Turning Returns into Revenue: The New Peak Season Strategy?

The return process is an inevitable part of ecommerce, and sometimes it is perceived as a drain on resources and a source of operational strain, especially after Christmas. But what if returns didn’t have to be a negative force for retailers? With the right strategies, they can be turned into an opportunity that boosts revenue and strengthens customer loyalty too.

Georgia Leybourne explores how retailers can rethink their approach to returns, focusing on three key areas: transforming returns from a cost to revenue opportunity, using technology to streamline the process, and leveraging returns to drive upselling…

 

From Cost to Opportunity: Rethinking Returns 

For years, returns have been regarded as a necessary evil in ecommerce. As a result, they are considered an unavoidable expense that eats into profits and strains resources. The time and money spent on processing returns, managing inventory, and handling complaints from customers can be overwhelming, and particularly so during peak season periods. And, when you consider an estimated £27 billion of goods were returned to ecommerce businesses during 2024, this is hardly surprising.

However, forward-thinking retailers are shifting their mindset and seeing returns not as a burden, but as an opportunity. Rather than simply writing returns off as a cost, businesses can work to recoup some of the losses by managing this process more effectively. A growing number of retailers are adopting models, such as Loop Returns’ “Offset” — where customers pay a small fee during checkout to cover potential return costs. This helps businesses to recover some of the expenses suffered during the returns process but also ensures customers are aware of the potential costs upfront, leading to a more transparent and fair process.

The financial dynamics of returns are changing as retailers adopt these practices, especially since six in ten British shoppers say they would stop shopping with a retailer if they were charged for returning an online purchase. But, this trend has spread to major fashion brands like Zara and H&M, who are changing the way they view returns from a drain on resources to something that is manageable and potentially profitable.

 

The Power of Technology as a Revenue Retention Tool

Thankfully, advancements in technology are helping retailers to automate and optimise this process, ensuring a smoother experience for both businesses and consumers.

Automating returns through centralised systems, inventory management platforms, and data integration tools can drastically reduce the time and effort involved in processing returns. These technologies allow retailers and other ecommerce businesses to track returns in real time, automate repetitive tasks associated with the process, and ensure consistency across all sales channels. By trimming the returns process down with the aid of technology, retailers can ultimately become more efficient, cut costs, and boost customer satisfaction.

Moreover, embracing technology is also directly linked to improved revenue retention. Businesses that are using advanced returns management tools are seeing up to 80% of returned revenue retained through exchanges or upsells.  This means that rather than losing money when a customer returns an item, businesses can reinvest up to four out of every five pounds. This approach therefore reduces the financial impact of returns but also promotes greater customer loyalty by providing a seamless, user friendly experience.

 

Returns as an Upsell Opportunity

Instead of viewing returns as the definitive end of a transaction, savvy retailers are turning the returns process into an opportunity for upselling and cross-selling. By offering customers alternatives such as exchanges, store credit, or recommending specific products, businesses can turn a lost sale into additional revenue. Additionally, businesses can also make returned inventory a priority by updating stock levels upon receiving returned goods, and then offering that stock up for purchase before new items are ordered.

For example, Progress Jiu Jitsu, a US based retailer, successfully offered bonus credits to encourage customers to exchange items rather than request a refund, leading to a 30% increase in exchange rates. In this case, an impressive 90% of shoppers chose to exchange rather than refund. This simple strategy had a double effect of helping the retailer retain revenue, but also enhancing customer satisfaction by offering them more flexibility.

Similarly, Hammitt, a luxury handbag brand, turned returns into profitable opportunities by incentivising exchanges. This approach enabled over $580,000 to be retained by offering incentives for exchanges, turning what could have been a financial loss into a revenue boost. By offering personalised alternatives, retailers can deepen customer engagement and strengthen loyalty. Customers are more likely to stay with a brand that provides tailored solutions during the returns process, which in turn can lead to repeat business and increased spending.

 

Conclusion

The traditional view of returns as a costly inconvenience is becoming outdated. With the right approach, the returns process can be transformed into a significant advantage for ecommerce businesses. By rethinking how returns are managed and embracing technology to streamline the process to enable upselling, retailers can mitigate the financial impact of returns and even increase profitability.

For future peak season periods, ecommerce businesses should consider turning returns into a competitive advantage. Rather than just a setback, they should be viewed as an essential touchpoint in the customer journey – one that, when optimised, can ultimately boost customer loyalty and the bottom line.