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How to Reduce Holiday Return Costs for your eCommerce Store
Rebecca Lazar

December 1, 2024

It’s that time of year again when eCommerce stores see a surge in sales and an influx of returns. While returns are inevitable during the holiday season, there are ways to reduce the cost of holiday returns for your store. 

Follow these tips to keep your return rates and return costs low, and maximize your profits from the holiday season.

What’s the True Cost of Holiday Returns?

Factoring in transportation, processing, and other costs, holiday returns cost online stores anywhere from 17-66% of the price of the original item. 

And it’s not just about the money. Every returned item goes through a complex journey: from the moment a disappointed customer initiates a return, through shipping, processing, and potential disposal. Each step carries hidden costs – labor hours, transportation fees, warehouse space, and even environmental impact – regardless of whether the returned item is in good condition or not.

Because of the high cost of returns, it’s essential to know how to reduce your holiday return rates and properly handle product returns in order to increase your profits this holiday season.

Reverse Logistics Costs

Reverse logistics costs include shipping, labor, processing, and restocking costs. Expect reverse logistics costs to rise during the holiday season as a result of increased sales and returns.

The influx of returns can slow down distribution centers during the peak holiday season. During the holiday season, the focus is more on delivering outbound products, so accepting returns can slow down operations.

Finding ways to make shipping, warehousing, and processing returns more efficient is essential for reducing your return costs. 

Loss of Customers

If it’s a pain to return products, customers are likely to stay away from buying holiday gifts from your store in the future. In fact, 84% of customers would stop buying from an online store after a negative return experience.

Losing customers comes at a great cost to your store, as it is more expensive to acquire new customers than to retain existing ones.

Consider the lifetime value of a customer. A single frustrating return could mean losing someone who might have made dozens of purchases over years.

The lost lifetime customer value (LTV) and the expense of winning back customers or acquiring new ones add up to a significant cost in both revenue and reputation. In the competitive world of eCommerce, your return process can be the make-or-break moment that determines customer loyalty.

Damaged Reputation

In the age of social media and instant reviews, your reputation is your most valuable currency. Each return is an opportunity to either strengthen or shatter that reputation.

Customers don’t just remember what they bought; they remember how they were treated when something didn’t work out. If someone receives a holiday gift and can’t easily return it, they are unlikely to recommend your store to their friends and family.

If your reputation is damaged, you could lose potential customers and referrals, which can have a long-term negative impact on your business.

Environmental Cost

The holiday shopping season comes with an often-overlooked price tag: environmental impact.

While nearly half of customers and gift recipients will return unwanted gifts in the weeks after the holidays, what many holiday shoppers may not know is that shipping back returned products contributes to carbon emissions, and each year, billions of pounds of returned products end up in landfills. Returns have a huge environmental cost unless handled wisely.

Online returns are particularly problematic. Unlike local store returns, each online return involves multiple transportation legs – from customer to return center, return center to warehouse, and potentially warehouse to landfill. This extended journey adds to carbon emissions and contributes significantly to environmental waste. 

Tips to Reduce Your Holiday Return Costs

This holiday season, reduce your holiday return costs by following these tips.

Offer “Just Keep It” Returns

Letting customers keep an item instead of sending it back is called a “returnless return.” This helps reduce costs because there’s no need to pay for shipping, processing, or restocking returned items. It also helps the environment since it cuts down on the extra shipping that contributes to carbon emissions.

This works well for inexpensive items or items that are hard to resell, like damaged or perishable goods. For these items, it’s often cheaper to let customers keep them than to deal with the return process.

Big stores like Amazon and Walmart already use returnless returns, especially for low-cost items. Offering this option during the holiday season can save your store money and make the return process easier for customers.

Give the Option to Buy Online, Return In-Store (BORIS)

Letting customers return online orders to your physical store can save a lot on shipping and processing costs. Many customers still prefer the option to return items in-store because it’s more convenient and faster.

A lot of people do their holiday shopping online but want to make sure that returns are easy. If they can return items to a store instead of mailing them back, it makes the whole experience smoother. Plus, offering this option could increase foot traffic to your store and help boost in-store sales.

More than half of customers plan to do their holiday shopping online, and customers are more likely to shop online if they can return an item in-store. This is especially important for gifts, as customers want to make sure their gift recipient has the choice of how they can return the gift if they don’t like it.

Offer the option to buy online and return in-store creates a seamless shopping experience while reducing your return handling costs at the same time. 

Reduce Return Rates

Reducing your return rates minimizes the costs associated with returns. Reduce your holiday return rates by making sure shoppers have as much information as possible up-front and optimizing your workflows to reduce the likelihood of returns after the holidays.

  • Give More Information Up Front

One way to reduce returns is to provide customers with as much information as possible before they buy. Make sure product descriptions are clear, size charts are accurate, and your photos show products from all angles.

  • Create a Special Holiday Return Policy

It’s important to have a well-thought-out holiday return policy in place, as 44% of customers say that return policies influence what holiday gifts they purchase. 

When creating your holiday return policy, take into account that some customers may be purchasing gifts well in advance of Christmas, and a return policy with a 30-day return window may not be sufficient. 

Consider making your holiday return policy more lenient, with a 60- or 90-day return period, so gift recipients have plenty of time to return items.

Make sure to clearly show your holiday return policy on your website and in emails or ads. If you have special rules, like a longer return period or different steps for returning gifts, make sure customers know about them before they buy.

  • Optimize Your Delivery Times

Every year, overwhelmed supply chains, unexpected weather events, and understaffed delivery drivers lead to millions of packages not arriving in time for Christmas. This is a huge problem, as no one wants to receive their Christmas gifts in January.

Reduce post-holiday returns by guaranteeing on-time delivery. Make sure you check your shipping carrier’s cut-off dates and update the holiday shipping cut-off dates on your product pages. 

  •  Learn from Last Year’s Holiday Returns

To reduce post-holiday returns, collect holiday return data from past years and determine what you can learn from it. 

Look at data such as: 

  • How many items were returned? 
  • What were the most common reasons for returns? 
  • Which items were most often returned?

With in-depth return data and customer feedback, you’ll have the information needed to implement new workflows, forms of communication, and ways to ensure product integrity. All of these can help you reduce the number of holiday returns this year.

Automate Returns Management

An automated returns management system like ReturnGO can reduce your holiday return costs by automating the return process from start to finish. This saves you time and money by reducing the need for manual processing, and improves customer satisfaction by providing an efficient returns process. 

Automating your return process during high-volume seasons like the holidays can free up your team to focus on other tasks such as fulfillment and customer service inquiries, which often peak during the holiday shopping season.

Reduce return rates, encourage repeat business, bring down costs, and improve your store’s reputation by automating your returns process.

Optimize Your Reverse Logistics

Reverse logistics during the holiday season can be tough for even large, well-established eCommerce stores because with returns come increased shipping costs, disruptions in warehouse operations, and questions about what to do with returned products.

Having efficient reverse logistics processes in place before the holiday return rush is essential for reducing return costs and environmental damage.

A great way to optimize your reverse logistics processes is by using a third-party logistics provider (3PL). 3PLs handle inventory management, return shipping, and returned product processing, which can save you time and money compared to managing these tasks yourself or using multiple different providers.

Using a 3PL for reverse logistics is becoming an increasingly popular choice for eCommerce stores – 40% of retailers use a 3PL to handle returns.

Integrating your 3PL with your returns management system gives you a complete and efficient solution for handling the reverse logistics process during the busy holiday season.

Reduce Your Return Costs This Holiday Season

Make sure your store is ready for the holiday return rush. Provide cost-effective return methods and optimize your returns process to reduce the costs of holiday returns, maximize your profits, and start off the New Year ahead of the game.

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