RETURNS AS RED FLAGS: HOW SMARTER CX CAN CURB COSTLY OVER-ORDERING
By Michael Klein, director of retail product marketing at Talkdesk
After closing customer accounts for making ‘too many’ returns and allegedly breaching its fair use policy, fashion retailer ASOS sparked heated debates earlier this year around returns and consumer shopping habits.
Returns are part and parcel of doing business online – especially in sectors like apparel and footwear. But, every business ultimately needs to make a profit, and returns can significantly eat into margins. While it’s unquestionable that retailers should offer some kind of returns option, managing the frequency of returns is important.
Return policy has a big impact on customer experience. Customers don’t expect to pay, or be penalised for, returns. Brands like Amazon make returns easy which does not only give them a competitive edge, but it sets the precedent for other retailers to offer similar benefits in order to stay competitive.
To stay up-to-date, retailers are bringing in new technology features which help shoppers feel more confident in their choices. AI-powered personalised fit guides, for example, draw on past purchases to recommend the right size. Virtual try-ons are another increasingly popular tool, letting customers see how a product will look before committing. These try-ons sit within the wider space of AR Visualisation, which isn’t limited to fashion.
In the Home Furnishings sector, for example, AR allows shoppers to picture how a sofa or dining table will look in their space. While purchases in this category are less frequent, the stakes are higher as the items are more expensive, and the cost of a return is substantial. That’s why reducing returns through accurate visualisation is just as vital for furniture as it is for apparel.
However, the issue with this tech is not about adoption or the accuracy, but how embedded into consumer behaviour it is. Ultimately, many customers have gotten used to the convenience of ordering two or three sizes of the same item and keeping only the one that best fits.
Drastic measures and their impact
Some other global retailers have experimented with more aggressive policies, including return fees, restocking fees, and limiting the number of returns per customer. During peak shopping periods, such as the US winter holidays in 2024, some businesses introduced these types of return measures only to then withdraw them after facing negative customer reactions.
The impact this has on brand loyalty can be significant. While fees may reduce return volumes temporarily, they risk alienating customers who perceive the policies as punitive. Conversely, targeted communication addressing repeated abuse of returns can mitigate losses without harming the wider customer base. Clear messaging about fair use, rather than blanket restrictions, allows brands to protect margins while maintaining trust.
How can retailers tackle rising returns?
Improving product information is a critical first step. Key details such as sizing guides, fabric composition, care instructions, and fit notes must be easy to find and clearly presented. Where possible, interactive elements, such as 360-degree views, videos, and style recommendations, can help customers make more confident choices.
In categories like Home Furnishings, this becomes even more important. Detailed dimension prompts at checkout remind shoppers to measure entryways, stairwells, and living spaces to avoid costly “doesn’t fit” returns of furniture, appliances, and other large items. Pairing these prompts with AR tools that let customers visualise how a piece will look and fit in their home adds another layer of confidence before purchase.
Additionally, testing and optimisation of product pages can make a measurable difference. Positioning information where shoppers naturally look, running A/B tests, and using customer feedback to guide page design ensures that the details most likely to reduce returns are front and centre.
CX is central to managing returns effectively. A frictionless, informative, and responsive customer experience can prevent unnecessary returns and build trust. Ensuring that shoppers can easily find sizing information, product care guidance, and fit recommendations reduces uncertainty and over-ordering.
A robust voice-of-the-customer loop allows insights from returns, reviews, and service interactions to reach the right teams quickly. However, some feedback currently fails to reach the right people or arrives too late to have meaningful impact.
AI can transform this process. Rather than humans manually sifting through return reason codes, AI can collate information across product reviews on the site, call transcripts, and social media, and present actionable insights for merchandising, product development, and customer experience teams. This ensures that the business can act promptly on trends and pain points, improving products and reducing avoidable returns.
When returns occur, companies should analyse trends at the SKU, brand, and category levels. Identifying patterns, such as consistent sizing issues or misleading product imagery, enables proactive adjustments. Customer service interactions, live chat transcripts, and social media mentions all provide additional insight, and AI can help prioritise the signals that matter most.
Behavioural nudges are emerging as another solution. Retailers can incentivise responsible purchasing through loyalty points, discounts for keeping items, or gamifying accurate sizing choices. Some brands have experimented with tiered return policies: customers who frequently return items receive reminders or additional guidance before completing purchases. These approaches aim to subtly influence behaviour without triggering backlash.
Ultimately, tackling returns requires a combination of smart technology, detailed product information, behavioural insights, and clear communication. Retailers who integrate these elements effectively can reduce unnecessary returns, protect profit margins, and maintain positive relationships with their customers – a balance that has become essential in the highly competitive online fashion sector.
By Michael Klein, director of retail product marketing at Talkdesk
