Can you Actually Drive Revenue from Returns ?

Let’s face it—retail returns are often seen as the nemesis of ecommerce success. They eat into net income, increase operating expenses, and can feel like a punch in the gut after all the effort spent getting products into customers’ hands.

But what if I told you that product returns don’t have to be your enemy? In fact, with the right returns management strategy, they can be a powerful marketing strategy for strengthening the customer experience and driving even more revenue.

We spoke with Susanna Tuan from Loop, and here’s what she had to say about driving revenue from your returns process.

The Real Cost of Returns

Before we dive into the opportunities, let’s acknowledge the elephant in the room: returns are expensive. We’re not just talking about return shipping labels here. Think about everything that goes into the reverse logistics of a returned item:

• Replacement packaging and materials
• Warehouse processing costs
• Potential product depreciation
• Customer service time
• The original outbound shipping cost

“Most retailers and brands think about returns synonymously with refunds… if you have that mentality as a brand and you just believe that refunds are synonymous with returns, if you’re a hundred million dollar business… that’s $14 million dollars of money that you’re refunding.” 

-Susanna Tuan, Partner Manager, Loop

The Shift in Return Economics

It’s 2025, and the landscape is changing for free returns and beyond. Remember when food delivery apps started charging for convenience? The same shift is happening with return policy structures. Here’s the surprising part: customers are actually okay with it.

Over 44% of merchants are now charging for returns, and they’re not seeing the mass exodus of customers that everyone feared. Why? Because consumers understand the value of convenience. Just like we’re willing to pay extra for next-day shipping, customers are increasingly accepting that the ability to try multiple sizes at home comes with a cost.

Smart Returns Strategy: It’s All About Personalization

The key isn’t to charge everyone the same return fee – it’s about creating personalized return experiences. This is where sophisticated return management really shines. Take Oh Polly as an example—they’ve implemented a tiered return policy approach where the first return might be free, but subsequent customer returns within a quarter might incur increasing fees. This balances customer satisfaction with net sales.

“You want to create a different experience for Susanna, as I do for Susan’s husband… because we’re all different shoppers. You’re creating a world through custom marketing and custom journeys for your shoppers, that should be mimicked on the return side of it.”
-Susanna Tuan, Partner Manager, Loop

Consider structuring your return policy around customer behavior:

• First-time customers get free returns to lower the barrier to entry
• Repeat customers might pay a small fee
• Multiple returns within a short period could incur higher fees
• VIP customers might get special treatment

Turning Returns into Revenue

Now for the million-dollar question: how do you actually make money from returns? The secret lies in viewing returns not as lost sales, but as opportunities to build lasting customer relationships.

“If you want to be a long-term legacy brand… you should be focusing on your customer. And the best possible way to prevent returns is to have repeat customers. If I’m a repeat customer, I know my size, I know what I like, I know what I don’t like.”
– Susanna Tuan, Partner Manager, Loop

Here’s how to make returns work for your business:

1. Build Long-term Loyalty: When a customer initiates a return, they’re often frustrated. The bar is low. This is your chance to surprise and delight them, turning a potentially negative experience into a positive one.
2. Drive Exchanges (or Store Credit) Instead of Refunds: Modern returns management platforms can show customers your entire catalog during the returns process, encouraging future purchase conversions and better marketing ROI. Maybe those shoes didn’t work out, but that jacket they’ve been eyeing might be perfect.
3. Gather Valuable Data: Returns provide direct feedback about your products. Use this data to improve your product descriptions, sizing guides, and overall shopping experience.

Why Great Returns Management Matters for 2025

In ecommerce, returns are inevitable—but how you handle them can make all the difference. A well-managed returns process protects your bottom line and keeps customers coming back.

Start by reducing returns before they happen. Clear product descriptions, accurate sizing details, and flexible return policy options help set the right expectations, minimize your overall return rate, and reduce surprises that lead to lost revenue.

When it comes to processing returns, a one-size-fits-all approach doesn’t cut it. A tiered return policy—one that considers profit margins, return shipping costs, and customer purchase history—can strike the right balance between keeping customers happy and protecting your revenue. Done right, this strategy not only reduces losses but also encourages repeat purchases, turning returns into future sales opportunities.

The Power of Analytics in Returns Management

One often overlooked aspect of returns management is the wealth of data it provides for improving customer feedback loops and driving sales revenue. Every return reason, every exchange preference, and every customer interaction gives you valuable insights into your business.

“Analytics are going to be your best friend… if these shoes continue to come back and the return reason is that they’re too big, maybe that messaging needs to change. That should be feedback directly from the customer and that should be fed back into the shopping experience and the manufacturing experience.”
– Susanna Tuan, Partner Manager, Loop

Prevention Is Still Better Than Cure

While we’re focusing on making returns work for us, let’s not forget about preventing unnecessary returns in the first place. The best way? Create repeat customers. They know your sizing, understand your products, and return less frequently.

Some practical tips:

• Use return analytics to improve product descriptions and sizing guides
• Implement AI-powered size recommendation tools
• Make product information crystal clear
• Consider virtual try-on technology where applicable

Managing Returns in a Multi-Channel World

In today’s retail landscape, managing product returns isn’t just about processing packages—it’s a crucial component of reverse logistics and operational efficiency, requiring real-time visibility across multiple sales channels.

“We’ve created this 24/7 shopping environment… I’m going to be buying something, returning, exchanging… That inventory is changing 24/7 all the time, everywhere. If you think about one brand having a B2B channel, a D2C channel, pop-up shops, their own retail stores, the amount of inventory that’s moving around all across the world for your one brand is pretty dramatic.”
– Susanna Tuan, Partner Manager, Loop

The Bottom Line

Returns aren’t going anywhere – they’re part of modern e-commerce. But by viewing them as opportunities rather than problems, you can turn what’s traditionally been a cost center into a revenue driver. The key is striking the right balance: use smart policies, personalized experiences, and data-driven insights to make returns work for both you and your customers.

“Don’t underestimate returns. Don’t take it as an ego hit. Think of it more as the opportunity to convert that customer into a long-term lifelong shopper.”
– Susanna Tuan, Partner Manager, Loop

Remember, it’s not about eliminating returns entirely—it’s about turning returned merchandise into a driver of customer lifetime value. By aligning your return policy with consumer behavior, you can boost revenue growth, improve the customer journey, and stand out in today’s competitive e-commerce landscape.

We understand the challenges of modern ecommerce, and Linnworks is here to help. If you’re facing specific operational hurdles or looking for tailored solutions, our team of experts is ready to assist. And be sure to bookmark our blog for ongoing tips and strategies to optimize your business.