30% of all internet purchases are returned, compared to less than 9% in physical stores.
These returns are more than just logistical issues for ecommerce companies; they are costly, environmentally destructive, and have the potential to undermine client loyalty.
As we approach a projected $890 billion in global returned merchandise by 2025, UK retailers are turning to industry-specific e-commerce ERP systems, artificial intelligence (AI), and immersive technologies such as virtual reality (VR) to stay ahead of the curve.
What’s the goal? To understand customer behaviour, tighten return policies, and optimise logistics. All to manage and reduce return rates.
Why Are Returns Rising in Ecommerce?
Retailers are feeling the financial pinch. The average cost of processing a return for a £40 item is approximately £26, which includes not just shipping but also repackaging, restocking, and handling fees.
The convenience of online shopping has a drawback. Shoppers cannot try on garments, handle materials, or test items. And the gap between expectation and reality is driving return rates higher year after year.
There are four drivers behind the increase in e-commerce nd retail returns:
1. Size and Fit Issues
When customers cannot rely on consistent sizing across brands, they return more. This is evident in apparel, where approximately 11% of returned items wind up in landfills.
2. Misaligned Expectations (Look and Feel)
Online visuals and descriptions only go so far. Lighting, photographic angles, and post-processing can all affect colour and texture. Customers frequently return things that do not fit their expectations based on a website’s appearance.
3. Bracketing
Customers are increasingly ordering many sizes or colours of the same item with the intention of returning all but one. This technique, while understandable from a consumer standpoint, imposes significant operational challenges.
4. Wardrobing
Wardrobing, or the act of purchasing an item, wearing it once (for example, at a wedding or function), and then returning it as “unworn,” is another emerging fad. It’s difficult to detect and increasingly prevalent in areas such as apparel and electronics.
How ERP Systems Help Reduce the Return Burden
Enterprise Resource Planning (ERP) systems, particularly those designed or connected exclusively for ecommerce, are proving invaluable in the fight against returns. Their power is based on data.
Return Pattern Detection
When connected with platforms like Shopify or Magento, modern ERP solutions provide detailed insights into customer behaviour.
As an example, Partsdoc, a UK-based car parts seller, implemented an ecommerce ERP to improve its operations. One significant advantage was the ability to identify high-return consumers and specific products with high return rates, allowing the organisation to change listings, product images, and even supplier connections.
With this level of granularity, merchants can start offering tailored return policies. For example, frequent returners may have shorter return windows or fewer free returns, whereas loyal customers may enjoy more favourable terms.
Smarter Inventory and Logistics
ERP systems simplify returns processing by combining warehouse management, logistics, and customer support on a single platform. ERP software includes automation technologies that can route returns more efficiently, issue restocking orders instantaneously, and even trigger warehouse adjustments in real time.
For example, UK fashion retailer END Clothing uses ERP and warehouse automation to track returned items efficiently, allowing it to refill things fast and resell them while they are still in demand.
Improved Forecasting
With access to return statistics and customer feedback, merchants can improve product selection and supplier quality. If a brand continually generates high return rates, ERPs can alert ecommerce enterprises to renegotiate terms, enhance product pages, or remove ineffective SKUs.
AI and VR: Addressing the Root Causes
Along with ERP integration, modern tech tools are addressing the fundamental causes of returns.
AI-Powered Virtual Try-On
AI tools are gaining popularity among fashion and cosmetics firms. ASOS, a large UK retailer, launched an AI-powered sizing tool called “Fit Assistant” that helps customers discover the right size based on previous purchases, body type, and brand-specific sizing data. This not only decreases return rates but also increases customer confidence and loyalty.
Virtual Reality Showrooms
In the furniture and home décor industry, virtual reality solutions provide buyers with immersive pre-purchase experiences. British retailer Made.com has added augmented reality capability to its smartphone app, allowing customers to visualise furniture in their home before purchasing. This has helped to reduce expensive “change of mind” returns on large, bulky items.
Beyond Tech: 5 Retail Policy Overhauls
While technology is crucial, UK companies are also implementing regulatory changes to reduce return misuse.
1. Return Fees
More UK retailers are charging for returns. Boohoo, for example, began charging £1.99 for UK returns in 2022. Zara and H&M have followed suit. These fees not only cover expenditures, but also discourage casual or noncommittal spending habits.
2. Shorter Return Window
Another option is to reduce the return window from 30 to 14 days. Amazon UK tightened return policies in some categories, while John Lewis lowered its generous 90-day return policy for certain items.
3. Use Store Credit Instead of Refunds
Some retailers now solely provide store credit for returned purchases, especially for final sale or seasonal items. This retains income within the brand environment while reducing the number of repeat returns.
4. Loyalty Programs with Return Perks
Retailers like Marks & Spencer are experimenting with membership-based models in which regular consumers receive benefits such as free extended returns, but new or non-members face harsher limitations. These programs encourage positive shopping habits while discouraging frequent returns.
5. Return Packaging Requirements
Some UK merchants have implemented policies requiring items to be returned in their original, unopened packaging or with all original tags intact. This inhibits wardrobing and allows things to be resold, lowering waste and restocking costs.
The 2025 Shift: The New Era of Ecommerce Returns
By the end of 2025, the convergence of software tools, smarter logistics, and more sophisticated returns policies has the potential to turn one of ecommerce’s biggest pain points into a competitive advantage.
Retailers who integrate ERP with their ecommerce platforms will be able to not only respond to returns faster but also foresee and prevent them entirely.
Tools like AI and VR are improving the pre-purchase experience, allowing purchasers to make more educated decisions. When combined with open, well-structured returns procedures, they result in a win-win situation: higher margins for the seller and increased buyer satisfaction.
The UK ecommerce market has long been at the cutting edge of digital innovation. As the pressure on returns increases, merchants who react through clever technology and stricter policies will be best positioned to succeed.
