More than a third of the world’s population shops online, which means that hundreds, if not thousands, of products are sold every second.
The only problem is that many of those products are returned.
Global online sales are expected to reach $6.419 trillion in 2025, while estimates suggest that the average ecommerce return rate in 2025 could be between 17% and 24.5%. The return rate for brick-and-mortar stores is considerably lower, as it rarely exceeds the 10% threshold.
Consequently, sellers worldwide may lose anywhere from $1.17 to $1.68 trillion due to returns of online purchases in a single year before the reverse logistics costs are factored in.
Still, abandoning the free returns model and asking the customer to cover the return costs doesn’t seem to be the solution because 79% of people who frequently shop online say that they wouldn’t purchase an item from a seller if they had to pay for returns.
Let’s take a closer look at what online sellers can do to keep the return rates in their stores low and avoid the costs associated with reverse logistics.
Key takeaways
- Return rates in the ecommerce industry are consistently higher than those in brick-and-mortar retail.
- A high return rate in an online store is usually a symptom of underlying issues, such as poor product quality or operational inefficiencies.
- Return rates depend on product category and range from 15% to 30%.
- 13.7% of all returns are due to wardrobing and other types of fraud.
- Diversifying return options improves customer satisfaction and encourages repeat purchases.
What is the Return Rate?
The return rate is a metric that measures the percentage of items returned after a purchase over a specific period.
Sellers must track the total number of sales and returns during that period to calculate their store’s monthly, quarterly, or annual return rate.
To calculate the metric, you must divide the total number of items returned by the total number of items sold and then multiply the result by a hundred.
For instance, if you sold 1500 items and received 150 returns during a month, your store’s monthly return rate is 10%.
Monitoring this metric on a monthly basis can give you insight into your store’s performance and, more importantly, help it remain profitable.
Retailers can use a similar formula to calculate the overall cost of returns by dividing the total cost of the returned merchandise by the total sales value.
However, it’s essential to understand that neither metric reflects the actual return cost. Reverse logistics entail a broad range of costs that sellers on online marketplaces usually cover, cutting their profit margins.
Here’s a brief overview of some of the most significant reverse logistics costs:
- Transportation (including free return shipping and outbound shipping)
- Handling and processing (receiving, inspecting, sorting, restocking, etc.)
- Inventory (holding, value depreciation, etc.)
- Technology (Returns management systems)
- Staff (customer service, administrative, warehouse)
According to the latest statistics, online retailers must spend between 20% and 65% of the product’s original value to process a return.
Optimal return rates for different product categories
Finding the perfect return rate for an ecommerce store is difficult because the metric varies significantly depending on the product category.
Hence, an online stores that primarily sell luxury apparel will likely have a considerably higher average return rate than stores that predominantly offer health and beauty products.
Let’s examine the return rates that are considered optimal for different product categories:
- Apparel – 10.01%
- Footwear – 9.1%
- Jewelry – 8.3%
- Electronics – 8.2%
- Sprots & Outdoors – 6.10%
- Beauty – 4.9%
- Health and Wellness – 4.2%
These figures should only serve as benchmarks because your store’s actual return rate depends on multiple factors other than the product category.
These factors include:
- The quality of the products you offer
- The number and quality of product images
- The accessibility and the terms of your Returns policy
- The informativeness of your product descriptions
- How prone shoppers in your niche are to bracketing
Although the list above isn’t comprehensive, it can be an excellent starting point for sellers struggling with consistently high return rates.
Managing the reverse logistics costs
As the store’s return rates grow, reverse logistics becomes a considerable financial burden that limits an online store’s profitability.
The process encompasses the product’s entire journey from the moment a customer decides to return it to its reinclusion into the sellable inventory.
Sellers must analyze each step of this journey and identify those that generate substantial costs. This information can help formulate an efficient reverse logistics process that minimizes unnecessary expenses.
Besides ensuring that product listings in their store contain all the information buyers need to reach the purchasing decision, online sellers can also reduce costs associated with processing returns by minimizing the chances of a product getting damaged during the delivery process.
Outsourcing the reverse logistics to a 3PL provider is arguably the most efficient solution for online sellers because it streamlines the returns experience.
Hence, entrusting a 3PL provider with your store’s reverse logistics can help you process and restock products faster while saving on labor and storage costs.
Sellers can also manage customer expectations by creating a clear and comprehensive return policy that provides consumers with multiple return options, offers a reasonable time window to return items, and discourages return fraud.
Adopting a data-driven approach and analyzing customer data and consumer behavior enables sellers to identify return patterns, reduce avoidable returns, and improve their customers’ online shopping experience.
Understanding why your customers return products
A study conducted by DealNews in 2023 found that, on average, a consumer in the United States returns eight products per year.
The same study also reveals that more than half of Americans prefer online returns, and it provides insight into the most common reasons shoppers return products to online and physical stores.
Here’s an overview of the reasons for returning items purchased online:
- Sizing issues (65%)
- Damaged or defective items (56%)
- The customer didn’t like the product (44%)
- The product didn’t match the description in the listing (31%)
- The customer found the same item at a better price (13%)
- The customer no longer needed the product (12%)
- Buyer’s remorse (11%)
- The customer ordered the wrong item (11%)
Even though there’s little that sellers can do if their online customers return an item because they didn’t like it or regret buying it, most of these issues are easily addressed.
Let’s see what sellers can do to address these issues:
- Include size charts in product listings
- Perform quality checks of all items before adding them to the sellable inventory
- Ensure that all information in the product description is accurate and matches the product
- Offer competitive prices
These recommendations align with best practices for listing creation on eBay, Amazon, and other marketplaces, so simply following the platform’s guidelines can help keep your store’s return rate in check.
The importance of return policies
Although often overlooked, an online store’s return policy plays an important role in customers’ purchasing decisions. The recent data shows that almost 70% of online shoppers consider a store’s returns policy before buying a product.
Moreover, a return policy can help sellers manage their customers’ expectations throughout the entire process by allowing them to communicate the conditions under which an item can be returned.
An ambiguous and poorly written return policy can increase the return rates, affect the quality of the shopping experience, and result in disputes or negative reviews.
A return policy should contain the following elements:
- Return window (Limiting the return window to 14 to 30 days can have a positive impact on your store’s return rates)
- Eligible items (Indicate which items cannot be returned)
- Item’s condition (Clearly state whether you only accept returns of unused items in their original packaging, or also accept returns of used and malfunctioning items)
- Detailed instructions for the return process (including the return in-store option when applicable)
- A list of refund alternatives, such as product exchange or store credits, together with the processing time for each option.
- Any costs the buyer must cover (This is particularly important for sellers who only offer buyer-paid returns)
It’s also paramount for sellers on online marketplaces to make their store’s return policy easily available to customers so that they can familiarize themselves with the return conditions before making a purchase.
Turning free returns into a competitive advantage
Even though the rising costs of free returns have forced a significant number of ecommerce businesses to switch to the buyer-paid returns, this model has proved inefficient due to a decrease in sales.
What’s more, most online shoppers consider free returns an important part of their purchasing decisions.
As a result, monitoring your store’s return rate and addressing some of the most common reasons shoppers return products remains the best way to keep return and reverse logistics costs relatively low while providing a good shopping experience and fostering customer loyalty.
Do you need assistance managing your eBay store’s domestic and international free returns? Webinterpret can help. Book a call to learn more about our Free Returns services.
About Webinterpret
Webinterpret supports merchants selling on eBay.
Our AI-based solutions enable more effective selling through automated listing localization, advertising, and returns and ensure all products placed on EU markets are GPSR-compliant.
By giving your international customers a full, end-to-end local shopping experience, Webinterpret improves your conversion and helps establish your business globally.
