Ecommerce returns are a pain. For everyone. Customers don’t enjoy the hassle of repackaging and shipping items back, and retailers certainly don’t relish the costs and logistics involved. Yet, they’re part and parcel of online shopping; returns are inevitable. Every ecommerce business must address returns as part of their operations, logistics, fraud prevention, and customer expectations. So, how can ecommerce businesses navigate this challenging aspect of retail while maintaining customer satisfaction and protecting their bottom line? Big brands like Amazon, H&M, J. Crew, and Zara have set the trend by introducing return fees (even if just small ones), and setting the industry standard for what a great returns policy looks like. As we navigate 2025, understanding ecommerce returns fees, the importance of a clear returns policy, and alternative strategies to manage costs is key for online merchants to balance customer satisfaction with profitability.
The Return Tide
According to the National Retail Federation, total returns for the retail industry were $890 billion in 2024, 16.9% of annual sales. Many shoppers consider the return policy before making a purchase, so it’s a key factor in their decision-making process. This is why retailers need to re-evaluate their return policy and fees. A clear return policy can convert browsers into buyers and reduce missed sales.
Why Retailers Charge Ecommerce Return Fees
Ecommerce return fees are charges retailers impose when customers return products. Return fees help retailers manage return costs, reverse logistics, restocking, and handling. These fees offset the costs of processing returns, restocking, repackaging, inspection, and reverse logistics. Not all retailers charge return fees, but the trend is growing as businesses try to mitigate the financial impact of returns.
1. Cost Recovery: Processing returns is resource-intensive. Retailers incur costs for shipping, restocking, and handling returned merchandise. To offset these return costs, retailers may charge return fees to recoup these expenses and protect profit margins.
2. Deter Excessive Returns: Charging return fees can deter customers from making impulse purchases with the intention of returning items, a practice called “bracketing.” Charging customers this way can reduce unnecessary returns.
3. Encourage Informed Purchases: By introducing a small return fee, retailers can encourage customers to make more thoughtful purchases, potentially reducing returns.
Sometimes the return fee is deducted from the customer’s refund, so retailers can recover return costs.
Return Fees
- Restocking Fees: A percentage deducted from the refund to cover the cost of putting the item back into inventory, including the time and labor required to restock returned items.
- Return Shipping Fees: Customer pays for shipping the returned item back to the retailer.
- Return Label Fees: Charge for providing a prepaid return shipping label.
- Processing Fees: Additional charges for inspecting, repackaging, or refurbishing returned items.
Processing returns can be especially time-consuming for high-volume retailers, so efficient management of restocking and reverse logistics is key.
Balancing Customer Satisfaction and Return Fees
While return fees can help with cost recovery, they can also impact customer satisfaction and loyalty, so a clear returns policy is essential. A transparent ecommerce returns policy is critical to manage expectations and should communicate return procedures and fees during the purchase process. Plus, offering alternatives like store credit, exchanges, or free returns can give customers flexibility and goodwill.
Alternatives to Charging Returns Fees
As return fees become increasingly contentious—potentially alienating customers and undermining loyalty—many retailers are exploring alternative strategies that balance cost containment with a positive return experience. The goal is to minimize the need for fees while ensuring returns processes do not excessively erode margins. The following actionable approaches can help retailers reduce reliance on traditional returns fees without sacrificing customer satisfaction.
1. Incentivize Exchanges and Store Credit
Rather than applying a flat returns fee, retailers can encourage exchanges or issuance of store credit at a slightly higher value than a straight refund. For example, offering a 10 % bonus on the original purchase price if a customer opts for store credit shifts returns costs back into new sales. This approach:
- Drives repeat purchases and increases average order value by nudging customers toward alternative items.
- Improves cash flow, as revenue is retained within the ecosystem rather than refunded outright.
- Reduces the volume of outbound shipments when customers choose exchanges over originating new orders.
Retailers implementing this strategy should prominently feature the exchange-credit option in the return policy and within the returns portal. Automated prompts—“Select store credit and receive 10 % extra”—can guide customers toward the exchange path. Front-line service representatives should be trained to communicate the benefits of store credit versus a fee-incurring refund.
2. Offer Tiered Free-Return Thresholds
In 2025, consumers increasingly expect free returns, but retailers can safeguard margins by setting purchase minimums. For instance, orders above $75 qualify for free returns, while orders below that threshold incur a nominal restocking fee. This tiered model:
- Motivates customers to increase basket size to avoid fees, benefiting average order value.
- Narrows the range of lower-margin, small-ticket returns that disproportionately drive up processing costs.
- Retains goodwill by still offering free returns on higher-value purchases.
To enact this policy effectively, retailers should analyze average order values and return rates by price bracket to identify the optimal threshold (e.g., $50, $75, or $100). Clear messaging—“Free returns on purchases over $75; $5 restocking fee otherwise”—must appear in prominent locations such as product pages, checkout, and the return-initiation workflow.
3. Integrate Virtual Fitting and Personalized Recommendations
One root cause of high return rates, especially in apparel and footwear, is poor fit or mismatched customer expectations. By investing in virtual fitting technology, size-recommendation engines, or AI-driven style quizzes, retailers can reduce returns at the source. Key tactics include:
- Embedding “size-finder” widgets that leverage historical fit data to recommend the correct size, reducing size-related returns.
- Offering curated bundles or “complete the look” suggestions that pair complementary items, decreasing the likelihood of individual-item returns.
- Providing augmented reality (AR) previews, letting customers virtually place furniture or décor in their space, and lowering returns from incorrect assumptions.
Although upfront investment is required, a 10 % reduction in returns can translate into significant savings, often eclipsing the potential revenue from fees. In practice, retailers should audit top-return product categories, identify where fit or visualization tools will yield the greatest impact, and roll out pilots in those segments first.
4. Implement Returnless Refunds for Low-Cost Items
For inexpensive, low-margin goods—such as phone accessories, small electronics, or clearance items—the cost of processing a return often exceeds the value of the product. Instead of charging a fee or forcing a return, retailers can issue a returnless refund, asking customers to keep or donate the item. Benefits include:
- Dramatically cutting processing, inbound shipping, and restocking overhead.
- Elevating customer experience by removing the friction associated with returns.
- Repurposing or liquidating “kept” items via donation or secondary channels, minimizing inventory loss.
To deploy this option judiciously, retailers should define clear product eligibility criteria (e.g., items under $10 or items with a return rate over 60 % that cost less than $8). The returns portal must automatically route eligible SKUs through the returnless-refund flow, with clear communication—“No need to ship: please keep or donate, and a full refund will process within 3 business days.”
5. Partner with Third-Party Return Hubs and Drop-Off Locations
Outsourcing last-mile returns to centralized partner locations—such as in-store drop-off at brick-and-mortar affiliates or third-party kiosks—can significantly cut carrier fees and reduce handling costs. By establishing relationships with nearby network partners, retailers can:
- Negotiate bulk-shipping discounts and optimize routing for returned packages.
- Offer customers convenient drop-off points, eliminating the need for prepaid labels in some cases.
- Increase operational efficiency by consolidating return shipments into regional pallets rather than individual parcels.
Action steps include mapping return hotspots (zip codes with high return volumes), identifying potential local collection partners (e.g., national retail chains or carrier-affiliated lockers), and integrating drop-off options into the returns portal. A co-branded return label referencing the partner network should guide customers to the nearest location, and logistics teams must coordinate scheduled pick-ups or bulk drop-offs to a central returns center for bulk processing.
6. Introduce Restocking Fees Selectively
Rather than blanket returns fees on all products, retailers can apply restocking fees only to specific categories with high processing costs, such as oversized items, hazardous materials, or customized goods. Key considerations:
- Clearly delineate which items incur restocking fees (e.g., 15 % on large appliances, 20 % on personalized or engraved products).
- Communicate restocking-fee policies at multiple touchpoints: product pages, order confirmation, and the returns page, ensuring no surprises.
- Offer an alternative exchange-only option without any fee, so customers still have a frictionless pathway if an exchange is acceptable.
Before implementing selective restocking fees, retailers should analyze the cost-to-process returns by category, isolating those where a fee offsets the bulk of handling costs. Transparent policy language—“Customized items are non-returnable” and “Standard items within the 30-day return window incur a 10 % restocking fee”—helps manage expectations.
7. Leverage Buy-Online, Return-In-Store (BORIS) Programs
For omnichannel retailers with physical footprints, facilitating in-store returns can remove carrier costs entirely and strengthen foot-traffic opportunities. BORIS programs:
- Eliminate return shipping expenses altogether when customers drop off items in person.
- Create chances for cross-sell or upsell during in-store visits, recapturing some margin lost on the original sale.
- Provide immediate refunds or exchanges, enhancing customer satisfaction and loyalty.
To roll out a BORIS program, retailers should ensure point-of-sale (POS) systems are integrated with the ecommerce platform so that online orders are recognized in-store. Staff training is essential; employees must be able to scan the customer’s digital order confirmation, process the return, and issue an immediate refund or credit. Signage and email marketing campaigns can promote the convenience of in-store returns to encourage adoption.
By adopting one or more of these alternatives, rather than defaulting to flat returns fees, retailers can craft a returns experience that preserves customer goodwill and loyalty while mitigating cost pressures. Each tactic requires upfront planning—analyzing return-rate data, revising technology infrastructure, and updating policy language. However, when executed thoughtfully, these strategies reduce net return-related costs more effectively than merely levying a fee, all while reinforcing a customer-centric brand reputation.
Final Thoughts: A Sustainable Returns Strategy
As ecommerce grows, the number of online shoppers highlights the importance of a well-managed online store. Online returns are part of the post-purchase process, and retailers need to consider return fees, logistics, and customer experience. By balancing operational efficiency and customer-centric policies, online merchants can ensure every online purchase and return experience is seamless, for long-term success in the digital marketplace.
Frequently Asked Questions
Why do ecommerce businesses charge returns fees?
Retailers impose returns fees to cover the costs of processing and managing returned merchandise. Returns require labor, restocking, reverse logistics, and can eat into already thin profit margins. These fees help offset these costs and discourage excessive or unnecessary returns.
Are returns fees bad for customer loyalty?
They can be if they’re not handled carefully. When return fees aren’t clearly communicated or feel unfair to customers, they can erode trust and discourage future purchases. However, when retailers provide transparency about these fees and offer alternatives like store credit, they can maintain customer loyalty while managing return-related expenses.
What are some examples of returns fees in ecommerce?
Common examples include restocking fees (a small percentage deducted from refunds), return shipping fees (where customers pay for return postage), and fees for prepaid return shipping labels. Some retailers also charge fees if returned items are missing original packaging or show signs of wear.
How can I reduce the impact of returns on my ecommerce business?
Start with clear product descriptions and size guides to reduce size-based returns. Offering virtual try-on tools can also help. Some retailers are experimenting with “keep it” policies for inexpensive items, offering store credit, or using data analytics to identify chronic returners. The goal is to find ways to reduce the volume of returns in the first place!
What should I consider when setting up my own returns fees policy?
Think about balancing your need to recoup costs with your customers’ desire for a hassle-free shopping experience. Clear communication is essential: make sure shoppers understand the fees and policies up front. Also, consider whether alternatives like store credit or exchanges might reduce the sting of fees while protecting your bottom line.