As e-commerce continues to grow and margin pressure peaks in today’s inflationary environment (e.g., labor cost, postage cost, etc.), online businesses must find ways to mitigate the mounting financial challenges by optimizing processes and workflows to reduce the overall cost of operations. Among the lowest-hanging fruit, one such method is to implement intelligent cartonization software to improve shipment efficiency and address the cost of postage, packaging, and labor while promoting sustainability. This technology utilizes sophisticated algorithms to identify the most efficient packaging to ship an e-commerce order by “fitting” products with known outer dimensions into a virtual 3D space with known inner dimensions. All while considering the shipping cost (actual weight vs. dimensional weight).

Understanding Cartonization Software

Cartonization software is a data-driven solution that determines the ideal packaging configuration for any given order, whether a single item or a multi-line/multi-quantity order. Unlike manual packing methods that rely on a human to eyeball the items in an order and select a box to ship them in, this technology analyzes many variables, from item dimensions and weights to available box sizes, any defined special handling requirements such as bubble wrap or other protective shipping supply requirements, among other packing constraints. Modern cartonization technology and packing systems incorporate 3D simulation and consider real-world factors such as orientation, stacking limitations, and the potential for damage in transit.

What sets intelligent cartonization software apart is its holistic approach. It does not merely calculate volume or dimensions; it optimizes the packing process to ensure items are securely packed using the least space. By doing so, the software minimizes unnecessary filler materials (while maintaining necessary cushioning as needed) and, ultimately, package size, directly impacting transportation and shipping supplies costs. Heavier and bulkier packages are more expensive to ship, and larger and more rigid cardboard boxes are more costly to consume.

Types of Cartonization Technologies

• Basic Cartonization Tools: These entry-level systems focus on volume-based calculations. They streamline box selection but lack advanced features such as considering shipping rates, displaying 3D orientation, or tracking the packaging quantity available.
  
  
• Advanced Algorithmic Solutions: These systems go beyond basic calculations by analyzing complex datasets. They consider multiple carrier rates, including dimensional weight pricing, and order-specific nuances, such as the need for temperature control or fragile item handling.
  
  
• Intelligent Fulfillment Platforms: These robust solutions combine cartonization with other aspects of order and inventory management software, such as tracking product and packaging inventory (what good is a cartonization tool if it tells you to pack an order in a box you don’t have in stock), multi-carrier shipping logistics, including carrier and service selection, and automatic label creation based on the delivery date promise. They provide end-to-end visibility into the fulfillment workflow.
  

Impact on E-commerce Fulfillment

Cartonization software has a profound influence on the efficiency and sustainability of e-commerce fulfillment operations:

• Operational Efficiency
  Implementing cartonization technology significantly streamlines warehouse operations. By providing precise instructions for box selection and item placement (the orientation that each item should be placed in the box relative to one another such that they fit snugly and ship safely), the technology reduces decision fatigue among packers and improves consistency. Manually picking a box that is too small results in re-handling: a new box needs to be selected that will fit the contents of the order, which is re-work. Manually picking a box that’s too big means you’re shipping a lot of “air” and both the shipping cost and packaging cost are higher than they need to be, spoiling margins unnecessarily and increasing the likelihood that items may be damaged in transit (the resulting customer returns further add to the financial implications).
  
  Advanced platforms can also create a separate pick list for the packaging supplies needed to ship a batch of orders. These features save a lot of time and increase productivity, enabling warehouse operations teams to seamlessly handle surges in fulfillment volume without increasing labor costs.
  
  
• Cost Optimization
  The financial benefits of smart cartonization extend across the entire fulfillment workflow. In addition to minimizing shipping costs by shipping in the smallest package possible, right-sizing packages reduce the need for void fill and the risk of product returns due to damage incurred in transit. Some platforms can identify opportunities to split orders into multiple packages, leveraging carrier incentives to achieve overall cost savings.
  
  
• Environmental Sustainability
  Cartonization software also promotes sustainability. By minimizing the use of corrugated materials and reducing the volume of “air” shipped in oversized boxes, the technology directly decreases the environmental footprint of e-commerce operations. Smaller, more efficient packages lead to better truck space utilization, resulting in fewer vehicles on the road, fewer planes in the air, and reduced greenhouse gas emissions. This aligns with growing consumer expectations for environmentally responsible ecommerce logistics practices.
  
  
• Customer Experience
  Consumers appreciate receiving their orders in appropriately sized packaging. Oversized or poorly packed boxes create unnecessary waste, diminishing the overall unboxing and post-purchase experience. They are also head-scratchers for customers (not to mention more annoying when breaking down larger boxes than smaller ones). Nearly 25% of solid municipal waste is composed of paper and corrugated paper products (cardboard), so shipping supplies are being sent to landfills at staggering rates, posing significant ecological consequences.
  
  Cartonization software ensures customers receive their purchases in well-fitted, secure packaging, enhancing satisfaction and fostering brand loyalty. Moreover, using environmentally conscious packing methods resonates positively with eco-conscious customers, adding another layer of value.
  

Challenges and Considerations

While cartonization software offers numerous benefits, its implementation is not without challenges. Both retailers and 3PLs (third-party logistics) must invest in the right technology and ensure seamless integration with existing warehouse management and order fulfillment systems—otherwise, productivity tanks from having to live in separate fulfillment software environments. Training staff to use the software effectively and establishing clear performance metrics are essential for maximizing impact.

Summary

The continued rise in shipping, labor, fixed assets, and associated operational costs demands that online retailers, brands, and 3PLs that service them find innovative ways to optimize their financial health. One easy way to do that is to employ intelligent packaging design to reduce dimensional weight charges and oversized shipment surcharges resulting from inefficient packaging. Relying on manual processes or outdated shipping software label systems is no longer viable.

Additionally, the environmental impact of e-commerce operations is under greater scrutiny than ever. Customers expect fast and reliable delivery and appreciate thoughtful packaging that reflects a company’s commitment to sustainability. Cartonization software’s ability to ensure that packaging decisions align with these priorities, minimize waste, and reduce carbon emissions positions it as an essential tool for meeting these increased pressures. For online businesses looking to stay competitive and profitable, investing in this technology is not just a practical decision but a strategic imperative.

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Returns are inevitable in e-commerce, influenced by psychological and practical factors. For example, “bracketing” is a practical problem where customers intentionally purchase multiple versions of an item, such as different sizes or colors, with the explicit plan to return the ones that do not meet their needs. This practice, now common among ~60% of online shoppers, highlights a desire to recreate the confidence of in-store shopping.

Impulse purchases, another significant driver of returns, are more psychological. Stress-induced purchases often result in regret, with 1 in 4 shoppers admitting to returning items they either did not need or could not afford. Furthermore, buyer’s remorse can stem from discovering better deals after purchase, leading to returns driven by price sensitivity rather than product dissatisfaction. Social influence and seasonal considerations also contribute, as it’s not uncommon for returns to stem from peer pressure or unused seasonal items that won’t create any value until a future season.

Unlike brick-and-mortar stores, online shoppers cannot physically inspect products before purchasing, leading to a return rate of up to 30% in e-commerce, nearly three times that of physical stores. To address this issue, understanding the myriad reasons customers request returns for online purchases, identifying their root causes, and crafting the perfect ecommerce returns program is essential to the success of today’s e-commerce merchants.

The bad news is that no magic solution will do everything for you automatically. But, the good news is that strategies are available to resolve or mitigate the risk e-commerce returns pose to your business. If you put in the work, the revenue retained from doing so is often considerably more than the value of the time put in.

We’re setting aside anything related to customer returns fraud and abuse for this article.

Top E-Commerce Return Reasons

1. Product-Related Issues:
   • Fit and Sizing Problems: Particularly prevalent in fashion and footwear, fit-related issues account for 70% of returns in these categories.
   • Damage or Defects: Products that arrive in less-than-perfect condition are a significant motive for returns. An estimated 4 out of 5 consumers cite damage and/or defects as the reason for their return, often a result of manufacturing defects or insufficient protective packaging that lead to damage caused in transit.
   • Inaccurate Descriptions or Quality Issues: Discrepancies between the descriptions or images on a product listing and the actual product delivered erode trust and can lead to disappointment. For example, variations in color from what was displayed on the product details page can cause disappointment.
   • Incompatibility: Products that do not fit with existing items can prompt returns.
     
     
2. Customer Behavior:
   • Gift Returns: Recipients often return unwanted or unsuitable gifts.
   • Price Sensitivity: As mentioned earlier, customers may return items if they discover a more competitive price post-purchase.
   • Changed Mind or Customer Error: Customers may simply reconsider their purchase after the fact, or perhaps they purchased the wrong item.
     
     
3. Operational Factors:
   • Shipping and Handling Issues: Late shipments, carrier delivery delays, lost packages, and other issues often trigger returns, especially if the items were intended as gifts.
   • Order Fulfillment Errors: Shipping incorrect items or shipping the wrong size, color, flavor, scent, or quantity increases the likelihood of returns.
     
     

Leveraging Data to Reduce E-commerce Returns

If you’re not already… you should be capturing returns data, which is a gold mine of actionable insights. Analyzing patterns can reveal:

1. Misaligned Expectations: Products regularly returned for size discrepancies indicate inaccuracies in product descriptions. Providing detailed size charts and fit guides can significantly reduce size-related returns (and minimize bracketing), so put effort into creating detailed, brand-specific sizing charts. Frequent returns of specific products suggest a gap between marketing and reality. Ensure descriptions are clear, detailed, and honest to set proper expectations.
   
   
2. Quality Control Issues: Modify fulfillment protocols to ensure safe delivery of damage-sensitive products. High defect and damage rates indicate manufacturing or shipping problems. Implement strict quality control measures to minimize defective items and hold suppliers accountable.

Merchants can use customer feedback to refine product descriptions, enhance quality control, and optimize customer education to reduce mismatches between expectations and reality.

Strategies to Minimize E-commerce Returns

1. Improve Product Presentation
   • Detailed Descriptions: Provide comprehensive information about size, materials, and functionality and offer educational content to help customers make informed decisions. This is not a one-time set-it-and-forget-it task but a recurring priority that uses continuous customer feedback to improve product data more and more over time.
   • Rich Visual Content: Include high-quality images accurately representing products, 360-degree views, and videos demonstrating products in action.
   • Augmented Reality (AR) and Virtual Reality (VR): Offer virtual fitting rooms or placement tools to help customers visualize products in their space
     
     
2. Engage with Customers Pre-Purchase
   • Live Assistance: To reduce return rates, customers should have access to excellent customer service representatives during the shopping process. These representatives can assist with inquiries before purchases are completed.
   • User-Generated Content: Encourage reviews, photos, and videos from previous buyers to create social proof and help customers make informed decisions.
   • Comparison Tools: Allow customers to compare items directly during checkout, which can reduce bracketing and near-guaranteed returns.
     
     
3. Optimize Promotions
   • Thoughtful Discounts: Avoid promotions that encourage excessive purchases and subsequent returns. Customers are inclined to artificially increase their cart size to qualify for free shipping and/or discount tiers, which can lead to returns of items not wanted or needed from the order.
     
     
4. Streamline the Post-Purchase Experience
   • Post-Purchase Support: Send follow-up emails with product setup, care, and usage tips. And, turn post-purchase interactions into new sales opportunities.
     
     
5. Incentivize Exchanges
   • Instant Exchanges: Offer immediate replacements for different sizes or styles (e.g., ReShop.com). Or, offer incentives for customers to keep items, such as discounts on future purchases.
   • Bonus Credit: Provide higher-than-expected refunds in the form of store credit for customers who choose exchanges over refunds.
     
     
6. Tie Returns to Customer Loyalty Programs
   • Tiered Policies: Offer free returns as a benefit for loyal customers/members while charging non-VIPs a modest return fee. Develop loyalty programs that encourage repeat purchases and reduce return rates.
   • Feedback Incentives: Encourage returners to provide detailed feedback, which will help refine future offerings. Use data analytics to track return patterns and identify areas for improvement.
     
     

Balancing Returns Management and Customer Satisfaction

An efficient returns policy is not just a cost center but a strategic opportunity to build loyalty. It’s how large retailers such as Amazon and Nike have increased loyalty through simplicity and predictability. Retailers should:

1. Simplify for Customers: Offer multiple returns options that meet the target demographic where they are, including the communication channels they prefer. It’s no longer acceptable to hide behind a website. Customers want several contact points: phone, email, chat, text (SMS), or support ticket/form submission.
   
   
2. Communicate Clearly: Be transparent about return policies, processing times, refund statuses, and return or restocking fees. Communicate final sale policies on product pages to avoid confusion before checkout. Don’t bury return policies three clicks deep (or more!). Consider offering perks for selecting exchanges over returns for a full refund (which helps retain revenue).

Implementing these strategies can help merchants reduce e-commerce return rates while maintaining customer trust and satisfaction. This leads to repeat business, a long-term relationship, and higher customer lifetime value (LTV). The key is turning your customers’ experiences into actionable improvement plans while anticipating and addressing potential issues before they arise.

Summary

As technology advances, innovations like AR, VR, and AI will play an increasingly pivotal role in reducing returns by giving customers an online shopping experience closer to what they’re used to ‘in store.’ At the same time, retailers must focus on fostering trust and transparency to align customer expectations with reality. By understanding and addressing the root causes of returns and implementing creative solutions, e-commerce retailers and brands can turn this challenge into an opportunity to engage with customers and nurture a long-term relationship that benefits both parties.

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As environmental consciousness becomes a core value for consumers, e-commerce brands and retailers are rethinking their strategies to align with eco-friendly principles. This shift in consumer behavior (~78% of shoppers now include sustainability in their purchasing decisions) allows businesses to adapt early and convert this eco-conscious market ahead of others. Understanding why sustainability matters to consumers can help brands get ahead of competitors and capture their attention sooner. This can grow market share through stronger customer relationships built on mutual ideals, leading to long-lasting loyalty and higher lifetime customer value.

Why Sustainability Matters to Consumers

Modern consumers increasingly recognize their role in addressing global climate challenges, many more recently citing sustainability as an important factor in their purchasing decisions. This signals an unspoken evaluation of businesses based on their environmental commitments. It wouldn’t be surprising to learn that the Millennials, Gen Z, and higher-income demographics lead this charge, often willing to pay premiums for eco-friendly products. Their motivations stem from a blend of personal values, social pressure, and a desire to support businesses that contribute to a healthier planet. Or at least don’t detract from one.

It’s important, however, to be aware that there’s a healthy amount of skepticism regarding the sustainability claims made by businesses, as nearly 90% of consumers are wary of greenwashing (the practice of making false or misleading claims about environmental actions and/or benefits), demanding verifiable data and authentic actions from brands. This growing awareness highlights the need for transparency and the measurable and verifiable impact of business efforts on the ecosystem.

Aligning Brands with Consumer Values

To capture the attention of eco-conscious consumers, businesses must demonstrate genuine commitment to sustainability through actionable strategies. Transparent reporting is essential, with brands needing to publish sustainability reports that include concrete metrics such as carbon emissions reductions or resource savings. Ethical sourcing and business practices, supported by certifications, enhance credibility. Innovative product design that incorporates recycled materials upcycled products and/or reduces waste or results in reusable goods plays a crucial role in meeting eco-conscious expectations. Purpose-driven marketing should authentically communicate a brand’s sustainability mission, avoiding vague claims while focusing on genuine storytelling that connects emotionally with consumers.

Strategies for Implementing ESG Programs

Embedding sustainability into the core of business operations requires thoughtful planning and execution. Companies can start by optimizing supply chains, which include reducing emissions through efficient delivery routes, local sourcing, and consolidated shipments to reduce transportation cycles. Sustainable packaging that uses biodegradable or recyclable materials addresses consumer concerns about single-use plastics. Recycling programs such as H&M’s Garment Collecting Program incentivize customers to recycle used and unwanted apparel, contributing to a circular economy that benefits consumers and the planet.

Reducing the impact of e-commerce reverse logistics (product returns) on the environment is another way to support eco-conscious consumers. When optimized, a well-rounded Return and Exchange Program can play a profound role in reducing waste and conserving resources, allowing businesses to recover value from returned goods while minimizing environmental impact. For instance, establishing systems to inspect, refurbish, and resell returned items not only reduces landfill waste but also offers cost savings to consumers who are more than happy to accept a discounted “open box” item while also creating a new revenue stream for the retailer that may have otherwise contributed to revenue erosion.

Efficient reverse logistics strategies require careful planning and investment in technology and service partnerships. Brands can implement streamlined return processes that reduce emissions, such as consolidating shipments for returned goods or offering local drop-off points to minimize the impact of exhaust emissions from the repeated transportation of the same items back and forth between customers and processing facilities. Partnerships with next-generation returns programs specializing in hands-off and sustainable re-commerce solutions can further enhance these efforts. By integrating reverse logistics into their broader sustainability programs, brands and retailers demonstrate a holistic commitment to reducing their environmental footprint and delivering value to eco-conscious consumers.

Capturing the Eco-Conscious Consumer’s Attention

We know that eco-conscious consumers are discerning, seeking authenticity and actionable impact. So, brands that want to attract this segment must offer engaging experiences that connect with their values. Developing interactive campaigns or gamification elements that reward sustainable choices fosters even deeper engagement. Simple education and awareness play an essential role in helping consumers make informed decisions by providing accessible resources that explain the environmental benefits of their products. Collaborations with eco-friendly organizations or other sustainable brands amplify efforts and build credibility, further strengthening consumer trust.

While attracting attention is a vital first step, converting eyeballs into loyal customers or even proponents and brand evangelists requires addressing barriers such as cost and accessibility. Clear value propositions are essential, emphasizing the durability, quality, and long-term cost savings of sustainable products. Affordable options make sustainability accessible to a broader demographic than older and more financially stable shoppers. Sharing relatable stories about how initiatives have positively impacted the environment and communities humanizes sustainability and nurtures emotional connections with the brand.

Overcoming Challenges

Despite the benefits of sustainability, businesses often face obstacles such as balancing profitability with the cost of such programs. Proving product quality is also a key step. Consumers need to believe in the performance and reliability of eco-friendly alternatives to counter misconceptions about their effectiveness. Lastly, consistent communication about the sustainability journey, including successes, setbacks, and future goals, is vital in building and preserving consumer trust.

Building Long-Term Customer Loyalty

The path to building an eco-friendly brand reputation and attracting loyal, eco-conscious customers lies in making sustainability a shared journey. Creating opportunities for customers to participate in meaningful actions, such as planting trees or donating to environmental causes through purchases, helps build a sense of community and purpose. Highlighting their contributions to the broader global sustainability objectives reinforces the customer’s connection to the brand and its mission. By prioritizing transparency, innovation, and authentic engagement, brands, and retailers can align themselves with consumer values, driving profitability and lasting impact and presenting a powerful opportunity to redefine success in an environmentally conscious world.

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E-commerce returns are an unavoidable aspect of online retail, and return rates have been steadily rising (averaging 20-30% across the industry, compared to under 10% in brick-and-mortar stores). This results in a critical challenge for retailers and a complex consumer experience. What was once a simple transaction has transformed into a nuanced ecosystem of choice. As consumers become comfortable moving more and more of their purchases online to take advantage of the nearly infinite product selection, they likewise become comfortable returning those purchases.

The reasons behind returns are as diverse as the products being shipped back. Some returns stem from practical issues like incorrect apparel sizing, inaccurate product descriptions, or items that don’t match online imagery. Others are driven by more strategic consumer behaviors like “bracketing,” where shoppers intentionally order multiple variations of a product, planning to keep only one, or “wardrobing,” where items are worn and then returned (a form of returns fraud).

Regardless of the reason for the ludicrous $500+ billion value of goods returned in the US in 2024, the cost of supporting them is increasing with no relief in sight. The cost of labor is rising every year. The costs from transportation, real estate and facility operations, returns processing, and loss of sellable inventory… go up yearly. But while e-commerce retailers and brands can’t afford to alienate customers and disincentivize returns, they likewise can’t ignore the increasing margin erosion. An exceptional returns process builds trust, improves customer satisfaction, and encourages repeat purchases. Numerous studies have found that ~92% of consumers will buy from a retailer again if the return process is easy.

Brands must balance the costs of supporting returns with the benefits of customer loyalty. Consumers want to know their options before buying to ensure a hassle-free experience. Sellers wish to encourage conversion because acquiring a customer can cost five times more than retaining one. Offering free or hassle-free returns can make a business more appealing but also comes with challenges, especially for smaller merchants. Some Sellers use innovative strategies like peer-to-peer return solutions, localized drop-off points, or charging restocking fees to manage costs. Some leverage help from third-party logistics (3PL) partners to outsource returns management to minimize operational overhead such as inspection, relisting, processing, and issuing refunds. The item can then be stored at the 3PL to fulfill a new order.

The most cost-effective reverse logistics strategy involves leveraging a centralized returns center with a dedicated location to handle returns and specially trained (highly efficient) staff. It also involves automating processes wherever possible, utilizing return-ready packaging that can be easily resealed and reused to eliminate repackaging costs, and analyzing return data to identify trends and proactively address common return reasons. Streamlining the returns process through technology and efficient management minimizes labor costs and optimizes inventory handling and tracking.

However, most of the costs associated with returned orders lay in the transportation. Sellers can certainly negotiate better shipping rates, but there’s a limit to what discounts can be achieved, and Sellers that fully outsource their fulfillment to 3PLs don’t even have control over that piece of the puzzle. So…what are the different ecommerce return types, and how do they stack up against one another? Let’s take a look:

Reduce Avoidable Online Returns

The first step in implementing an exceptional returns program to encourage customer loyalty is to spend the time to avoid returns in the first place. Businesses should focus on the many aspects of the customer experience that lead to returns. This includes providing detailed and accurate product information using high-quality images and comprehensive descriptions, implementing robust sizing guides, and encouraging customer reviews to help potential buyers make informed decisions. Additionally, companies should invest in packaging and void fill sufficient to prevent damage in transit. Lastly, merchants can identify and address the root causes of returns by carefully monitoring return trends beyond these suggestions.

Returns via Small Parcel Shipping

E-commerce returns by small parcel shipping (USPS, UPS, FedEx, etc.) offer convenience for customers by allowing them to simply repackage their order, print and affix a pre-paid shipping label, and then either schedule free carrier pickup (in most cases) or dropoff to a convenient carrier location or network store such as a UPS Store, FedEx Office, or the like. But this type of return comes with major drawbacks, including very high shipping costs, the potential for the package to be lost or damaged in return transit, shipping delays that prevent the inventory from being resold and fulfilled promptly, lengthier time to refund/credit which is beyond the customer’s expectations because item inspection naturally takes longer.

Customers may be happier with parcel shipping directly to the returns processing facility (maybe they’re in a more rural setting, and it’s more convenient to choose their preferred carrier). Still, the extra shipping is terrible for the planet. Merchants will likely use lower-cost shipping such as consolidators (FedEx Economy service, UPS SurePost service, etc., in which cost is inversely related to time in transit), which means even more delays. Merchants could receive hundreds or thousands of small parcel deliveries at a time that must be opened, inspected, perhaps rebarcoded with the accurate SKU for the condition, put away, inventory tracked, item relisted for sale, and the cycle begins again.

Another huge disadvantage is the removal of checks and balances against returns fraud. Trusting Sellers (or those looking to build trust with their customers by quickly refunding) may receive the wrong item back, no item at all, or a box of rocks (true story). Returns fraud and abuse substantially increase the overall cost of returns.

Boxless Returns

Boxless returns have several advantages. Firstly, transportation is the largest cost in ecommerce reverse logistics (assuming high-value items were not damaged in transit and returns fraud and abuse are not a factor). Giving the customer the option to bring the items to a local returns desk (aka attended kiosk) allows for consolidating returns into larger shipments sent to a regional facility in groups, reducing transportation costs considerably. They can then be sorted en masse and further consolidated so that full truckloads containing tens of thousands of units from nationwide kiosks are delivered to the returns facilities at once and ready for bulk processing. This allows retailers to prioritize the processing and resale of higher-value items first, maximizing the value of the recaptured revenue. It also reduces time and cost for the items shipped directly to liquidators or donation centers, skipping wasteful transit and processing time and cost.

Another benefit of boxless returns is the real-time ‘inspection’ at the time of dropoff of the items at the attended kiosk. The attendant may not thoroughly inspect the item for authenticity, damage, etc., but at least the retailer knows that an item is coming back, AND it’s not a box of rocks.

Finally, this returns process appeals to the eco-conscious consumer by reducing packaging waste, which translates into more savings for Sellers.

On the flip side, most retailers don’t have the infrastructure to support nationwide boxless returns, requiring an attended kiosk within 10 – 12 miles of each customer. So this usually requires fully outsourcing the reverse logistics, at least until the point of delivery at the returns processing facility. This adds a layer of complexity, which adds cost. Plus, returns need to accumulate at the kiosks to some extent to achieve the most benefit from consolidation before shipping to the second consolidation facilities for final sortation and consolidation. The result is inherently built-in delays. However, the transparency offered by the returns partner allows some visibility into what’s coming back and approximately when and allows Sellers to ‘pre-sell’ the incoming returned units, which recaptures revenue more quickly.

Merchants must ensure customers understand what is expected and provide sufficient guidance to avoid confusion regarding boxless return procedures. So, some level of customer education is needed.

Buy Online Return In Store (BORIS)

Retailers with physical stores may consider allowing e-commerce customers to return their items in person. This is called Buy Online, Return In Store (BORIS). The returned goods can then be inspected and sold to future in-person customers or shipped in bulk to a returns processing facility for the next steps.

This can be more convenient for customers who live nearby and may want to exchange the item(s) for different ones but want to touch the alternatives (e.g., different sizes or colors) before deciding. That gives them more confidence in future online purchase decisions because they know their size in that brand. It also entices customers to make alternate purchases (upsell/cross-sell) using in-store coupons or promotions. Kohls and Staples are particularly good at this for their e-commerce returns and those of their partners for whom they serve as attended kiosks for boxless returns. Returns fraud and abuse are also less likely in these cases, and for items that can be resold in the store, processing, and resale occurs much quicker than any other returns approach as items are inspected ‘on the spot.’

More in-store traffic, increased brand and location awareness, and opportunities to delight new customers with the in-store experience are all key benefits to BORIS. Exchange is also more likely than a refund, preserving revenue and lowering overall costs by eliminating transportation costs in most cases. As discussed earlier, this eliminates the likelihood of items being lost or damaged in transit.

It’s important to remember that this BORIS does not eliminate logistics costs. The transaction must still be tracked; employees must provide customer service, inventory updates, liquidation or donation, and tax implications if the items aren’t resellable. So, there’s still some complexity, but overall, it’s an excellent option for e-commerce customers.

Home Pickup

Home pickup for e-commerce returns can significantly increase customers’ convenience and satisfaction. However, it also comes with operational challenges, such as increased costs and logistics complexities, which require careful consideration of the pros and cons before implementing such a service. The service is flexible because it often leverages the gig economy or specialty couriers, so it can be applied regionally using lower-cost transportation methods, depending on volume.

Further, a home pickup option can be perceived as a customer-centric service, improving brand image and customer loyalty. Many of these hyper-local services can support box-free home pickup, which helps when customers don’t want to procure packaging for their return or simply appreciate the option of a zero-waste return.

Home pickup does make returns more accessible, however, so customers may be more likely to return items they no longer want, potentially leading to higher ecommerce return rates. And it’s not without complexity as a third-party partner(s) manages logistics to coordinate. If several returns cannot be collected during a single trip around an area, transportation costs can increase rather than provide relief. However, if a retailer’s products are in a category or serve a demographic that would endear customers, or if this option is reserved for VIP clients, it can be a big win to include it as part of a returns program.

Keep It (Returnless Refund)

Have you ever created an e-commerce returns request only to be surprised by the Seller telling you not to bother sending it back? Packaging it up and dropping it off at a kiosk or locker is unnecessary. Just keep it, donate it, toss it, whatever you want, and still get your refund?

Some retailers offer customers the option to keep the item based on purchase history, lifetime value, and/or no previous patterns of return abuse. And there are several scenarios where the ‘Keep It’ approach makes the most sense. For example, transportation costs for low-value or low-margin items could easily spin out of control. For items with sanitary concerns, such as undergarments, mattresses, etc., and can’t be resold…, eliminating the time and cost of customer service and managing the returns, shipping, and processing might make the most sense.

Keep-it policies also help reduce the impact of returns on excess stock, which can cost a merchant even more by way of storage costs, space congestion that limits the ability to stock new products, and processing costs, among other things, such as the impact on operational efficiency managing space allocation. Excess inventory is not considered a favorable position.

Summary

Ultimately, e-commerce returns are a trade-off: they hurt margins but are essential to compete in a market where convenience and customer-centric policies drive success because there’s always another place to get the item. No retailer is irreplaceable, particularly in e-commerce.

The source of the problem primarily stems from customers’ inability to physically inspect products before purchase, leading to returns due to sizing, description discrepancies, or even shipping damage. Crafting the perfect e-commerce returns program requires Sellers to understand their core customer demographic and “meet them where they are,” which means offering the options customers prefer while managing costs. As customers have amazing experiences shopping with your competitors or even across categories, they naturally seek out similar experiences for future purchases.

The most common approaches include small parcel returns, boxless returns, buy online return in-store (BORIS), home pickup, and even “keep it” returnless refunds. As discussed, each method offers unique advantages and challenges, but despite the associated costs and complexities, an exceptional returns program is crucial to building customer trust and loyalty.

E-commerce has matured to a point where expectations are set before checkout. Retailers follow through on the unspoken social agreement and even delight customers by going above and beyond a stand to earn trust, which begets loyalty and repeat customers. A retailer’s probability of selling to a returning customer is higher than selling to a new customer, and repeat customers spend more than brand-new shoppers. So, instead of viewing a purchase as the end goal in a transaction, Sellers should approach the entire post-purchase journey as the start of a new customer relationship that needs to be nurtured for it to grow and flourish over time.

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Retail is under siege by a sophisticated form of economic sabotage that threatens the very foundation of online commerce as it silently erodes retail profitability. Returns fraud and refund fraud have transformed from a minor inconvenience into a multibillion-dollar crisis that undermines the entire ecommerce ecosystem. In 2022, an estimated $816 billion of merchandise was returned in the United States, with a staggering $84.9 billion classified as fraudulent (more than 10%). The problem has grown rapidly, initially fueled by the explosive ecommerce growth during the COVID pandemic, with retailers experiencing a 67% increase in return rates over the past five years.

The Economic Impact

The scale of returns fraud is staggering, and the financial consequences extend far beyond simple refunds. Processing a single return costs an average of 20 – 30% of the original order value. The total annual cost of retail fraud has ballooned to $101 billion, with holiday seasons seeing returns fraud account for nearly 20% of all returns.

Examples of Returns Fraud:

1. Wardrobing: Consumers purchase apparel, footwear, accessories, or just about anything with the intention of wearing/using them temporarily and then returning them for a full refund. This is particularly common for luxury items that might be needed for one-time events or one-time use, such as parties, meetings, or to complete a non-recurring task. For example, a soccer mom who wants a lovely dress for a New Year’s Eve party, online personalities, and influencers would be highly likely to purchase elaborate clothing and supplies for use in videos, photos, and demonstrations and then return the items without significant wear, treating online retailers like free rental services.


2. Bracketing: A risk management shopping approach where customers intentionally order multiple variations of a product, knowing in advance that they will only be keeping one or a select few. For example, a shopper might order three sizes of the same collared shirt in different neck and/or arm lengths or multiple colors to try them on at home and then return all but the one that is needed. The convenience of browsing online catalogs and knowing that the returns will be free allows consumers to “try it before they truly buy it.”


3. Component Stripping: A fraudulent act primarily targeting high-end electronics; scammers purchase the devices, remove valuable components to sell them, and then return the items with the missing components. Often, retailers have no idea until the item is resold and doesn’t work for the next customer. For example, a fraudster might purchase a laptop, take out the RAM card or a graphics card, then return the machine with inferior parts in its place or no replacement parts at all, effectively stealing the valuable hardware while appearing to make a legitimate return.


4. Empty Box Fraud: The scammer reports that the box was delivered empty or missing some of the intended contents, requesting a refund or replacement without shipping anything back to the retailer.


5. Product Swapping: A type of return fraud where a new condition item is purchased and then an older, worn, or broken item is returned in the new product’s packaging. The business approves the refund, not knowing about the deception until the next customer has a bad purchase experience.

Examples of Refund Fraud:

1. Receipt Manipulation: Cybercriminals create and sell fabricated receipts or purchase confirmation messages on the dark web, enabling the purchasers to obtain refunds for products they never purchased. This intricate scheme targets both online and physical retail stores.


2. Chargeback Fraud: Customers dispute legitimate charges with their credit card company, claiming the transaction(s) were not unauthorized or that they never received the product (similar to making a No Delivery claim with the Seller). This forces the retailer to prove the order’s validity or lose the value of both the product and the revenue.


3. Price Switching: A deliberate manipulation requiring careful execution whereby barcodes are altered, or price tags are swapped between two items with distinctly different prices to obtain larger refunds. For example, one might purchase a higher and lower-priced item, swap price tags between the two, and then return the lower-priced item for the higher refund amount. Or they may modify the barcode on an item to trigger a more favorable refund.


4. No Delivery Claim: Customers claim their order was not delivered and claim a full refund when the item(s) were indeed delivered; they keep both the item and the refund.


5. Bogus Product Defect: A customer falsely claims that a product was delivered damaged or otherwise defective to either secure a refund without returning the item or to receive a replacement and complete the transaction, having acquired two for the price of one. This involves fabricating or exaggerating product flaws to trigger the retailer’s return or replacement policy without genuine grounds for the claim.

Summary

Returns fraud represents a complex economic challenge requiring continuous monitoring and adaptation. Retailers must remain vigilant and leverage the latest fraud detection tools and technology while designing a returns program that protects their bottom line while encouraging customer trust and loyalty.

By employing technology, training employees to spot patterns, and consistently enforcing return policies, retailers can prevent systemic abuse and minimize the impact of returns and refund fraud on profitability.

The battle against returns fraud transcends simple loss prevention. The ability to detect, prevent, and mitigate fraudulent returns and refunds will separate successful retailers from vulnerable targets.

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Reverse logistics has emerged as a vital aspect of supply chain management in modern e-commerce. While it still includes the movement of goods from customers to retailers, it’s no longer limited to just handling returns. It encompasses customer communication and expectation setting, order and inventory management, repairs, recycling, resale, and recommerce and can have substantial revenue implications. With e-commerce return rates averaging 20-30% across categories, businesses must adopt innovative strategies to optimize reverse logistics to balance efficiency, profitability, customer relationship, loyalty, and sustainability.

The Importance of Reverse Logistics

Reverse logistics has become a pivotal part of retail success, influenced by changing consumer desires and behavior. For example, well over 50% of online shoppers now report engaging in “bracketing,” the practice of purchasing multiple product variations to return those that do not meet their needs. This necessitates sustainability programs that mitigate the increased environmental considerations, as estimates put the carbon emissions related to reverse logistics somewhere near 25% of the total e-commerce footprint.

Returns management impacts operational costs and brand loyalty, as customers are significantly more likely to make repeat purchases following a retailer’s smooth returns experience. Optimized reverse logistics delivers numerous advantages, from enhanced inventory management and quick reintegration of resellable items, streamlined processing for reducing operational expenses to refurbishing and reselling non-new items to generate creative income streams where products might otherwise have gone to the landfill. Efficient returns handling software and processes build customer trust and loyalty, and proper recycling and waste management mitigate sustainability challenges.

Core Strategies for Optimization

1. Technology Integration
Integrating advanced technologies is key to streamlining reverse logistics operations. Solutions include:

• Warehouse Management Systems (WMS) enable the real-time tracking and management of returns and exchanges, centralizing all customer communication (automating where possible), and creating and managing workflows for maximum efficiency.
• Inventory Management Systems (IMS) are used to authorize customer returns, return shipping, inspection, categorization, and resale/redistribution of returned goods.
• Implement software systems to create efficient return and exchange workflows that enable customers with a self-service portal and a consistent but straightforward process for making returns, requesting exchanges, and suggesting upsell and cross-sell items to retain revenue rather than providing full refunds. Implement robotic systems for sorting, inspecting, and storing returned items to remove as much of the human from the process as possible, decreasing the returns program’s overall cost.

2. Data-Driven Decision-Making
Closely analyzing data can provide valuable insights into returns trends and help address root causes to prevent future returns. Retailers can:

• Capture and analyze the reasons for returns and fix the issues, such as manufacturing defects or inaccurate product descriptions, that are leading to mismatched customer expectations.
• Use returns data to improve product design and to design new products that align offerings with customer preferences.
• Use returns data to implement disposition rules that streamline returns processing to reduce the time to resale.
• Use predictive analytics to forecast returns and optimize inventory procurement.

3. The Importance of Sustainability
Environmental responsibility is an integral part of modern reverse logistics. Strategies include:

• Repairing/refurbishing and reselling returned items to minimize waste.
• Partnering with local organizations to recycle unsalvageable products.
• Investing in durable shipping materials to reduce packaging waste.
• Engaging in the circular economy and encouraging recommerce through platforms like ThredUp and Arrive Recommerce.

4. Customer-Centric Solutions
Prioritizing customer experience ensures loyalty and reduces friction. Retailers should:

• Offer multiple return options, including in-store returns, home pick-up, and drop-off points such as lockers.
• Implement a clear and transparent return policy and prominently display the details using simple website language.
• Offer printerless and boxless return solutions with easy-to-follow procedures.
• Provide regular status updates and quick refunds to reinforce trust and transparency.

5. Consolidation and Localization
Consolidating returns locally can significantly reduce costs and environmental impact by reducing the transportation burden. However, this is not a one-size-fits-all strategy. For example, high-value items, seasonal items, or those in high demand in a particular region should be sent directly to the store or warehouse that is most likely to sell or ship the item(s) most quickly to maintain resale value.

6. Policy Development
Developing competitive yet viable return policies is essential. Key practices include:

• Implementing category-specific restrictions to manage expectations and costs.
• Setting clear guidelines for handling high-value items.
• Offering premium return and/or exchange services for VIP customers, such as free returns, grossed-up store credit for exchanges, etc.
• Training staff to handle returns efficiently or partnering with specialized third-party logistics providers to outsource returns operations and minimize expenses.

Summary

Optimizing reverse logistics is no longer optional but essential for thriving in today’s modern ecommerce landscape. Technological advancements and evolving consumer behavior patterns will shape its future. Retailers should explore innovations such as agentic artificial intelligence to create a more robust and personalized customer experience that operates 24/7/365. Blockchain technology can improve transparency and traceability within the supply chain. At the same time, collaborative platforms enable logistics solutions from outsourcing returns entirely to helping offload the inventory through third-party recommerce channels. Businesses must also prioritize sustainability, integrating eco-friendly practices to meet consumer expectations, and it’s also just good citizenship. Balancing customer convenience with cost control will remain a central challenge, requiring continuous adaptation and investment in innovative returns solutions. A well-executed reverse logistics strategy minimizes costs, strengthens customer relationships, and reinforces a brand’s commitment to environmental responsibility.

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Amazon recently announced that Fulfillment by Amazon (FBA) fees would be frozen for 2025 in the US, and no new fees would be introduced. But in classic Amazon sleight of hand, they’ve made a move that allows them to stay true to their word while still improving their bottom line.

Starting March 10, 2025, Amazon will implement changes to its Fulfillment by Amazon (FBA) Inventory Reimbursement Policy, specifically, how they will pay out claims for lost or damaged inventory. The new plan is to start reimbursing Sellers the Manufacturing Cost for each item rather than the current reimbursement rate equal to the Amazon Sale Price. Manufacturing Cost is defined as the cost of sourcing a product from a manufacturer, wholesaler, or reseller, excluding expenses like shipping, handling, and customs duties. Some estimate that this change could slash reimbursements by as much as 60% on average, posing a substantial loss for FBA Sellers that rely on their new condition inventory to make new sales and earn new customers. The policy page will be updated to reflect the changes after the policy goes into effect in March.

Unfortunately, there is little that can be done other than to take prompt action between now and the transition date to maximize the reimbursements owed under the current policy.

The New Calculation

Amazon offers two ways to determine Manufacturing Costs:

1. Amazon Estimates: Amazon will determine cost based on a comprehensive evaluation of comparable products sold by Amazon and competitive Sellers.


2. Seller-Provided Costs: Starting January 2025, sellers can configure their manufacturing costs through a new “Manage Your Manufacturing Cost” page in the Inventory Defect and Reimbursement Portal. Amazon reserves the right to ask for proof to validate the amount.

It’s worth noting that the new payout rate applies to items that are lost or damaged before the item is sold on Amazon’s store. Items that are lost or damaged after a customer places an order will continue to be reimbursed at the Amazon Sales Price minus applicable fees.

While Amazon now offers automatic reimbursements for eligible items to save Sellers the time it takes to submit a claim, this new payout rate represents a substantial financial change. Thus, keep a keen eye on inventory status and submit claims promptly, or risk losing the opportunity to collect reimbursement at the current 2024 rate and safeguard entitled revenue.

The Losses Add Up

Some reports estimate that reimbursements can account for 1 – 3% of most Sellers’ revenue. With payouts dropping by 60% or more, even smaller Sellers stand to lose tens of thousands of dollars annually—more if they sell in high-value categories or products prone to pre-fulfillment damage.

New Administrative Burden

Sellers must now provide (and continuously manage) accurate manufacturing costs on new Seller Central screens to avoid discrepancies and limit inevitable disputes with Amazon. The alternative is accepting Amazon’s determination of value, which will not likely be a favorable number.

Time-Sensitive Claims

Reimbursement claims for lost or damaged items must be filed within 60 days of the reported loss or damage. Delays in filing claims could result in missed reimbursements.

To maximize recaptured value, Sellers should take the following steps:

• File Claims Before the Deadline: Sellers must prioritize filing eligible claims ahead of the March 10 deadline to receive reimbursements based on the Amazon Sale Price.


• Use Tools and Technology: Advanced auditing tools, such as those provided by GETIDA, can automate most identification and submission work. They can also help identify overlooked claims, ensure compliance, and maximize reimbursements.

Optimize Manufacturing Cost Reporting

Starting January 2025, Sellers should:

• Use the “Manage Your Manufacturing Cost” page to input accurate costs.


• Regularly review and update cost data to reflect market changes.


• Prepare necessary documentation to support cost claims to expedite the reporting updates.

Summary

Whether you’re a veteran at this and have ample experience regularly submitting claims or haven’t gotten around to it yet, Amazon’s upcoming FBA Inventory Reimbursement Policy changes will hurt Sellers through reduced payout amounts–to tens of thousands of dollars on average. We shouldn’t be surprised that Amazon announces no FBA fee increases for 2025 but then reduces payouts that will dramatically affect the bottom line of its third-party Sellers. Different sides of the same coin. But predictable. And there’s no shortage of stories going further back.

All e-commerce retailers should diversify their fulfillment strategies and have FBA alternatives in place when Amazon exercises its whim and throws its “partners” under the bus again. It’s a matter of when, not if.

Learn more about Cahoot e-commerce order fulfillment services to protect your business from monopolies like Amazon.

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Labor tensions between Amazon and its workforce have escalated in recent years as allegations of unsafe working conditions have been made public, along with a growing interest among employees to unionize and organize labor under a collective bargaining agreement to improve workplace safety and align compensation with current market rates. After Amazon allegedly failed to respond to a Teamsters request to “come to the table” by Dec 15, 2024. The Teamsters approved a strike and 7 out of 10 unionized facilities took to the picket line representing the “largest strike against Amazon in U.S. history,” targeting major delivery hubs in New York, Georgia, Illinois, and California.

Thirteen (13) months after sending an open letter to Amazon CEO Andy Jassy in June 2023 regarding investigations into the working conditions at the e-commerce giant’s facilities, (and a call for Amazon employees to come forward with stories), the Senate Health, Education, Labor, and Pensions (HELP) Committee led by Chair, Senator Bernie Sanders, of Vermont (I), published a report titled “PEAK SEASONS, PEAK INJURIES: Amazon Warehouses Are Especially Dangerous During Prime Day and the Holiday Season—and the Company Knows It”.

The report describes just how bad the rate of recordable injuries is (10 out of every 100 workers) and goes on to indicate that 10% is more than double the industry average injury rate over the last seven years. If all injuries reported by employees were considered, (not just the ones required to be submitted to OSHA), the injury rate is closer to 50%! It’s no wonder employees in many facilities have been wanting to unionize and negotiate better working conditions, despite Amazon’s well-publicized efforts to thwart unionization attempts.

Workplace Safety Concerns and Senate Allegations

Amazon faces sharp criticism from workers and drivers alike over its workplace safety practices. The HELP Committee’s investigation uncovered alarming data regarding the company’s warehouses. The report alleges that Amazon prioritized productivity over safety, creating a “uniquely dangerous” environment. Internal company studies, such as Project Elderwand and Project Soteria, identified that high rates of repetitive motions led to elevated injury risks. The latter study even showed that injury rates dropped when speed-based disciplinary measures were temporarily suspended during the pandemic (i.e. when allowed to work at a slower pace, risk for injury went down).

Despite these findings, Amazon reportedly rejected safety recommendations that would reduce productivity, alleging that the company manipulates injury data to obscure risks. Additionally, workers reported being discouraged from seeking external medical care, and some were terminated while on approved medical leave.

Amazon has dismissed these findings as outdated and selective examples unrepresentative of the whole. The company cites improvements in workplace safety and claims a 28% reduction in incident rates since 2019. However, these assertions have done little to deter criticism from lawmakers and labor organizers.

Amazon Workers Path to Unionization

Unionization efforts at Amazon gained meaningful momentum in 2022 when workers at the Staten Island, NY warehouse voted in favor of organizing labor. Then in June 2024, the Amazon Labor Union (ALU), which led the Staten Island push, successfully affiliated with the International Brotherhood of Teamsters (IBT), consolidating the movement and enabling more resources to further their goals. The new partnership also enabled the ALU to leverage the Teamsters’ extensive resources to target multiple facilities simultaneously. Today, the Teamsters represent approximately 10,000 Amazon workers and contractors across warehouses, delivery hubs, and air facilities.

Financial Context and Broader Implications

As the second-largest private employer in the United States, Amazon’s practices have far-reaching implications for workplace standards in the online retail and logistics sectors. Internationally, Amazon’s labor policies have also come under scrutiny. For example, German workers represented by the United Services Union announced strikes alongside the American workers to show support and solidarity.

Summary

The strikes last week represent a critical juncture in the ongoing labor struggle between Amazon and its workforce. While the coordinated pickets disrupted some fulfillment and warehousing operations, Amazon asserts that on-time delivery remains unaffected. Participation levels varied, with some sites seeing dozens of picketers while others reported normal activities. The Teamsters claim “thousands” of members are currently on strike and have vowed to expand their efforts, threatening to picket additional facilities if their demands continue to be ignored.

Meanwhile, legislative efforts, including Senator Sanders’ proposed Warehouse Worker Protection Act and Protecting America’s Workers Act, aim to address safety and accountability issues at companies like Amazon. If passed, these proposals would increase transparency around work quotas and impose stricter penalties for safety violations.

Amazon’s resistance to unionization reflects broader tensions in a digital economy where traditional labor protections often clash with new business models. And as organized labor continues to push back against one of the world’s most influential companies, the outcome of these unionization and labor strike efforts could reshape labor relations far beyond the e-commerce and logistics industries, potentially extending to manufacturing and other assembly line-like workflows.

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UPS SurePost is a hybrid delivery service that integrates UPS’s network with USPS’s extended final-mile reach and capabilities. It’s a partnership between two competitors playing to each of their strengths to achieve greater cost efficiency, and it’s set to undergo notable changes in 2025. In particular, the primary benefit of SurePost, the lower cost of getting packages into the hands of their intended recipients, will see a substantial rate hike and service modifications in 2025, marking a profound shift in what ecommerce shippers have come to expect from the service. Understanding these developments is crucial for merchants to adapt their operations and optimize margins next year.

Key Changes to UPS SurePost Rates in 2025

Starting January 13, 2025, packages weighing 1 to 9 pounds will see a 9.9% price increase, while those weighing 10 to 70 pounds will increase 5.9 to 7.1%. Additionally, surcharges for deliveries to less densely populated areas will increase dramatically. The Delivery Area Surcharge (DAS) will rise 61.8% to $6.15, and the Extended Delivery Area Surcharge will climb a whopping 69.4% to $8.30. These changes reflect the broader trend of rising costs of last-mile delivery services.

In addition to these changes, the U.S. Postal Service will discontinue the allowance of dual shipping labels starting January 1, 2025, as it looks to increase its network’s efficiency and gain more direct customers for USPS Ground Advantage Services, which has a faster delivery SLA than SurePost by ~2 days on average. This will limit UPS’s package routing flexibility which currently allows them to decide which agency will deliver the package to the doorstep much later in the sortation workflow. Now, shippers must use labels that indicate the responsible final mile delivery agent when the package is accepted for processing.

Comparisons Across National Carriers

UPS’s SurePost fee changes align with what we see in the broader shipping industry. USPS will increase rates for its Parcel Select service by an average of 9.2%, depending on where the package enters the postal network, while its Ground Advantage service will rise by 3.2% for commercial accounts. FedEx is implementing various surcharges and rate adjustments, including a new $1.50 inbound processing fee, expanded fuel surcharges to include address correction and dangerous goods, and implementing their own DAS price increases. So, although UPS’s SurePost increases are significant, they reflect all the national carriers’ efforts to address rising operational costs and align pricing with market demands.

Implications for E-commerce Merchants

All shipping rate hikes pose challenges for e-commerce businesses, particularly those with razor-thin margins that rely on lower-cost carrier services to operate profitably. In many cases, the increased shipping costs trickle down to the consumer through higher pricing because online retailers cannot shoulder the entire burden. We may eventually observe altered consumer spending behavior, forcing Sellers to find new opportunities to reduce costs and return the business to healthy and sustainable margins.

Strategic Adjustments for Merchants

Several strategies could be employed to help reduce shipping costs:

1. Shipping Cost Analysis and Carrier Negotiations: Conduct a detailed shipping cost analysis to identify order distribution across the product catalog and which SKUs, customers, regions, channels, etc., will contribute to increased cost. Use the data to adjust the carrier/service mix, matching delivery date promises with carrier/service SLAs and pricing. Identify opportunities to negotiate carrier contracts to reduce shipping costs in other areas, such as different package sizes, weights, variances, zones, and alternative delivery services, to minimize the impact of the new rate changes (or explore alternative carriers and services in particular, regional carriers that are trying to compete with the large national carriers to gain market share).


2. Shipping Optimization: Leverage technologies such as next-generation shipping label software for AI-assisted rate shipping, automatically creating optimal shipping labels and optimizing fulfillment across inventory locations (in and out of the ‘network’).


3. Free Shipping Adjustments: Retailers offering free shipping may either need to raise minimum order thresholds to balance customer expectations with the new financial realities or, as mentioned above, intelligently merge the new overall expected transportation cost into the complete product catalog pricing to minimize or offset the financial burden.


4. Packaging Optimization: Review packaging (boxes, mailers) and void fill (air cushions, paper) pricing and optimize for smaller packages and less void fill where possible. Also, shift to less expensive padded mailers. Use intelligent cartonization software to pack shipments efficiently to reduce carrier shipping costs and packaging waste. Negotiate with packaging suppliers and consider taking larger deliveries less frequently or pre-buying supplies to take advantage of volume/commitment discounts.

Summary

As carriers adjust to ever-rising costs by updating their fee structures and passing costs on to their customers, e-commerce brands and retailers must also determine how to manage the rising costs by cutting elsewhere or passing all or part of the costs further to their customers.

The last-mile delivery space is continuously evolving as new solutions are brought to market and innovations applied to existing technologies and services continue to mature. There are a dozen prominent regional carriers that could help reduce shipping costs for some percentage of shipments. Or, consider partnering with fulfillment experts to distribute the high-volume inventory and capture meaningful margin savings by shipping orders from warehouses closer to the customer.

In any case, one thing is clear…costs continue to rise year after year, and the solution isn’t one-dimensional. To stay competitive and grow a successful online commerce business, there needs to be a fundamental shift in how e-commerce order fulfillment and reverse logistics are managed.

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