In a perfect ecommerce world, every successful conversion is a cause for celebration. But the world is far from perfect and a growing number of online orders are being returned, costing merchants money. That’s why ecommerce return optimization is so important in 2025.
Call it a response to the dual curse of returns and fraudulent returns — a curse that is on the rise.
Online returns cost merchants just over $301 billion in reversed sales in 2024, according to data included in the ”2024 Consumer Returns in the Retail Industry” report by the National Retail Federation and Happy Returns. Think of it as $301 billion in “un-conversions.” Worse yet, about $46 billion of those returns were abusive or fraudulent, given Appriss Retail’s finding that about 15% of ecommerce returns last year were illegitimate.
And the problem is only growing: Abusive returns increased 64% during the first half of 2025, according to Signifyd returns data. So how can retailers fight back? In a phrase, ecommerce return optimization.
What is ecommerce return optimization?
Ecommerce return optimization is the process of turning costly product return challenges into a competitive advantage by minimizing expenses, boosting customer loyalty, and eliminating waste to increase profitability.
The roots of the term go back to the early 2020s when online retail exploded because of COVID. Here’s why ecommerce return optimization has since become a critical issue for online retailers:
- Significant financial impact: Returns can cancel out a large percentage of ecommerce profits.
- Rising customer expectations: Amazon and other companies taught customers to expect painless (and free) returns when they buy online. But although free returns may seem to be a reasonable price to pay to get 62% of ecommerce shoppers to buy more from you, you must face the sobering fact that15% of returns could be fraudulent.
- The urgent need for you to differentiate your business from competitors: A big chunk of brand loyalty in today’s competitive markets can be attributed to customers enjoying a generous, smooth, fast and low-friction returns process.
- Fast-maturing technology: New software tools, AI, cloud platforms, data analytics and reverse logistics networks make it possible for ecommerce vendors to support increasingly sophisticated return policies at scale.
Why is ecommerce return optimization important?
Ecommerce return optimization is critical today because it turns what can be a painful and expensive process into a genuine competitive advantage. Here’s how:
Increase customer satisfaction
A fast, hassle-free returns process builds trust and makes customers more likely to come back. It also turns a potentially frustrating experience — not being satisfied with a purchase — into a positive one.
Reduce costs
Cutting down on return abuse and avoidable returns saves on shipping, handling and restocking fees — freeing up budget for other aspects of the business. The cost of processing an online return averages 21% of an order’s value, according to a Pitney Bowes BOXpoll survey of digital and omnichannel brands.
Improve profitability
Fewer returns mean less money lost per sale, so more of your revenue actually turns into profit.
Enhance operational efficiency
Streamlining returns allows warehouse and customer service teams to work faster while making fewer mistakes.
Types of ecommerce return fraud
If your returns process is designed to be painless and quick for customers, it can become a reason why they choose your online store over others. But there’s a dark side to making it too easy. People can take advantage of your lenient return policy. The result: increased ecommerce return fraud.
Here are some of the techniques fraudsters use. It’s important to note that some of them are not obvious and can result in “hidden fraud” for your business—fraud that slips under your radar but nevertheless has a powerful effect on your bottom line.
Serial returners
An ecommerce serial returner is a customer who frequently purchases items online while intending to return most (or all) of them. This results in higher shipping and handling costs, making inventory items unavailable for other customers, reduced profit and waste.
Wardrobing
This refers to customers who buy an item, use it briefly and then return it for a full refund. For example, it’s not uncommon for costly clothes items to be “wardrobed” as customers purchase them to wear for a special event, then attempt to return them as if unused.
Bracketing
An increasingly common form of returns policy abuse is when a customer orders multiple versions of the same product, but in different sizes or colors. They do this intentionally to see which size or color they prefer, and return all the rest. This can be very costly for retailers.
Bricking
Expensive electronic items are particularly vulnerable to bricking, which is when a customer strips a purchase of valuable components or otherwise alters it so it no longer works. They attempt to return it, claiming it’s intact, but because it can’t function properly, it can’t be returned to inventory and resold.
Empty box
Sending back a box with no product inside (or replacing the product with a worthless item of equal weight) while claiming a legitimate return is very common. Anything from a rock to a piece of junk is used by fraudsters to pull this off.
Receipt fraud
Using a stolen or fake receipt to return stolen items for cash or credit.
Cross-retailer returns
Buying an item cheaply from one store and returning it to another retailer at a higher price for a bigger refund.
Switch fraud (or “item swapping”)
Buying a genuine product, replacing it with a cheaper or counterfeit version, and returning the fake while keeping the original.
Friendly fraud/chargeback abuse
This is when a customer claims a product never arrived or was faulty, and demands a refund or files a chargeback claim through their bank or credit card provider.
Stolen goods returns
Returning shoplifted or stolen goods for store credit or cash. This practice is so profitable that professional return fraud rings are now promoting their services on message boards and elsewhere online.
Give yourself a returns fraud checkup
Curious about how serious your returns fraud vulnerabilities are? Check out Signifyd’s free returns revenue optimization self-assessment.
How to optimize ecommerce returns to improve customer experience
Brands known for fair, hassle-free returns can gain significant loyalty from customers. Those seen as “too harsh” risk negative reviews and lost sales. An ecommerce practice optimized to improve the customer experience will follow these strategies.
- Provide customers with clarity and transparency: When customers know exactly how and when they can return an item, it removes uncertainty and anxiety, allowing them to shop with more confidence.
- Enhance speed and convenience: A fast, straightforward process minimizes disruption to the customer, giving them a positive impression of your business even if the product wasn’t right. In fact, if retailers could better manage legitimate returns by giving instant refunds to deserving customers, they’ll be rewarded with more sales. Signifyd’s work with online retailers found that 23% of consumers who receive an instant refund will soon buy something again from that business.
- Be flexible when it counts: Making allowances for special cases (for example, for a particularly loyal customer) can work wonders for cementing customer loyalty by turning what could be a negative experience into a positive one.
- Communicate everything all the time: Delivering timely updates on the status of returns reassures customers. It reduces the need for them to chase you for information and improves their sense of control over their relationship with you.
- Build trust: A well-managed return proves your business is reliable and has integrity. This encourages customers to feel safe making future purchases — even high-value ones — without worrying about being stuck with a product that didn’t meet their expectations.
- Follow up on all feedback you get from returns data: Using returns data to improve inventory decisions, product descriptions, sizing guides or quality issues prevents future customers from being disappointed. This not only cuts back on returns, but makes the overall customer experience more pleasant in the future.
How to Optimize Returns for Fraud Prevention
Although improving the customer experience is vital, ecommerce return optimization also requires protecting the business from fraud and abuse. Good policies balance both priorities by making returns easy for legitimate customers while discouraging abuse.
| Return initiative | Goal |
| Conditional returns | Accept only products in original packaging, unused, with tags attached to prevent bricking and wardrobing. |
| Return shipping-cost controls | Offer free returns only for defective or damaged products; other reasons require the customer to pay shipping. |
| Restrictions on returns of specific products: | Helps curb bracketing for products often ordered in multiple sizes or colors. |
| Pre-paid label tracking and weight checks: | Reduce empty-box and “switching” scams. |
| Use digital records to verify purchases | Ensure returns are linked to actual purchases. |
| Charge restocking fees for costly products: | Discourage casual returns. |
While each of these steps will reduce returns, merchants should carefully consider the effects of adding friction to the return process. Again, finding the right balance between experience and security and understanding an individual customer’s circumstances are key to successfully optimizing ecommerce returns.
Top five return optimization strategies for ecommerce
A well-designed ecommerce return optimization strategy is more than a cost-control measure. It drives customer loyalty, operational efficiency, and long-term profitability. Without a clear, strategic approach, returns can erode margins, strain resources and damage brand trust, while a thoughtful plan can turn them into a competitive advantage.
Make best use of returns data
Tracking patterns in return frequency, product type, customer behavior and timing helps identify root causes and areas for improvement. For example, if data shows that a specific sweater is returned 35% of the time due to “too small” sizing feedback, the retailer can adjust sizing charts or update the product description. Retailers can also use returns data to personalize returns for each customer. By using historical customer data (like past purchases and returns) and AI, you can create a more tailored experience for each customer that leads to greater trust.
Analyze reasons for returns
Understanding why items come back—whether due to quality issues, inaccurate descriptions or poor fit—helps businesses address the source of problems. For example, if a shoe brand notices “color different from photo” as a frequent reason for returns, it could invest in more accurate or higher-quality photography.
Automate the returns management process
Using software to manage return requests, generate shipping labels and track the status of returns for customers, speeds up processing, reduces errors and improves the customer experience. For example, a sporting goods retailer could deploy a self-service online returns portal where customers could instantly download return labels, significantly cutting the average processing time until they get their refunds.
Create and make public a comprehensive return policy
A clear, detailed policy sets expectations for both customers and staff, reducing disputes and confusion. For example, an electronics store could outline in plain language that headphones that have been opened and removed from their original packaging can only be returned within seven days. This can cut off hassles and arguments before they begin.
Leverage returns for higher customer retention
A well-handled return can turn a negative experience into one that drives loyalty by demonstrating your brand’s reliability. For example, an online clothing retailer could offer free express shipping for a replacement dress after a customer returns it. Experiences like this can transform into both more five-star reviews and dramatically increased repeat business.
Intelligence that transforms returns into revenue protection
If achieving all this feels like a tall order, you’re correct. It requires a lot of moving parts. Most importantly, it requires some serious automation in terms of data collection, analysis and integrating data into a broad range of operational functions. Happily, a new solution suite from Signifyd — called Intelligent Returns — transforms the typically less-than-transparent and overly complex returns process into actionable intelligence. The Returns Insights solution makes highly visible and addressable even costs and waste that are frequently hidden in the returns lifecycle.
Returns are a hidden revenue opportunity
Signifyd CEO Raj Ramanand explains how deep insights into return data can turn what was once considered a cost of doing business into what can now be a key differentiator.
Say you see a spike in abusive returns from a particular geographic area. Returns Insights gives you a comprehensive view of any patterns that are hidden in the data, providing you with granular analyses of customer behavior, product sales trends and even geographical anomalies. Armed with this intelligence, you can pinpoint where fraudulent and abusive activities are happening or where product-specific problems are causing high returns.
The Instant Refunds solution provides the automated, machine-learning decisioning needed to assess the level of risk accompanying a return. That allows merchants to respond with the appropriate amount of friction — for instance, issuing an immediate refund or requiring inspection of the returned product — based on the risk involved
Rapid refunds are a key to upgrading the returns experience
David Cost, Rainbow Shops vice president of digital and ecommerce, talks about the value of Instant Refunds in a time when Amazon and Walmart are raising the bar for consumer expectations.
In short, Intelligent Returns empowers you to avoid returns in the first place and sets you up to respond appropriately to those returns that come your way.
With intelligent Returns, you now have the right solutions to transform your returns operation from a cost center to a strategic asset. You possess the power to proactively prevent revenue leakage and optimize operations, thus turning returns from a costly hassle to a source of significant competitive advantage.
Want to optimize your ecommerce returns? Let’s talk.
