Retailers Turn to Digital Tools to Manage Post-Holiday Return Surge

The surge in online shopping and practices like “bracketing”— ordering multiple sizes or variations with the intent to return unwanted items — has significantly increased return volumes, posing logistical and financial challenges for retailers, according to Hannah Bravo, CEO at Loop Returns.

In fact, new data shows a 28% hike in returns over last year and consumers have already returned $122 billion in merchandise.

In an interview with PYMNTS, Bravo said to maintain customer satisfaction while controlling costs, businesses are turning to digital tools and strategic policies to manage returns more efficiently.

“Holiday returns hit new highs this year, especially in cosmetics and personal care,” Bravo said, “however, returns in the following days grew more slowly than last year, suggesting retailers’ efforts to reduce returns are working.”

In an effort to cut costs, she said, retailers are trying different approaches, including “longer return windows, return fees, and even letting customers keep low-value items rather than return them. They’re also using digital tools like virtual try-ons and AI [artificial intelligence] recommendations to help customers make better choices before buying,” she said. “Online platforms now make it easier for customers to exchange items or receive incentives to keep their purchases. These changes are helping retailers balance customer satisfaction with costs during this key shopping season.”

Leveraging Digital Tools to Streamline Returns

Bravo said the growth of online shopping and eCommerce platforms has impacted the volume and efficiency of post-holiday returns.

“The rise in online shopping and easy return policies has led to new shopping habits,” she said. “Many customers now routinely order multiple sizes or colors of the same item, planning to return what doesn’t work, a practice called bracketing. This trend is increasing return volumes significantly. For online retailers, handling returns is far more complex than shipping orders. Each return must be manually unpacked, checked and restocked, requiring extra staff and warehouse space. This costly process has pushed retailers to seek new technologies that can both reduce returns and keep customers satisfied.”

Digital tools are playing an important role in streamlining the post-holiday return process for both consumers and retailers, Bravo said.

“Digital tools like return portals play a pivotal role in ensuring customers and retailers experience hassle-free returns, especially given the mass volume of returns post-holiday season,” she said. “By integrating digital tools, retailers can offer a range of return options like designated drop-off locations, convenient shipping label alternatives like QR codes, and even scheduled pickup of returns at consumers’ addresses. These options ensure convenience for consumers but also benefit retailers by aligning with workflow and inventory management processes or by reducing processing costs, depending on the practice.”

The ease of returns is one of the reasons consumers choose to shop at specific retailers, according to a PYMNTS report, “The Online Features Driving Consumers to Shop With Brands, Retailers or Marketplaces,” which drew from survey data of 3,521 U.S. consumers.

Primary Reasons for Post-holiday Returns

The main reasons for post-holiday returns often stem from products not meeting expectations, such as wrong sizes, damaged items, delayed deliveries or discrepancies between online images and actual products, Bravo said. Retailers can leverage digital tools to address these concerns to enhance the shopping experience. Virtual try-ons, AI-powered sizing recommendations and detailed product images and descriptions help customers make more informed choices. Additionally, accurate delivery tracking and notifications can prevent late shipments, while offering real-time support and incentives for exchanges can reduce return volumes and improve customer satisfaction.

Online shopping also provides retailers with valuable data on customer behavior, Bravo said, which can be used to identify products that are frequently returned and the reasons behind these returns.

“This helps retailers spot which items get returned most often and why, allowing them to fix product issues, improve descriptions, and personalize product recommendations,” she added. “During the holidays, when return fraud increases- like customers returning boxes of rocks or counterfeit items — retailers can leverage fraud detection systems to identify suspicious patterns and target stricter policies toward dishonest customers.”

As online shopping grows, Bravo said, platforms are transforming the return experience for consumers and retailers. The “buy online, return in-store” model, for example, is becoming popular, allowing customers to return products locally, while providing retailers with better control over the returns process and reducing logistical challenges.

Increase in Online Shopping Leads to in-Store Returns

“The rise in online shopping has led to a new purpose for customers going back in-store, not to shop but to return,” Bravo said. “With digital platforms revolutionizing the returns experience, consumers get the flexibility of where and how they return their items. Specifically, the ‘buy online, return in-store’ model combines the convenience of quick returns while providing valuable in-person interactions that are paramount for boosting customer loyalty and driving additional in-store purchase and cross-sell opportunities. In-person return options also reduce labor and shipping costs for retailers, further driving profitability.”

To elevate the customer experience, Bravo said retailers can implement digital strategies to reduce return rates and improve customer satisfaction.

“Retailers can reduce returns by improving both pre-purchase and post-purchase experiences,” she added. “Better product photos, using AI to better visualize fit and style help customers know exactly what they’re buying. Accurate, real-time delivery dates help them know when to expect it. Clear return policies upfront, including fees and deadlines, can discourage impulse buying and prevent customers from ordering multiple sizes with plans to return most items.”

Additionally, post-purchase, “retailers can encourage exchanges over returns by offering perks like loyalty points, discounts on replacement items, or free shipping on exchanges,” she said. “This approach helps maintain customer satisfaction even when implementing stricter return policies.”

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