What: The cost to process $100 of returned merchandise is about $26.50 on average.

Why it is important: Returns are one of the biggest profit drains for online retailers. Fixing that has become a priority as inflation continues to crimp shoppers’ spending on everything from clothes to home décor.

Online retailers are making efforts to cut down return rates to increase profits as inflation continues to impact consumer spending. The shift to online shopping during the pandemic caused return rates to rise by about 14% in 2022 compared to 2019, largely due to customers buying multiple sizes of the same item for fit. Processing returns is expensive, costing on average $26.50 to handle $100 of returned merchandise, according to Narvar, a returns-management company.

Retailers are now attempting to reduce returns to save costs. Amazon shows items with high return rates to customers, while Dress the Population offers discounts to customers who promise not to return their purchases. Major retailers like Zara and H&M charge for mail-in returns, and 66% of retailers now charge for returns, up from 60% in the previous year.

However, a survey showed that 69% of consumers would stop shopping at retailers charging for returns, while 49% would pay more upfront for free returns. Retailers are also encouraging in-store returns and offering incentives for customers to keep unwanted goods. Some, like Dress the Population, offer significant discounts if customers agree to keep purchased items. This strategy has helped decrease the overall return rate by 7% and reduced the cost of returns by half for the company.

In addition to cutting down returns, retailers are also aiming to reduce customer acquisition costs, which have surged due to restrictions on online shopper tracking implemented by tech companies like Apple and Google. They are also trying to identify and manage heavy returners who account for a disproportionate amount of returns.

Retailers clamp down on returns