Where is the Friction Line in Retail Returns?

Retailers continue to grapple with one of the most persistent challenges in modern commerce — how to manage returns in a way that preserves margin without damaging customer loyalty. A recent RetailWire discussion sheds light on the divide between rising refund volumes and the cost pressures facing retailers, highlighting industry perspectives on how to balance customer experience with operational sustainability.

Returns Are Growing Despite Stricter Policies

According to data cited in the conversation from ACI Worldwide’s annual Global Ecommerce Report, refund volumes climbed by 18.1% in 2025 compared with the prior year, while the overall value of those refunds increased by 12.7%. This trend persists even as many retailers have adopted stricter return policies — a reminder that tightening rules alone may not significantly reduce return behavior.

This complex picture contradicts earlier reports suggesting returns were declining due to tighter policies. Instead, the RetailWire panel argues that underlying industry forces — including booming e-commerce and elevated holiday season returns — continue to drive return rates upward even as retailers seek to clamp down on generous practices.

The Cost of Returns Hits Retail Margins

Experts in the discussion noted that returns carry a heavy financial burden. Every dollar refunded is typically accompanied by additional costs for reverse logistics, restocking, payment-processing fees and even depreciation of merchandise value. These combined expenses mean that refund growth can have a larger impact on profit than the headline return numbers might imply.

This aligns with broader industry data — returns are a massive cost driver for retail, with total returns projected to reach hundreds of billions annually and return rates averaging around 16–17% of sales.

Debate: Friction for Customers vs. Retail Economics

One core question in the RetailWire discussion is whether retailers should add friction to the return experience — through fees, tighter rules or other barriers — to discourage excessive returns and protect margins. Some industry voices argue that imposing fees or limiting return windows can help constrain abusive behaviors and signal the real cost of returns back into pricing and customer decisions.

However, this approach isn’t without risk. Customer experience experts point out that easy returns are widely valued by shoppers and can be a competitive advantage. One panel contributor cited research indicating that a large proportion of customers make future purchases because of a seamless return experience, suggesting that policies perceived as punitive could undermine loyalty and long-term revenue.

This tension reflects broader discussions in the retail industry about the impact of return policies on customer satisfaction: while stricter control can reduce costs, overly rigid approaches may dissuade shoppers or push them to competitors with more generous terms.

Focus on Root Causes and Prevention

Rather than simply adding return hurdles, many industry commentators advocate for tackling the root causes of returns — such as poor product fit, inaccurate descriptions, or unclear sizing guidance. Solutions like improved online content, richer imagery, virtual try-ons and AI-powered recommendation tools have been shown to reduce the probability of returns by helping customers make better purchase decisions up front.

This preventive strategy aligns with research showing that proactive tools and enhanced shopping experiences can significantly lower return rates and improve operational efficiency. Retailers that invest in these capabilities often see healthier outcomes because customers arrive at purchase decisions with higher confidence.

Balancing Friction and Experience: A Strategic Imperative

The debate underscored by RetailWire reflects a broader industry consensus: there is no one-size-fits-all solution to the returns dilemma. Instead, the “friction line” exists somewhere between protecting profitability and preserving customer trust. Strategic combinations of targeted controls — such as tailored fees for chronic abusers — and customer-friendly practices may provide the best path forward.

As retail evolves, brands and merchants that successfully integrate smarter front-end experiences, dynamic policy frameworks and AI-driven insights will likely be better positioned to manage returns without compromising loyalty or long-term growth.