addressing. Most of the retailers surveyed in the NRF’s latest report said return-related fraud and other exploitative behavior was an issue for their business. 

“The rise in e-commerce shopping has led to an increase in return rates and volumes across most categories because online shoppers can’t touch and feel products before they buy,” David Morin, vice president of customer strategy at returns company Narvar, said via email. “The notion that ‘the living room is the new fitting room,’ where consumers try items at home before deciding whether to keep them, has led retailers and brands to review their return programs, including tightening their return policies.”

Buying multiple items with the intent to return some of them, also known as bracketing, has grown among younger people, the NRF found, with 51% of Generation Z consumers acknowledging they’ve done it. 

Morin said Narvar’s research has found rising rates of what it terms “friendly fraud” — behaviors like bracketing or wardrobing, where someone buys and wears an item with the intention of returning it. But Narvar also found rising rates of potentially criminal return policy abuse.

“The increase in fraud, along with the heavy incurred costs to retailers, is driving a larger focus on strategies that identify potential fraudsters and create unique workflows to deter the behavior,” Morin said. “Retailers are also balancing out strategies that still reward trusted customers to maintain the sense of ‘peace of mind’ that is critical in returns.”

Indeed, a return abuse or fraud crackdown must be balanced with maintaining customer experience, Katherine Cullen, the NRF’s vice president of industry and consumer insights, said in the organization’s latest report. Other experts echoed that perspective.

“Although Amazon, REI and Target and others have tightened their return policies this quarter to ‘combat fraud,’ the Gen Z and Alpha customers still expect to have a satisfactory and easy ability to return unwanted items in an efficient manner whenever they please,” Shawn Grain Carter, a retail industry consultant and professor at the Fashion Institute of Technology at the State University of New York, told Retail Dive in an email. “This is part of their seamless retail shopping experience of which they have grown accustomed.”

Who gets hit the hardest by returns? 

Some categories in particular are more vulnerable to returns. For example, several analysts told Retail Dive that apparel makes up the majority of retail returns.

“This is for multiple reasons,” Neil Saunders, managing director of GlobalData, told Retail Dive. “Sizing is a major issue, especially if buying online, and many consumers will buy multiple sizes and return the ones that don’t fit. How things look in person is important in apparel, and this is another factor driving returns.”

Returns also peak during certain time periods. Besides the holiday season, Saunders said returns typically surge after big promotional periods, like Amazon’s Prime Day. Apparel also follows seasonal trends, which may drive upticks in returns as consumers buy new outfits for the changing seasons, Saunders said. 

Additionally, the prevalence of online apparel shopping and an inability to try on items before buying contributes to high return rates in the category, as do consumers’ expectations on issues like fit, color and fabric, Jonathan Zhang, a professor at Colorado State University’s College of Business, told Retail Dive. 

And for the same reasons — look and feel — Zhang said home goods, like furniture and decor, also have high returns. “Items in this category are often returned due to damage during shipping, mismatched expectations about size or color, or changes in customer decisions after seeing the product in their home environment.”

Services like Stitch Fix that allow shoppers to try on apparel at home before purchasing came about to help solve this problem. Yet many such offerings have shuttered in recent years. Amazon also made a major change involving its own apparel try-on service. The retailer plans to phase out its Try Before You Buy service. The program allowed Prime members a seven-day trial of select apparel, shoes and accessories. Amazon said it’s ending the service as an increasing number of customers turn to AI-powered features like virtual try-on as they shop for apparel.

Regardless of the driving factors for returns, the rising tide of returned merchandise also poses a sustainability issue for retailers. More than 11% of the $100 billion worth of purchased apparel that’s returned to retailers eventually ends up in a landfill, according to research by Equal Ventures, a venture capital firm.

“Consumers are increasingly aware of the environmental impact of returns, such as waste from disposed products and emissions from reverse logistics," Zhang said. “Retailers are under pressure to address these concerns, either by encouraging exchanges over returns or by implementing fees to disincentivize habitual returning behaviors.”

How are retailers responding?

During the last couple of years, retailers across the industry have made some noteworthy return policy changes. A key driving factor, according to industry experts and retailers themselves, is the escalating cost and volume of handling returned merchandise.

In 2024, Morin said Narvar saw about 25% more retailers charging for return shipping. Many others shortened their return windows, especially retailers that had policies longer than 30 days. 

“Rising return costs and fraud are pushing retailers to overhaul their policies,” Zak Stambor, a senior analyst for retail and e-commerce at Emarketer, said. “While many have rolled back free returns, others are taking more targeted steps to cut costs and curb abuse.” Stambor added that the nuanced approaches retailers are employing “reflect the growing pressure on retailers to balance customer satisfaction with operational efficiency.”

Data analytics advancements are now enabling retailers to identify and address return patterns among specific customer segments. Zhang said advancements in data collection make personalized return policies a possibility in the near future, although he cautioned the data should be handled carefully and decisions should be based on actual behavior to avoid any perception of preemptive discrimination.

Morin said another significant factor is that regulations on handling consumer data are becoming stricter. That’s making first-party customer loyalty program and membership data more valuable — and more costly to acquire.

“Loyalty and membership programs are some of the most valuable sources of first-party data for merchants, but consumers, especially younger generations, are increasingly mindful about sharing their data and may only be willing to provide personal information if they perceive the value exchange is equal.” 

Morin said some retailers are launching more incentive-based loyalty and membership programs with built-in returns benefits such as free shipping in response to concerns about data privacy. Better logistics and automation could also make the retail returns process faster, more seamless and more consumer-friendly by the end of this year, the NRF forecast in its report.

Saunders said a leading factor that’s likely to shape future return policies are changes in the cost and volume of returns, along with how rival retailers are responding. “The aim of any retailer is to reduce returns, but this must be balanced against protecting sales,” Saunders said. “Return policies that are too onerous can cost retailers sales.”

Amazon has launched a program allowing sellers using its fulfillment services to issue product refunds without customers returning the item. 

Fulfillment by Amazon Returnless Resolutions will help sellers avoid returns-related fees by cutting out the physical reverse logistics process and letting customers keep the items instead, the company said. Some products are ineligible for the program, including dangerous goods, heavy and bulky items, and those with an average sales price above $75.

Sellers and customers tapping into Returnless Resolutions have to be in good standing with Amazon, as defined by the company. Only customers without "a history of abuse" can be offered a returnless resolution, the company said. If the shopper making a return is deemed ineligible, the item may still be sent to an Amazon fulfillment center as normal.

Amazon aims for Returnless Resolutions to increase customer convenience while providing sellers with a more cost-efficient way of dealing with returns. The program could be particularly convenient for international sellers and businesses with low-cost items, Gopal Pillai, Amazon vice president of worldwide returns and recommerce, said in a separate post about Returnless Resolutions.

There are no program fees associated with Returnless Resolutions, and tapping into the program allows businesses to avoid returns-related charges levied by Amazon. The company is raising its fee structure as return logistics costs grow. 

For example, the company expanded its returns processing fee for products with high return rates, excluding apparel and shoes. Amazon said the charge covers the operational costs of returns while reducing waste.

Amazon is one of many companies rolling out "keep it" returns options that cut out the often-expensive reverse logistics process entirely. This tactic is particularly common for lower-value items, according to a 2023 report from goTRG, a returns management solutions provider.

Walmart Marketplace, the retail giant's e-commerce platform, also gives sellers the ability to allow customers to keep their items and receive a full refund. Meanwhile, other retailers are charging returns fees or implementing stricter policies to cover costs.

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By Narvar

A Tale of Two Returns

Maya had been looking forward to it all week. A dress for her 30th birthday dinner. But it arrived late. Crumpled. The wrong size.

The return? Confusing. Box required. Hidden fees. A two-week wait for a refund. So Maya didn’t just abandon the return, she abandoned the brand. For good.

Now picture the opposite. The package arrives on time. A QR code makes the return box-free and drop-off easy. Maya’s issued instant store credit and places a new order: one that fits, feels right, and unlocks a little birthday happiness, before the first return is even processed.

One return ended a relationship. The other built loyalty. Same moment. Two outcomes.

The difference isn’t logistics. It’s intelligence.

What Retailers Keep Getting Wrong

The majority of consumers — 96% — say a good return experience earns their loyalty. But one in three won’t come back after a single bad one. That’s not a preference; it’s a pattern.

Yet many retailers still treat returns as an afterthought. They optimize for efficiency, not experience. They automate everything, but personalize nothing.

But shoppers don’t want generic. They crave speed, clarity, and control. And that one-size-fits-all policy? It fits no one.

Returns are more than reverse logistics. They’re a moment of truth — a test of how well a brand understands and values the consumer.

But too often, brands are still approaching it like it’s just a label and a box.

Static Doesn’t Scale

One-size-fits-all return policies might streamline operations, but they often do so at the expense of experience. High-value consumers face delays they don’t deserve. Bad actors exploit gaps designed for speed, not security.

And the cost? It’s not just operational. It’s reputational. It’s retention. It’s margin.

The smarter move is to ask better questions:

• Is this return legitimate or high-risk?
• Should this consumer be refunded now — or not at all?
• Could this become an exchange — or spark a new order?

Speed won’t answer those questions. Insight will.

The Rise of Return Intelligence

Return intelligence is about more than automating workflows. It’s about enhancing them with real-time context. It replaces flat rules with smart decisions, based on trust, behavior, and value.

It’s how leading retailers turn returns into strategic moments instead of sunk costs.

This is exactly what IRIS™, Narvar’s AI engine, enables. Trained on 42 billion+ annual interactions, IRIS™ helps retailers:

• Spot fraud patterns like wardrobing or fake label scams
• Personalize outcomes for high-trust consumers, like instant refunds or “keep the item” options
• Surface exchanges or store credit to turn a return into a repurchase
• Optimize logistics by routing returns to the most cost-effective destination

It’s not about replacing people. It’s about giving teams the intelligence to act with precision and scale it. And when it’s done right, it doesn’t just protect revenue. It strengthens loyalty, right at the moment it’s most at risk.

Because return intelligence isn’t just about smarter systems.
 It’s about a smarter understanding of people.

Who’s earned an instant refund.
Who’s likely to reorder, if given the right nudge.
Who’s trying to game the system.

It’s how brands turn “uh-oh” moments into “wow” ones — by showing they know the difference.

Why This Matters Now

Returns aren’t slowing down. They’re accelerating, on pace to become a $1 trillion problem by the end of 2025.

Fraud is rising. Consumer expectations are sharper than ever. And loyalty can be lost in a single moment.

The brands that will win aren’t the ones that eliminate returns. They’re the ones that learn from them. They’ll use return intelligence to protect margins, personalize outcomes, and strengthen relationships.

Loyalty isn’t won at checkout. It’s earned in how you handle what comes after

With online spending comes returns.

Nearly 40% of consumers return an item purchased online “at least” once a month, according to a Narvar survey. 

On average, customer returns cost companies between $25 and $30 per return due to shipping, customer support calls, product damage and other expenses, the report of over 1,900 consumers found. 

Fifty-two percent of survey respondents said they had submitted a fake return at least once in their lifetime, up from 36% who said the same last year.

Signaling the rise of online shopping, 87% of shoppers make at least half of their purchases online, according to Narvar’s findings. Forty-six percent of survey respondents said they shop online at least once a week or more.

“The returns process is often overlooked, but it holds incredible potential for driving customer loyalty and lifetime value,” Amit Sharma, CEO of Narvar, said in a statement. “As our research shows, retailers who invest in optimizing their returns experience can transform this traditionally costly and burdensome process into a significant growth opportunity.”

Sixty percent of consumers are open to exchanges or store credit instead of full refunds “if the process is quick and convenient,” according to Narvar’s findings. 

The report offers some insights into consumers’ return habits across demographics. While 62% of men prefer to receive immediate store credit without a fee in exchange for their returns, half of women are willing to wait five to seven business days for credit card refunds with no fee, the report said. 

Other research suggests that consumers choose where to shop based on a retailer’s available return options. According to an ICSC report, 82% of shoppers decide where to buy based on retailers’ return policies. The ICSC also found that nearly 8 in 10 consumers prefer to return their items in brick-and-mortar stores.

Figuring out the returns process will be critical for retailers as online shopping is predicted to rise in the U.S. FTI Consulting predicts that U.S. online retail sales will grow 9.8% to $1.2 trillion this year. 

Integrating another returns service into its business, Kohl’s is introducing The Return Drop at Kohl’s across more than 1,100 U.S. locations.

Through a partnership with Narvar and Inmar Post-Purchase Solutions, the retailer is accepting returns from brands like Carhartt, Hanes and Levi’s at its stores, the company said in a press release. 

After initiating the returns process, shoppers can choose “Kohl’s Drop Off” to receive a Narvar-generated QR code, then bring the item and QR code to a local Kohl’s location. Shoppers don’t need a box or shipping label to make the return, the company said.

Kohl’s collaboration with Narvar and Inmar Post-Purchase Solutions signals the retailer’s expansion of its returns services. In 2019, the department store extended its Amazon returns service across its 1,150 locations, which executives have touted as boosting foot traffic.

For Narvar sellers, the deal broadens their customers’ return options, Amit Sharma, founder and CEO of Narvar, said in a statement. 

“Providing shoppers with convenient services is critical to Kohl’s ongoing commitment to the customer experience,” Gregg Barta, Kohl’s executive vice president of supply chain and logistics, said in a statement. “Not only will The Return Drop at Kohl’s remove friction for customers, but it will also provide operational benefits and efficiencies to participating retailers and brands.”

Besides bringing another return option to its physical stores, Kohl’s is shifting its focus away from its digital business and concentrating on its physical stores.

E-commerce retailers with generous return policies have greater brand loyalty than those with stingier ones, according to a Rithum survey of 6,000 consumers.

Nearly 9 in 10 consumers expect free returns as standard, while 2 in 5 consider a retailer’s return policy before making a purchase.

About half of consumers — 47% — have stopped shopping at a retailer due to an unfavorable return policy. 

Returns are essential to e-commerce, with 3 in 5 consumers making one in the past 12 months.

“Returns are no longer a post-purchase afterthought — they’re shaping buying decisions,” Rithum CEO Lou Keyes said in a prepared statement. “For brands and retailers, the return experience has become a critical business lever, not just a logistical function.”

In fact, 84% of consumers are satisfied with the return policies of their most frequented retailers.

Rithum concludes that “this high satisfaction likely reflects consumer self-selection — shoppers are avoiding anywhere with less favorable return policies.”

Shoppers in the United States and Canada have higher expectations than those in other markets, with about 2 in 5 consumers saying that a 30-day return window is reasonable.

Returns, however, cost retailers a lot of money. In 2024, U.S. retailers paid an estimated $890 billion for returns, accounting for 17% of total sales, according to the National Retail Federation. 

“These returns create an expense iceberg for retailers and brands — where the lost sale is just the tip, and hidden costs like shipping fees, manual labor, and thinning margins erode profits beneath the surface,” according to Rithum.

The fashion industry experiences more returns than any other, with over two-thirds of consumers returning clothing or footwear in the past year. More than one-third of consumers admit to buying multiple items to try on and return. That figure rises to 50% for shoppers under age 35.

With deliberate overbuying so widespread, nearly 9 in 10 merchants try to avoid returns through return policy changes like restocking fees, shortened return windows and store-credit-only refunds, according to a 2024 Blue Yonder survey. 

However, apparel shoppers are buying more than they need because they don’t trust product descriptions. Poor fit is the main reason that 3 in 5 consumers return items, according to Rithum. Another one-third of consumers have returned items because they didn’t match their online description or images. 

Better size and fit recommendations, as well as more detailed product descriptions, could help reduce returns, according to Rithum.

“As consumers look to get more for their money, they want to trust that they'll get what they paid for,” Rithum CMO Suzin Wold said in a news release. “When product content and return policies don’t match the actual experience, it breaks that trust. Today’s shoppers expect accurate, detailed listings — and anything less risks both returns and lost loyalty.”

Electronics, home goods, toys, books and hobby items also have high return rates.

“These purchases tend to be more discretionary, gift or taste-driven, where returns stem less from defects and more from preferences,” according to Rithum.

However, despite the high cost and complexity associated with returns, “return policies are one of the few factors that retailers and brands can fully control,” according to Rithum.

“Returns aren’t going away — but they don’t have to be a revenue drain. By proactively addressing the root causes of returns and rethinking your policies with new consumer expectations in mind, you can better protect margins, boost customer satisfaction, and even stand out in a crowded market,” the survey says.

Retailers differentiate their brands from the competition through product assortment, price and quality. Customer experience matters, too — particularly when it comes to return policies. 

Part of Maine mainstay L.L. Bean’s reputation was originally built on its no-questions-asked policy, allowing any reasonable return for life. A 2018 article from The New Yorker recounted a customer who successfully returned an old piece of fishing equipment that appeared to have already provided decades of use. 

But the rise of e-commerce has prompted many businesses to eschew the no-questions-asked approach, Steve Rop, COO of returns-management solution company goTRG, said. Retailers now face more returns fraud, and the reverse logistics required to process online returns is pricey. 

So, like other retailers, L.L. Bean eventually changed its famous policy.   

“In 2018, in response to an increasing trend of misuse, we clarified our returns policy to better reflect the original intent of our guarantee and to protect price integrity for our customers,” an L.L.. Bean spokesperson told sister publication CX Dive. “After one year we will work with customers if an item proves to be defective due to materials or craftsmanship.”  

While such a decision aims to protect the business’ bottom line, it could bring about customer experience risks. A more cumbersome return policy may negatively impact what was once a simple experience, Kassi Socha, director analyst at Gartner, said. But it is possible for retailers to appease both their finance department and customers.

“The way that you communicate the steps to return is actually more of what makes it to be good or bad CX than the policy itself,” Socha said. 

Practicality over policy

That’s not to say policies don’t matter at all, however. “The impact of retailer return policies is significant,” Rop said. Customer satisfaction, brand perception, trust and reduced risk are all at stake. 

Though no-questions-asked return policies seem like they might enhance CX by providing maximum flexibility, CX is actually one of the reasons retailers have generally moved on from such setups, Socha said. Not asking questions is a missed opportunity for customer feedback. 

“Retailers prioritizing their customer experience need to know why customers are returning what they’re returning — to ensure that they can strengthen the merchandise that they sell, how and why they offer it, and course-correct for any issues that are arising in the quality or assortment of what they're offering,” Socha said. 

The other factor driving the decline in no-questions-asked policies, she continued, is finances. That not only includes guarding against fraud, but finding out why returns are happening can help manage inventory and improve margins. 

And customers may be amenable to that reasoning. In 2018, when L.L. Bean announced its policy change to customers in a Facebook post, reactions were varied. Some customers were disgruntled, but many expressed support.

“LL Bean has wonderful merchandise and will honor any defective product. Lighten up,” one commenter said in response to those opposed to the policy shift. “They are just tired of all those people taking advantage. It’s a shame but you should understand.”

Customers are smart, Socha said. They are aware of return policies across the industry, and they understand why standards are necessary. Customers are looking for more than just liberal policies, she said, as it's less about the written policy and more about the practicality. 

If a customer buys a product online and goes to a store to return it, only to find out online returns aren’t accepted in store, that’s a negative experience — no matter how liberal the policy, Socha said. If the policy is generous, but there are elaborate repackaging instructions to send the item back, that makes for a negative experience.  

Through years of customer surveys, Gartner has found customers would consider shopping elsewhere if they perceived a retailer’s return policy to be bad or if it’s associated with a fee, according to Socha.   

“A lenient and seamless return process translates into consumers believing that the retailer is flexible and friendly while reducing the perceived risk of the transaction. In consumers’ minds, confusing and overly complicated return policies signal that the retailer is attempting to make the returns experience difficult for one reason or another,” Rop said. 

The future of returns

Despite the drawbacks of no-questions-asked returns policies, they met a need years ago when customer acquisition and retention was top of mind, according to Socha. Due to the inability to robustly measure the impact returns programs had on acquisition and retention, there wasn’t an immediately conveyable downside to not asking questions. 

“You would do whatever it takes to have a variable account that you can retain,” Socha said. 

Modern return policies focus on curbing returns altogether, Rop said. If a customer is satisfied upon purchase, that’s a positive for CX and for a company’s financials. 

According to the National Retail Federation, the average retailer incurred $145 million in merchandise returns for every $1 billion in sales last year. Abuse and fraud in returns cost the industry around $101 billion, while the percentage of abuse and fraud impacting total returns was 13.7%.

One way to decrease returns is to increase customer satisfaction by providing customers with more information about products. Mark Mathews, NRF’s executive director of research, said in a video report about returns in 2023 that retailers have begun providing more in-depth product descriptions, so consumers know exactly what they’re purchasing. Virtual-reality technology allows people to see what furniture would look like in their houses before they buy. 

Rop highlighted Amazon, which recently enabled a message on product design pages that warns customers of items that are returned frequently. Many Asia-based retailers offer returns insurance, he added, in which customers can pay extra to receive free shipping on returns and a larger return window. 

If a customer wants to make a return, that should also be a frictionless experience. Socha predicted retailers would pursue that by expanding returns beyond the counter. Curbside returns could operate alongside buy online, pick up in-store programs. And technology could facilitate that, she added. 

The frictionless experience will also pertain to communications around returns, Socha said. No longer can retailers get away with burying return policies in the frequently asked questions page on their websites. To increase conversion rates in e-commerce, retailers should communicate their policies on category pages, product pages and checkout, she said. 

“The simplicity of communication around policy and the transparency around policies is the wave of the future, as well,” Socha said.

Retailers’ return policies influence the purchasing decisions of 82% of consumers responding to a recent survey from ICSC, which represents shopping centers.

Across all retail categories, 6.2% of in-store customers returned items they bought, while about a third of online shoppers did so. Among apparel shoppers, 6.2% of in-store customers returned their merchandise, but over a fifth (22%) of online apparel shoppers returned theirs, the survey found. 

When faced with charges for online returns, almost eight in 10 shoppers said they would be more likely to return an item in stores, and 77% said they would go to a store to purchase, the survey found.  

The ICSC’s survey adds to the evidence that e-commerce means higher levels of returns.

A great majority of consumers who purposely over-order online are shopping for apparel: 87% of those surveyed said they order extra items to try on at home and return what they don’t want. Some retailers are instructing shoppers to keep items they want to return, with six in 10 survey respondents saying that retailers had given them full refunds and told them to keep their unwanted online purchases. 

“We have known for some time the value of brick-and-mortar to a retailer’s strategy,” Tom McGee, president and CEO of ICSC, said in a statement. “Our latest findings further prove this by showing that the return rate for in-store purchases is three times less than the return rate for online purchases. Additionally, consumers are becoming more mindful of changing return policies that result in fees and shortened return windows.”

The National Retail Federation and transaction data from the analytics company Appriss Retail estimate that $10.40 per $100 worth of returns are fraudulent transactions. 

More major retailers, including H&M, Zara and Amazon, have begun charging fees for returns. Meanwhile, the apparel retailer South Moon introduced its KeepIt Program, which allows shoppers a 15% discount on full-priced items but prohibits customers from returning them.