Returns have become one of the most complex and costly challenges in UK retail. Online shoppers return nearly £27 billion in purchases annually, according to the ZigZag and Retail Economics Annual Returns Benchmark, while Loop Returns notes that ecommerce return rates are approaching one in five orders. And as online sales grow — the House of Commons Library says they now account for nearly 29% of UK retail — returns increasingly affect entire operations, online and in-store alike. Effective retail returns management can protect margins, curb fraud, build customer loyalty and turn a cost centre into a competitive advantage.
The Retail Returns Landscape in 2026
The pain inflicted by the volume of returns is compounded by the reality that in the UK, most returns represent pure loss. And when a customer sends something back for a refund — rather than exchanging the item — that revenue exits the business entirely.
The UK’s ecommerce return rate stands out globally. At 17.5%, it significantly exceeds the US (11%) and Australia (10.9%), according to Loop’s 2025 State of Ecommerce Returns Report. More concerning is what happens to those returns: 78.1% result in refunds, while only 5.8% convert to exchanges — the lowest of any region studied.
UK consumer law amplifies this challenge. Under the Consumer Contracts Regulations 2013, online shoppers have a legal right to cancel orders within 14 days and return items within 14 more — protections that don’t apply to in-store purchases, where return policies are at the retailer’s discretion. Combined with the UK’s high ecommerce penetration, a significant share of sales falls under these mandatory requirements.
The financial toll extends beyond lost sales. Returns fraud now costs UK retailers £1.3 billion annually, according to Retail Economics, with the British Retail Consortium flagging it as a key concern in apparel and footwear. Bracketing (ordering multiple sizes or colours in a single transaction with the intention of returning most) has become commonplace, particularly in fashion. And serial returners (customers who consistently return a high proportion of orders across many purchases over time) accounted for £6.6 billion in returns in 2024, though ZigZag research shows this figure is dropping as retailers fight back.
In fact, 76% of the UK’s 100 largest retailers have now implemented return fees or withheld delivery refunds according to ZigZag, and typically charge £2.50–£2.95. As a result, serial returners have fallen from 12% to 8% of consumers, saving retailers an estimated £1.7 billion in 2025.
Whether returns arrive by post or over the counter, the underlying challenges are the same: protecting margins, preventing fraud and retaining customers.
8 Strategies for Managing Customer Returns in the Retail Sector
Returns are a natural part of retail. Some reflect genuine product issues; others reflect the cost of offering customers flexibility. But ecommerce has pushed volumes to unsustainable levels. The strategies below focus on three overarching goals: preventing avoidable returns, processing necessary ones efficiently and recovering value where possible.
-
Establish a clear returns policy
Clear rules set customer expectations and protect retailers from abuse. The most effective policies specify timeframes, conditions and exceptions in plain language and are easy for customers to find.
Some UK retailers have moved toward tiered approaches: offering standard terms for most customers, but stricter conditions for those who make frequent returns. For example, ASOS — the fast-fashion and cosmetics retailer — introduced a £3.95 fee for customers who often send back merchandise while keeping returns free for those who keep at least £40 of their orders.
Whatever the approach, consistency matters. Staff need to understand the policy and enforce it uniformly, even if terms differ between online and in-store channels.
-
Review returns procedures
A clear policy is only as good as the processes behind it. Returns that sit in a warehouse queue, get miscategorised, or take weeks to refund, hindering operations and frustrating customers waiting on a credit. Efficient returns procedures meticulously define steps for receiving, inspecting and routing items based on whether they can be resold at full price, discounted or written off.
How fast this happens matters. Seasonal goods and fashion items lose value quickly, making processing delays particularly costly. Auditing return workflows can reveal bottlenecks and inspire change. Where are items getting stuck? How long does inspection take? Are refunds processed promptly? Making small improvements in such areas contributes to meaningful savings.
-
Consider omnichannel return options
For retailers with physical locations, offering multiple ways to return items — post, drop-off points, in-store — gives customers greater flexibility while creating opportunities to steer them toward options that cost less to process. In-store returns, for instance, are generally cheaper to handle. There are no shipping costs, products can be inspected immediately, and businesses get a chance to convert refunds into exchanges on the spot.
Several UK retailers have leaned into this by charging £2–3 for postal returns while keeping in-store returns free. This approach nudges customers toward the more cost-effective channel without removing choice entirely.
-
Enhance the pre-sale experience
The most cost-effective way to manage returns is to prevent them in the first place. Many returns stem from a gap between what customers anticipate and what they receive. Detailed product information — such as high-quality images from multiple angles, accurate sizing guides and clear descriptions of materials and dimensions — helps close that gap.
In fashion, where fit is the leading cause of returns, some retailers have added virtual try-on tools or size recommendation features based on previous purchases. Customer reviews can also reduce returns by providing real-world context that product descriptions can miss: how an item fits, whether colours match the photos and how it holds up over time. Though building a base of reviews takes time, actively soliciting feedback post-purchase can accelerate the process.
-
Empower employees
How staff handle returns — either at a service desk or over chat — can determine whether a refund becomes an exchange, and whether the customer comes back. Empowering staff means helping them understand the reasoning behind return policies, giving them room to use their judgment and training them to turn a return into a retention opportunity, be it through a seamless exchange, a goodwill gesture or simply a positive interaction.
Returns also generate valuable intelligence. Records of why items are being returned (wrong size, damage, not as described) can reveal problems with product listings, packaging or suppliers and point towards fixes.
-
Improve fraud detection and prevention
Fraud takes many forms, including wardrobing (wearing items and returning them), returning counterfeits instead of genuine items, falsely claiming items never arrived or exploiting lenient policies through fake claims. Basic countermeasures include requiring proof of purchase, inspecting returns carefully and limiting how long after purchase items can be returned. Retailers with the resources to invest further can use fraud detection software or predictive analytics tools to flag suspicious patterns, such as unusually high return volumes, repeated claims from the same address or inconsistencies between stated return reasons and item condition.
These measures help, but overly aggressive fraud prevention can create its own problems. Requiring excessive documentation or flagging too many transactions as suspicious can frustrate legitimate customers. Tiered policies can help strike a balance by applying stricter scrutiny to high-risk transactions while making returns seamless for shoppers with a solid purchase history.
-
Utilise automation and data analytics
Manual returns processing is slow, inconsistent and hard to scale. Automating repetitive tasks — such as generating return labels, updating inventory and triggering refunds — reduces errors and frees staff to do higher-value work. Similarly, data analysis reveals patterns that manual processes miss. Tracking returns by product, channel and customer segment, for instance, can help retailers identify problems early. A spike in returns from a particular region could signal a fulfilment problem, whereas a surge in returns for a specific product might point to a quality issue or misleading listing.
Dashboards make this easier by showing real-time returns data. This helps operations teams respond quickly when problems arise, while giving leadership the insight to adjust policies, renegotiate supplier terms or discontinue problem products.
-
Upgrade inventory management systems
When inventory management software isn’t up to the task, returned stock can sit in limbo — not available for resale or written off, but filling warehouses and tying up capital. Retailers looking to manage returns may want to look into inventory management systems that track returned items from the moment they arrive, then route resaleable stock back into circulation quickly.
For retailers selling from the same pool of stock online and in-store, integration is especially important. Connecting returns processing with inventory management systems keeps stock counts accurate across channels, so a returned item inspected in the warehouse becomes available on every channel at once.
For items that can’t be resold at full price, systems with configurable routing rules can automatically direct damaged or opened items to secondary channels — clearance sales, third-party liquidators or donation programmes — helping recover at least some value instead of writing items off entirely.
Reduce Retail Returns with NetSuite ERP
Effective returns management requires seeing what’s being returned, why and how quickly items get back into sellable inventory. This is hard to do when data is scattered across systems. NetSuite ERP for Retail brings inventory, orders and sales data together on a single platform, with real-time visibility into all channels and locations. For retailers selling online and in store, this means accurate stock counts everywhere and fewer fulfilment errors — reducing the friction that can lead to returns in the first place.
Given consumer expectations, legal requirements and the continued growth of ecommerce, a high rate of returns is likely to remain a fixture of UK retail. But retailers who treat returns as a strategic priority (and not an unavoidable cost) are better positioned to protect margins and retain customers. The path forward is about managing returns efficiently, preventing avoidable returns and extracting value where possible. Clear policies, empowered staff, smart use of data and integrated systems all play a role.
Returns in the Retail Sector FAQs
What is the consumer law for returns in the UK?
The Consumer Rights Act 2015 gives customers 30 days to return faulty goods for a full refund, whether the item was bought in-store or online; the Consumer Contracts Regulations 2013 give online shoppers an additional right: 14 days to cancel an order for any reason, and another 14 days to return it. There is no legal right to return non-faulty items bought in-store — those policies are at the retailer’s discretion.
How can retailers handle returns without receipts?
Retailers can require proof of purchase in order to process a return, but proof doesn't have to be a receipt. For online returns, this is rarely an issue — order history is usually tied to the customer's account or email. For in-store purchases, loyalty programmes make it possible to verify transactions even when customers don’t have a receipt. Bank statements and order confirmations can serve the same purpose. Retailers should set clear policies on what proof they’ll accept and train staff to apply them consistently.
