The trend: Retailers’ attempts to rein in online returns are delivering mixed results.

• Over half (53%) of retailers that implemented return fees reported a reduction in return rates, and 43% say they are recouping revenues from returns, according to a survey by Happy Returns and the National Retail Federation.
• At the same time, ecommerce returns are rising at a steady clip, suggesting that consumers are finding ways around stricter policies—such as increasing shopping with retailers that offer more lenient returns options, or engaging in fraud. We expect online return volumes to rise 6.3% this year to nearly $379 billion, accelerating from last year’s 5.7% rise.

The big picture: Returns are a costly problem for retailers, particularly as tariffs are making every piece of inventory—and every sale—precious. Companies must balance the need to protect their bottom lines against the risk that most shoppers (59%) will consider abandoning a retailer that charges return fees, according to a December FedEx survey. Resistance to return fees is even higher among Gen Zers (65%) and boomers (72%), a rare instance of behavioral overlap between the two generations.

Being overly punitive about returns could also coincide with an uptick in fraud as shoppers look for ways to circumvent stricter rules. More merchants reported an increase in fraud after implementing returns fees (44%) than a reduction (42%), per Happy Returns and NRF.

• Nearly half of shoppers (45%)—and two-thirds of Gen Zers—say it’s acceptable to “bend the truth” when making a return.
• Gen Zers are more likely than the general population to admit to engaging in behaviors such as decoy returns (39%), shipping fewer items back (37%), label tampering (38%), and policy abuse like wardrobing (49%).
• More than half (53%) also engage in bracketing, or ordering multiple versions of an item intending to return most of them, a practice that raises reverse logistics costs for retailers.

What retailers can do: To avoid losing sales and frustrating shoppers, retailers need to take a more flexible approach to returns. Rather than implementing one-size-fits-all policies, companies should adopt more nuanced approaches that reward loyalty while penalizing frequent offenders.

• For instance, fashion marketplace Asos introduced a feature that shows customers their return rate and offers guidance to help them stay within the threshold for free returns. Shoppers whose return rate surpasses 70% are subject to a $5.02 fee, and those with return rates of 80% or higher face an additional restocking fee.
• Other companies are piloting AI tools to flag high-risk returns and reduce fraud without disrupting legitimate shoppers. Apparel brand Everlane, for example, is testing Happy Returns’ technology, which identifies suspicious returns for review. Flagged items are pulled from distribution centers and audited using software that compares products to catalog images to verify authenticity.

By leaning on AI and adopting more tailored strategies, retailers can reduce fraud without alienating the 68% of consumers who consider return policies when choosing which retailers to patronize.