Don’t Ignore the Cost of Returns: Top 3 Impacts on Your e-Commerce Business

Are returns slowly killing your new e-commerce business? In many cases, returns can often be a serious issue for your e-commerce fashion brand, aggressively affecting profit margins and gutting your conversion rates.
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Last updated on September 20, 2022

Are returns slowly killing your new e-commerce business? In many cases, returns can often be a serious issue for your e-commerce fashion brand, aggressively affecting profit margins and gutting your conversion rates.

You probably know that dealing with returns is one of the inevitable parts of running a retail business online. While you can take many measures in order to reduce returns, you will also have to know and understand how you can manage and minimize the returns that you get. If you would like to keep the costs down while offering an excellent customer experience, you will have to streamline your returns process, making it more efficient. Also, with tighter retail margins, you should grab the returns bull by the horns.

The fashion industry has the highest return rates. Also, keep in mind that the impact of returns depends mainly on the kind of customers. Did you know that free returns can have an adverse impact on your revenue? These returns can increase your operating cost as well.

According to Statista, in the US alone, the cost of customer return deliveries will be $550 billion by the end of 2020. This is 75.2 percent more than the last 4 years. And the troubling thing is that this number doesn’t include inventory losses and restocking expenses. It is worth noting that nailing down accurate numbers on customer return rates is very difficult. However, keep in mind that compiled data from various sources paints a rather bleak portrait, particularly for online clothing retailers and fashion brands.

Here are the top three impacts on your e-commerce clothing business if you ignore the cost of return.

Top 3 Impacts on Your e-Commerce Business if You Ignore the Cost of Return
Photo by Nik Shuliahin / Unsplash

1. Impact on Brand Image

Keep in mind that the modern online shopping experience is usually supplemented and improved by customers sharing both their purchases as well as opinions on various social media channels.

As social platforms, such as Facebook, Instagram, and YouTube, bring in higher amounts of web traffic to your store and increase your store’s purchases, note that a difficult or hassling product returns experience may associate negative connotations with your brand, and you don’t want that.

2. Impact on Customer Retention

You may know that customer returns can hurt your e-commerce business growth considerably by causing churn. Kissmetrics reveals that it is seven times more expensive for your business to obtain new customers than it’s to concentrate on the ones that you already have. ****Keep in mind that the online return experience can cause you to lose important customers.

This is why when you compute the total cost of return shipping, it is important to include the various opportunity costs of lost business, especially when you make customer returns difficult. Note that many customers will not purchase from your online fashion store in the future if they have a poor or confusing experience with online returns.

Also, it is worth noting that this trend is prevalent among millennials. Keep in mind that more than 50% of them will likely shun your website if you hassle or irritate them about a return.

3. Impact on Profit

As returns can cut into your profits, note that preventing returns is important for your business. Excellent customer service will help avoid unnecessary returns by timely solving a customer’s issue or problem with support.

If you are an online retailer, returns are costly for you, not just because the valuable resources used to sell the products are squandered. This is also because tackling returned items is quite complex.

For example, goods that would normally be available to customers for purchase are taken out of circulation, and this requires extra inventory. As merchandise returns can lower your net sales, they also indirectly reduce your gross and net profit margins.

Reducing the Cost of Online Returns

How returns can impact your ecommerce business revenue.
Photo by Claudio Schwarz | @purzlbaum / Unsplash

There is no doubt that customer returns are an important part of fashion retail, whether in a conventional physical store or online. Although it is hard to eliminate returns (and not allowing returns will just hurt your clothing business), there is a lot you can do in order to lower customer returns in an efficient and cost-effective manner.

Streamline Your Return Process

You should review your logistics carefully for handling returns. Keep in mind that every business must have an effective plan for handling reverse logistics. It is best to benchmark the existing return process right from initial customer contact to resolution. If customer support is a bottleneck, you may be able to automate it with SaaS software.

You have to audit this process carefully, treating every bottleneck in the process as an opportunity to improve.

Incorporate Top-Quality Visuals

Did you know that about 23 percent of product returns are due to inaccurate or misleading depictions of the product? You should use top-quality visuals that offer detailed and excellent views of items in order to close the gap between the customer’s expectations of the product and the reality.

You can also incorporate images of models wearing the garment so that people can picture how the products look on themselves.

Adjust the Return Policy

Did you know that simply having an effective e-commerce return policy can considerably impact your revenue? It can also influence whether customers decide to shop at your online clothing store.

A UPS study reveals that 88 percent of online shoppers review return policies and 67 percent check the customer return policy before making a purchase. Remember that 15 percent of online shoppers will likely abandon the purchase because of an unclear or unfavorable return policy?

This is why you should ensure that your return policy is clear and simple to find. You should also consider updating the return policy so that it is more customer-centric.

Use Accurate Size Charts

Small, large, and medium: Note that these sizes may vary considerably in terms of actual fit, and this can be a huge challenge for your business if you sell clothing and apparel online. It is no surprise that size and fit are still major issues for most e-commerce retailers. This is because consumers are not able to try on items. As a result, wrong-size purchases usually contribute to high customer return rates.

However, as a retailer, you can easily increase customer confidence, improve sales, and lower returns in your store by creating a simple and comprehensive size chart. Note that having a comprehensive and simple size chart will also protect you as a merchant, especially if you market custom-made products.  You can even try a size recommender as it is a valuable tool that will help minimize returns.

Incorporate Customer Reviews

Undoubtedly, product reviews offer both considerable SEO as well as sales benefits for many e-commerce clothing retailers. However, keep in mind that they can also help minimize product returns.

Also, product reviews empower your customers to make better and well-informed decisions, and this ultimately leads to fewer mistakes and regrets.

What’s next?

Returns can have a considerable impact on your business and its bottom line. If you are experiencing higher returns, you should use Kiwi Sizing. You can benefit from Kiwi Sizing as it helps improve your customers’ overall shopping experience with tools like a customizable sizing chart as well as a fit recommender.

Read more: Why sizing is a problem for online shopping, and how to prevent losses from your e-commerce store


To reduce the return rate after a successful sale, we also recommend that you can create a size chart with unit conversion to make your customers pick the unit they are most comfortable to think in to make a purchase decision.

Or use Kiwi Sizing AI Size Recommender as a size chart tool. It will recommend the most suitable size of products for customers to reduce return rate, help you decrease the cost of the return, and to create a positive cycle of your e-commerce business.

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