Returns are considered one of the largest challenges in retail today, particularly in the ecommerce sector. But what if, instead of just costing money, returns could actually enhance the customer experience? What if they could also strengthen brand loyalty and boost revenue at the same time?
You might be wondering, “How can I turn this challenge into such a positive opportunity for my brand?” The answer lies in a rising trend: personalized returns. By leveraging data and technology, you can create a tailored ecommerce returns experience for each customer — one that adds value instead of detracting from it.
Returns: The $890 billion elephant in the room
When it comes to returns, the retail industry faces a dilemma that costs hundreds of billions a year. In 2024 alone, returns reached about $890 billion, with the return rate for online purchases exceeding 15%. On top of that, $46 billion worth of online returns were found to be fraudulent in the same year, according to industry figures cited in Signifyd’s State of Commerce 2025 report.
Why do online returns happen more often? In-store, customers can make more informed decisions because they can physically touch, try on and inspect items for defects before completing the transaction. Online shopping, however, doesn’t offer this option, making customers rely on pictures, product descriptions and sometimes short demonstration videos to help guide their decisions. This dependence on digital representations often results in discrepancies between customer expectations and the actual product, such as issues with the quality of materials, color mismatching or even receiving the wrong item — all of which naturally lead to more returns happening online than in-store.
Unfortunately, returns also happen due to some customers taking advantage of the online return system for dishonest purposes. Common return abuse scams include “wardrobing,” where people wear an item for a short period (with the tags still on) before returning it for a refund, or “empty box returns,” where customers send back a package that’s completely empty or contains something other than the original product, hoping to get a refund for an item they never actually returned. In more elaborate cases, criminal rings purchase large quantities of items with stolen credit cards, only to return them for cash or store credit.
Returns abuse is ecommerce’s existential threat in 2025
The answer to returns fraud and abuse isn’t building barriers to stop the bad actors. Why should every customer have to scale a wall to be treated well? Signifyd Senior Risk Analyst Vito Petruzzelli breaks down the threat of returns fraud from his Texas Panhandle Fraud Ranch. And he provides a winning plan for tackling the problem.
The problem of both honest and fraudulent online returns has become a drain on ecommerce profit margins, resulting in lost revenue and higher operational expenses. In a market where every dollar counts, the pressure to lower these costs is high. To address this issue, leading ecommerce retailers are reevaluating their return policies and adopting strategies like personalized returns. This shift not only turns a major challenge into a growth opportunity but also helps set them apart from the competition.
What are personalized returns and how do they work in ecommerce?
Personalized returns is a term that refers to exactly what it sounds like: a customer-focused approach to handling returns that’s based on customer behavior and intent. This strategy works by using historical customer data (like past purchases and returns) and artificial intelligence (AI) technologies to create a more tailored experience for customers based on trust. Here’s how personalized returns improve customer experience while protecting the business:
- AI models continuously analyze customer data to uncover patterns and predict future actions. When combined with a network of many retailers, AI models are able to provide insight into the identity and intent behind each return and refund request. By processing transaction history, purchase frequency and return habits, these models can differentiate between illegitimate and legitimate return requests and potentially automate the response.
- Retailers may take a more cautious approach to return requests that have been flagged due to a history of abusive or fraudulent returns. For example, when confronted with a customer with a record of abusive or fraudulent returns, a retailer might require the returned product to be inspected before a refund is processed. The retailer may issue the refund as store credit to limit its exposure if the customer returning an item has a dubious online history, including payment fraud, first-party fraud or return fraud. In the most extreme case, a retailer may decline to offer a refund at all, depending on the merchant’s stated policies.
- On the flip side, retailers may reward customers who have a history of making honest purchases and returns with an instant exchange for a similar item without waiting for the return to be processed. Or, they may issue an immediate refund as soon as the return is scanned, showing appreciation for the customer’s loyalty.
Why personalization matters for returns
Customers want to feel understood, valued and respected throughout their shopping journey, including during post-purchase activities. In fact, 80% of customers say they expect tailored experiences, meaning they want retailers to show that they’re paying attention to their customer’s preferences, even when it comes to returns.
Personalizing the returns process allows retailers to meet customers where they are, turning a traditionally frustrating experience into one that’s easy and even pleasant. By offering flexible return and refund policies, retailers make it clear that they care about more than just the sale — it shows they’re committed to delivering a seamless, delightful shopping experience from Point A to Point B.
Keep in mind that a personalized approach doesn’t just matter because it elevates the initial customer experience. It also offers a range of other benefits, from building stronger customer loyalty to sharpening a retailer’s competitive edge.
Increased customer retention
Trust is a major factor in customer retention, and personalization is key to both building and maintaining it. When retailers offer tailored solutions that align with a customer’s preferences or needs, they transform a potential pain point into an opportunity to strengthen their relationship.
Offering faster refunds or allowing customers to choose the most convenient return method, for instance, drastically improves their feelings toward the retailer. This level of consideration strengthens trust and deepens emotional connections with the brand, leading to a higher customer lifetime value (CLTV).
Maintaining a strong personalized returns process also ensures that even while order volumes grow as a retailer scales, individual customers continue to feel seen, heard and valued.
Lowered return rates
Personalization can actually help prevent returns from happening in the first place. By analyzing purchase and return data with AI, retailers can identify patterns that signal a higher likelihood of returns.
For example, if a customer tends to return items due to issues with materials or sizing, AI can flag these trends and suggest proactive solutions. This might include offering size guides or more detailed product descriptions before the order is placed, helping customers make better choices which, ideally, lowers the overall return rate.
Reduced inventory and logistics costs
Personalized returns in ecommerce help reduce costs by improving inventory management and optimizing return logistics. When retailers can understand which products are being returned most often and why, they can make better data-driven decisions, such as improving the consistency of product sizing. This helps avoid excess returned inventory and the added costs of restocking.
Giving customers more flexible return options, like letting them choose the most convenient return method or providing pre-paid labels, helps lower shipping costs and makes logistics run more smoothly. With data on return trends, retailers can also better predict return volumes and even negotiate lower shipping rates with carriers, further reducing expenses.
Enhanced competitive edge
Taking a more customer-centric approach to returns helps ecommerce retailers stand out in a crowded market. While larger competitors often rely on streamlined, one-size-fits-all policies, their returns processes are seen as impersonal and rigid. Personalization helps online retailers create a more flexible, responsive experience that caters to unique customer preferences. This adaptability can give merchants a distinct advantage over competitors who may struggle to match the same level of individualized attention.
Best practices when adopting a personalized returns strategy in ecommerce
The key to unlocking the above benefits and turning the $890 billion returns challenge into a growth opportunity lies in the details. To ensure a seamless personalized process, it’s important to keep the following best practices in mind.
1. Understand the customer segment
Not all customers have the same needs. Segment the customer base based on factors like purchase frequency, order amount, return history and loyalty. This lets retailers improve the returns process, making individual customers feel special by offering fast refunds or exclusive return options.
2. Make the returns process as frictionless as possible
Simplify the process for customers to initiate returns by offering a seamless, self-service portal, clear return instructions and pre-generated or pre-printed return labels. Also provide multiple return options, such as in-store returns, home pick-up or return kiosks, based on what works best for each customer to boost satisfaction.
3. Use customer data for smarter purchases and returns
Leverage data from past purchases and returns to enhance the customer experience. For example, a retailer can suggest more suitable products or offer better size recommendations before a purchase is made. If an exchange is initiated by a customer who frequently buys certain sizes, prominently display relevant size guides or fit recommendations during the process. This approach helps prevent future returns by guiding customers toward more fitting choices.
4. Communicate clearly and often
Provide instructions and easy-to-find FAQs about return and exchange policies so customers fully understand how they work. Transparency is essential in building trust, so it’s important to keep customers informed at every stage of the process — from researching and initiating the return to tracking its status and receiving a refund or exchange. Clear communication not only lowers confusion but also boosts customer confidence throughout the process.
5. Monitor and adjust the returns process accordingly
Retailers should monitor their returns process, continuously collecting insights from customer feedback, return data and emerging trends in ecommerce. Regularly evaluating and refining the returns strategy helps retailers stay ahead of industry shifts and changing customer expectations while ensuring the returns process is efficient, cost-effective and customer-friendly.
Start driving ecommerce growth with personalized returns today
Although returns is one of the biggest obstacles to overcome in ecommerce today, it doesn’t have to be tomorrow. Through personalized returns, retailers can reframe this challenge into a massive growth opportunity.
With the right tools, like Signifyd’s Commerce Protection Platform, ecommerce retailers can fine-tune their returns processes, offering faster, customized experiences for customers while safeguarding against fraud and return abuse. This streamlines operations, helps reduce costs and fosters long-term relationships. By adopting this data-driven approach, retailers can position themselves to confidently meet ever-changing customer expectations, stay ahead of the competition and turn returns from a cost center into a growth engine.
Want to personalize returns for your customers? Let’s talk.
