Returns are a drain on profitability, and such a pervasive problem for retail that some companies have begun taking a more combative approach, banning customers for bad behavior and charging fees for returned goods. Is there a better way?
Part of the problem stems from learned behavior. Over the years, many retailers trained shoppers to expect fast shipping, long return windows and free refunds. Those policies helped drive conversion, particularly as e-commerce accelerated during the pandemic. But the cost of maintaining that level of flexibility has risen sharply, from logistics and restocking to fraud and lost full-price sales.
The 2025 holiday season, followed by the January returns wave, offered another stress test. Salesforce reports a 10% year-on-year increase in returns from the end of the 2024 holiday season to the same period in 2025. “Returns are a balance sheet issue, and we’re still in the thick of it,” says Caila Schwartz, director of consumer insights at Salesforce. At the same time, consumer behavior is shifting, with many using generative AI tools like ChatGPT and Gemini to research products, and social media for discovery, Schwartz notes. This can lead to impulse and last-minute shopping, she says, which feeds into the returns landscape: Salesforce has found that purchases made in the last four days before Christmas are most likely to be returned. The US National Retail Federation predicts customers returned $850 billion worth of merchandise in 2025.
While a flexible returns policy can rope customers in, a bad experience can turn customers off. Almost all — 93% — of consumers say a bad return experience makes them less likely to shop with a brand again, according to Salesforce. Against this backdrop, retailers are reassessing whether policy changes alone can meaningfully solve the problem. Experts say the best strategy is prevention, especially as emerging AI technologies begin to shape fit, sizing and product choice earlier in the customer journey.
Policy vs prevention
In the past few years, retailers have been tightening their previously liberal returns policies, from introducing shorter windows to charging fees, in an effort to curb abuse and recoup costs. “Consumers still desire fast shipping, free returns and lenient exchange policies, but most retailers are starting to pull back on these because they simply cannot afford to do it for all customers,” says Woodrow Levin, co-founder and CEO of returns and exchanges platform Extend. “Today, retailers do not have a way to segment their most valuable customers from policy abusers and therefore are forced to push stricter less favorable policies on everyone.”
However, this risks alienating customers. Last year, Asos unexpectedly deactivated the accounts of some shoppers with high returns rates. The backlash was swift, particularly from plus-size customers who said they often need to buy multiple sizes to find a good fit (a behavior called bracketing). Then, earlier this month, Asos introduced a more transparent tool, which shows clearly to customers that those with a return rate below 70% will continue to benefit from free returns. Meanwhile, those with a returns rate of over 70% will face a £3.95 returns fee if they keep less than £40 worth of items from their order, and customers with a returns rate of 80% or higher will also be subject to an additional £3.95 restocking fee, on top of the returns charge.
Salesforce’s data suggests that policy changes can work, but only if they are communicated clearly — and early. “Consumers are tolerant as long as they know before they make the purchase,” Schwartz says.
But both Schwartz and Levin point to prevention — rather than post-purchase penalties — as the more sustainable lever. That includes better fit tools, more accurate product data and more proactive guidance at the point of purchase. According to a Vogue Business survey of almost 700 consumers, 38% said they often return clothes because they are ill-fitting, while 91% said their clothing size changes depending on what brand they’re purchasing from.
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