In the highly competitive world of ecommerce, delivering an exceptional customer experience is the key to fostering long-term loyalty. While much focus is placed on the initial purchase journey, the often-overlooked return process can make or break a customer’s relationship with a brand. While many ecommerce businesses view returns as a painful but necessary evil, forward-thinking retailers are discovering their untapped potential for building customer loyalty. In today’s competitive marketplace, a positive returns experience can transform one-time shoppers into lifelong brand advocates, driving sustained growth and profitability.

The challenge lies in meeting the lofty expectations set by industry giants. Shoppers today demand frictionless, convenient returns, with 76% of consumers considering free returns a crucial factor in their purchasing decisions. Brands that fail to deliver on this expectation risk severe consequences, as 89% of customers are less likely to buy from a retailer after a poor returns experience. Conversely, those who prioritize seamless returns can reap significant benefits, with 97% of shoppers saying they’d buy again from a brand that offers a positive returns process.

The evolution of ecommerce has led to a rise of return rates (particularly in the fashion industry, where some apparel brands experience return rates as high as 40%!), has dramatically shifted customer expectations around returns. Modern shoppers demand easy, quick, and convenient return processes. Indeed, they demand flexibility and transparency throughout the entire purchase lifecycle – which includes returns and clear return and refund policies.

What is a Returns Policy?

A returns policy is a set of rules that outlines the conditions under which customers can return purchases. It provides details on how and when a return can be made, whether customers will receive a refund, exchange, or store credit, and any other necessary requirements. For online sellers, a clear and fair returns policy can help build customer trust, reduce disputes, and improve overall customer satisfaction.

Key Return Policy Terms

1. Return: When a customer sends back an item they purchased, whether due to defects, dissatisfaction, or other reasons.
2. Refund: The process of reimbursing the customer for the returned product. Refunds can be issued via the original payment method, store credit, or alternative methods.
3. Exchange: When a returned item is replaced with another of equal value, whether it be the same product (e.g., a different size or color) or a different product entirely.

Common Return Policy Elements

1. Time Frame:
   The number of days customers have to return an item. This period typically ranges from 15 to 30 days but may extend up to 90 days for certain products or special occasions.
2. Refund Information:
   How customers will receive their refund, whether through their original payment method, store credit, or another method.
3. Customer Support:
   Contact details for customer service, including email, phone, or live chat, so customers can get assistance with returns.
4. Return Instructions:
   Step-by-step guidelines on how customers should return an item, including options such as mailing it back, returning it in-store, or using a drop-off location.
5. Condition of Returned Items:
   Any conditions regarding the state of the product being returned, such as whether it must be unused, in original packaging, or accompanied by a receipt. Return policies often have specific rules on damages for items.
6. Return Shipping and Restocking Fees:
   If applicable, any fees customers may be required to pay for returning an item.
7. Exceptions and Restrictions:
   Details on which products are not eligible for return, such as final sale items, perishable goods, or digital downloads.

Legal Considerations

1. Compliance with Consumer Protection Laws:
   Online sellers must comply with regional and international laws related to consumer rights, such as the U.S. FTC regulations, EU Consumer Rights Directive, or other applicable legislation.
2. Refund Processing Time:
   Some jurisdictions require refunds to be processed within a certain number of days after receiving a returned product.
3. Transparency in Policy Terms:
   Sellers must be upfront about any conditions, fees, or exceptions to avoid misleading customers and potential legal disputes.
4. Privacy of Customer Data:
   Ensure that any customer data collected during the return process is handled in compliance with data protection laws such as GDPR or CCPA.

Return Policy Best Practices for Online Sellers

1. Ensure Accessibility:
   The return policy should be easy to find on the website, preferably linked in the footer, checkout page, and product descriptions.
2. Offer Free Return Shipping:
   Consider covering the cost of return shipping, especially during the holiday season, to encourage customer confidence and repeat business.
3. Provide a Hassle-Free Process:
   Simplify the return steps to enhance the customer experience and reduce friction.
4. Use Clear and Simple Language:
   Avoid complex legal jargon so that customers can easily understand their rights and responsibilities.
5. Request Customer Feedback:
   Collect feedback from customers on their return experiences to identify areas for improvement.
6. Analyze Return Data:
   Track return reasons and trends to make adjustments to product quality, descriptions, and return policies as needed.
7. Mitigate Return Fraud:
   Return Fraud is an inescapable part of providing returns, but the benefits of providing online returns can be maintained while still protecting against fraud.

A well-crafted return policy not only protects the business but also fosters customer loyalty by demonstrating fairness and transparency.

Understanding the Importance of a Returns Program

An effective and efficient returns program is a cornerstone of any successful online business; directly influencing customer satisfaction and reinforcing loyalty. When customers know they can return or exchange items with ease, it transforms potential frustration into a positive experience, encouraging repeat purchases and strengthening brand trust. This sense of security and flexibility is crucial in today’s competitive market, where customer expectations are higher than ever.

A poorly managed returns program can severely damage customer loyalty. When customers encounter difficulties returning or exchanging items, frustration and distrust can quickly set in. This negative experience can lead to unfavorable reviews, a decline in repeat business, and ultimately, a loss of customer loyalty.

Sustainability and Eco-Friendly Return Interest Rising

In addition, customers are becoming increasingly environmentally conscious; sustainability and environmental impact are becoming a deciding factor for more and more customers. Including sustainability into a returns program can capture this market segment’s interest and loyalty.

Create a Clear, Customer-Friendly Return Policy

Transparency is crucial when it comes to building trust and confidence. Make sure the refund policy is prominently displayed, written in plain language, and covers all the key details upfront. Having a purchase receipt is essential for returns, as it determines eligibility and the return window. Refunds will be processed back to the original payment method. Spell out exactly what’s eligible for return, the timeframe, any fees, and the available resolution options like refunds, exchanges, or store credit.

Different research studies report that between 60% and 80% of customers check the return policy before making a purchase. So a clear, easy-to-understand policy can be the difference between a lost sale and a prospective loyal customer. Setting reasonable expectations and making the process seamless will encourage shoppers to buy, knowing they can return items hassle-free. And remember, most online shoppers consider free returns a crucial factor in their purchasing decisions.

Benefits of a Customer-Centric Returns Program

Implementing a customer-centric returns program offers numerous advantages. These benefits include:

Offer Flexible Return Methods with Free Return Shipping

Convenience is king, especially when it comes to returns, and especially for those that spend the most online (30 – 60-year-olds). Items purchased with gift receipts often have more lenient return policies. For example, not all customers have easy access to packing materials or printers, so providing flexible return options – like including pre-paid labels with the purchase or offering boxless drop-off locations (aka ‘return bars’) – will ensure a seamless experience by meeting the customer where they are.

Generous policies play a crucial role in building trust and fostering long-term relationships. Extended returns windows, (even if only for unopened or unused items), signals to customers that their business is a top priority. Catering to different customer preferences, demonstrates commitment to the customer relationship, increasing the chances they’ll shop again in the future. Empowering shoppers to make informed decisions up front has also been shown to encourage larger purchases, more frequent shopping, and increased recommendations.

Building a VIP Loyalty Program Around Returns

If returns are just too expensive in categories with razor-thin margins, consider offering a loyalty program that caters specifically to the needs of high-value customers. By offering VIPs enhanced returns benefits such as free return shipping, expedited processing, or extended return windows, brands can demonstrate their commitment to their satisfaction, deepening their loyalty and encouraging them to shop more frequently, a point which is frequently confirmed by respondents in research studies. Such a VIP program helps build a moat around the returns process to prevent return scammers from abusing returns.

Incentivize Exchanges Over Refunds

While refunds are sometimes unavoidable, savvy retailers can leverage exchanges as a powerful tool for retaining revenue and strengthening customer bonds. Restocking fees can significantly impact the profitability of returns, making it crucial to manage these costs effectively. By incentivizing exchanges through exclusive discounts, coupons, free shipping, or even offering the option to exchange for a more expensive item, companies can encourage shoppers to stay within their ecosystem, transforming potential lost sales into loyal, repeat customers. Nearly all respondents across research studies say they’ll buy again if the returns experience is easy.

Process Customer Returns Quickly via Automation

Time is of the essence when it comes to returns. Speedily handling returns not only helps with customer satisfaction, but also brings inventory back into a sellable state as soon as possible.

Implementing an automated returns management system is perhaps the most impactful step brands can take to improve both the customer experience and inventory processing of returns. Clear return and refund policies are crucial in such a system, as they streamline the return process and enhance customer satisfaction. By streamlining the returns workflow through self-service portals, eligibility rules, and seamless integrations, businesses can resolve requests quickly and accurately – freeing up time to focus on higher-value tasks.

Efficient returns handling not only prevents customers from becoming frustrated, but more than half of customers say they’d be willing to spend more if they knew their refund would be processed quickly. Streamlining the returns workflow through automation can drastically reduce wait times, building trust and loyalty in the process.

Once returns arrive in the warehouse, automation also helps to streamline the receiving workflow to match the item to the customer’s order and bring the inventory back into the system for resale.

Collect Customer Feedback to Improve Customer Satisfaction

Regularly gathering data and feedback on returns and the returns process is crucial for continual improvement and reducing the cost of returns. Track key metrics like return rates, reasons for returns, along with customer satisfaction scores, to identify trends and pinpoint areas for optimization. This data-driven approach allows sellers to address pain points, fix underlying issues (which lowers cost), and tailor the returns experience to the customers’ evolving needs. By continuously improving the process based on their input, customers will see their satisfaction is a top priority.

Clearly Display Returns Policy for Customer Ease of Access

Displaying returns policies clearly and prominently is essential for building trust and confidence with customers. Here are some effective strategies for making the site’s returns policy easily accessible:

Website or App Footer for Easy Access

One of the most effective places to display the returns policy is in the footer of the website or app. This ensures that customers can easily find and reference it at any time. Additionally, consider including links to the returns policy on product pages, during the checkout process, and within the customer account dashboard. By making the returns policy readily available, businesses demonstrate transparency and commitment to customer satisfaction.

Summary

The returns process is a critical touchpoint that can either strengthen or undermine customer loyalty. Return shipping costs significantly impact a business’s finances when customers opt for refunds instead of exchanges. By prioritizing transparency, flexibility, speed, and automation, businesses can transform this often-overlooked aspect of the customer journey into a strategic advantage that keeps shoppers coming back. Just look at the success stories. It’s not hard to find companies that reduced their return rate from 15% to 4% or converted 30% of returns into exchanges. When the returns experience is seamless, customers are more likely to remain loyal, make repeat purchases, and even become brand advocates. It’s no secret that loyal customers are incredibly valuable.

So, don’t let returns be an afterthought. Embrace them as an opportunity to build trust, boost satisfaction, and cultivate a base of devoted, lifelong customers. They may be expensive in some cases, but they’re a part of doing business. And by investing in the returns process with a clear policy and convenient options presented to the customer, it becomes a differentiator, and brands will position themselves as industry leaders in customer satisfaction, which encourages loyalty and attracts new business.

Frequently Asked Questions

What is a Return Policy?

A return policy is a store’s rules on how customers can return unwanted or problematic products. Return policies can allow for refunds (either for cash or store credit), exchanges (the same item, or upsells), or both. There are usually time limits or specific product warranties, and often exceptions based on the kind of goods sold.

Do I Need a Return Policy?

In the US, consumer protection laws require retailers to uphold sales promises, which includes any return policy specified. However, not all states require a return policy for online retailers. Having a clear and easily accessible return policy helps prevent any ambiguity.

Knowledge workers have their work cut out for them. The advent of Artificial Intelligence (AI) Agents represents a revolutionary leap in technological innovation and will transform how business operates across every sector. They are highly specialized applications built from a foundation of Large Language Models (LLM) and Natural Language Processing (NLP) capabilities, (think ChatGPT or Llama by Meta AI), but instead of just returning an answer from a huge database of content built from webpages in the public domain, they can understand private, proprietary data and then “act” on the initial result to complete a workflow or achieve an outcome.

“Act” is the key word. AI Agents take autonomous action on the user’s behalf to complete the task or achieve the desired outcome. So, knowledge workers will either need to learn to harness the power of AI to 10X their output (or the output from the tools at their disposal), or AI agents will take over those jobs at a fraction of the cost. Being able to understand how these new tools work and marshal them in the right direction will be critical to gaining an early edge in the retail market and then staying there.

Ecommerce Order and Inventory Management Systems are already starting to incorporate AI agents to evolve these SaaS platforms into back-office powerhouses (unlike anything that has come before) that will do a better job, do it faster, and achieve lower overall costs for the business. Examples include:

1. Best-in-Class Demand Forecasting
   Predict demand with remarkable accuracy. Merchants have historically used unsophisticated data analysis tools and methods that led to unreliable forecasts, but typically some kind of guesses were better than no guesses at all. But modern Inventory Management Systems (IMS’s) using AI agents can analyze many millions of historical sales data points, current inventory on hand, and real-time market trends and supply chain issues to make intelligent forecasts to avoid stockouts and tying up capital in overstock.
   


2. Automatic [Humanless] Procurement
   AI agents can automatically create Purchase Orders with vendors at precisely the right time based on current inventory on hand using demand forecasts that include vendor lead times and transit times that consider real-time ocean freight availability, holidays such as Chinese New Year, weather conditions, port strikes, etc.
   


3. Optimize Fulfillment Costs
   Modern AI-enabled shipping software takes the thinking out of shipping label creation by removing the human and creating the optimal shipping label in the smallest packaging (box, mailer) that will deliver the order safely and on time, every time. It tells the warehouse staff which packaging the label was created for and tracks the packaging quantity on hand with reorder points. AI-assisted Order Management Systems (OMS’s) can monitor weather conditions and assign orders to fulfillment centers that are more likely to deliver them on time. See how much you can save.
   


4. Eliminate Returns and Reclaim Revenue Faster
   It’s critical to manage returns effectively (especially for the highest return rate categories such as women’s apparel), and frequent shoppers/returners typically represent the customers with highest lifetime value. So it’s important to take care of them. If an exchange or store credit is declined by the customer and a return is the only option, groundbreaking new returns technologies such as the Cahoot Peer-to-Peer Returns Solution are already eliminating returns altogether by enabling the return to be graded, approved, and quickly shipped by the customer. But NOT back to the warehouse… the shipping label delivers the item directly to the next customer, saving merchants significant money and time. AI detects the product’s condition by picture and automatically lists acceptable items at an open box discounted price, all without human oversight.
   


5. Dynamic Pricing Strategies
   AI agents can monitor competitor pricing and compare it with unique and repeat page views, sell-through rates, and unit quantity available to make real-time pricing adjustments that convert the sale while maximizing profitability and remaining competitive. Add a real-time discount incentive if an item is added to the cart. And, these personalized interactions not only drive sales, but also foster loyalty.

Summary

Agentic AI is here, and the transformative power of the technology extends way beyond mere automation rules and logic trees. Some people are worried about how this new technology will replace jobs, and they should be. But it can’t take over all higher-level jobs. At least in the near-term, people are still needed to build and direct the agents to work on the problems that will improve business outcomes.

It’s an extremely exciting time in history, and particularly for the ecommerce industry. As ecommerce businesses embrace these advancements and the powerful tools that emerge, (such as the Order and Inventory Management agents described above that can dig deep into the data and deliver precise forecasting, intelligent automation, and lower operational costs), they will not only streamline their operations but also build the agility needed to thrive in an increasingly complex and competitive industry.

The rise of ecommerce has revolutionized the retail landscape, offering unparalleled convenience and putting an unlimited selection of products at consumers’ fingertips. However, this boom has also led to a significant increase in return rates, posing challenges for retailers. Returns have significant operational and financial implications for online retailers. High return rates burden ecommerce operations, increasing processing and restocking costs. Understanding the reasons behind this trend and identifying who is most likely to return online orders is crucial for developing effective strategies to mitigate returns.

What is a Return Policy in Ecommerce?

A return policy in ecommerce is a set of guidelines that outlines how customers can return products they are not satisfied with. It is a crucial component of building trust and ensuring customer satisfaction. A well-crafted return policy should clearly state which items are eligible for return, the steps to initiate a return, and what customers can expect during the return process. Additionally, it should specify any fees associated with returns, providing transparency and setting clear expectations. By having a comprehensive return policy, businesses can improve customer experience and foster long-term customer loyalty.

Understanding Ecommerce Returns

Ecommerce returns are an inevitable part of the online shopping experience. Understanding the intricacies of ecommerce returns is essential for businesses aiming to enhance customer satisfaction and streamline their returns process.

Average Return Rate for Ecommerce

The sheer popularity and ease of online shopping have led to a significant increase in the frequency of ecommerce returns. The average return rate for ecommerce varies across different industries and product categories. However, studies indicate that the average return rate for ecommerce hovers around 20-30%. This means that for every 100 products sold, 20-30 are returned. This return rate is at least double the rate observed in brick-and-mortar stores. Companies across industries are grappling with the financial impact of unsustainable return rates. Understanding this average return rate is crucial for ecommerce businesses to effectively plan and manage their returns process. By anticipating return volumes, businesses can allocate resources more efficiently, optimize their reverse logistics, and implement strategies to reduce return rates.

Why are Return Rates so High?

This can be attributed to several key factors. The inability to physically inspect products before purchase makes it more likely that items will not meet customer expectations. Product sizing, quality, and functionality are common pain points leading to returns. Inaccurate product descriptions, poor-quality imagery, and lack of detailed sizing information often result in receiving items that don’t meet customer expectations. Additionally, “wardrobing” – the practice of wearing an item and then returning it – and the similar practice of “bracketing” – where customers intentionally order multiple variations of a single product with the plan to return all but one – have become increasingly common, driven by the convenience of ecommerce.

Certain product categories are more susceptible to high return rates. Apparel, for instance, can see return rates as high as 40% or more as customers struggle to find the right fit without trying items on. Other segments like luxury goods, beauty, and electronics also tend to have elevated return volumes. Ultimately, the anonymity of online shopping compared to in-person experiences contributes significantly to the ecommerce return epidemic.

Fraudulent returns are another growing challenge, with many merchants reporting incidents of thieves taking advantage of lax policies that are meant to encourage customer loyalty by endeavoring to achieve customer satisfaction. This dynamic has forced retailers to implement stricter measures to validate legitimacy and protect profit margins. Meanwhile, consumer expectations around generous, hassle-free return policies remain high, creating a delicate balance for merchants to manage.

Besides dissatisfaction with product quality, appearance, functionality, or sizing or fit issues, some other key factors driving the high ecommerce return rates include customers receiving the wrong or damaged product(s), as well as changing one’s mind about the purchase, and buyer’s remorse.

Return Rate Demographics

Several research studies have been published on the demographics associated with high ecommerce return rates, and which groups are returning items most often.

• Wealthier Countries: Countries with higher economic strength, like the U.S., U.K., Switzerland, and Germany, have higher return rates. This is partly due to more lenient return policies and better consumer protection laws.
• Frequent Shoppers: Impulsive shoppers who are excited to explore new products tend to return items more frequently.
• Apparel Shoppers: Customers buying apparel have one of the highest return rates because they can’t try on clothing before purchasing online.

These insights suggest that understanding the demographics and behaviors of a brand’s customers can help retailers implement strategies specific to their business to reduce return rates.

Causes of Ecommerce Returns

Ecommerce returns can be driven by various factors, and understanding these causes is essential for businesses to implement effective strategies to minimize returns.

Some of the most common reasons include:

• The item did not fit as expected
• The item was not as described
• The customer received the wrong item
• The item was damaged or defective
• The customer changed their mind
• The item did not arrive on time

Understanding these reasons is vital for businesses to identify areas for improvement. By addressing issues such as inaccurate product descriptions, poor-quality imagery, and inadequate packaging, businesses can reduce the likelihood of returns and enhance the overall customer experience.

Broken or Damaged Products

Broken or damaged products are one of the most common reasons for ecommerce returns. This issue can arise due to poor packaging, mishandling, or shipping-related problems. To minimize the risk of damaged products, businesses should invest in high-quality packaging materials and ensure that products are handled with care throughout the shipping process. Additionally, offering shipping insurance can provide an extra layer of protection against losses.

Businesses can take several steps to prevent damage during shipping, including:

• Using sturdy and protective packaging materials
• Clearly labeling packages as “Fragile” or “Handle with Care”
• Providing detailed instructions on how to handle and care for the product
• Offering tracking and monitoring services to ensure timely delivery

By implementing these measures, businesses can reduce the risk of damaged products and minimize the number of returns due to this reason. This not only enhances customer satisfaction but also helps protect profit margins and improve overall operational efficiency.

Return Costs

Ecommerce returns are costly for retailers, ranging from 20-65% of the original item value in most cases when accounting for shipping, restocking, and potential loss in value, which doesn’t include the initial fulfillment cost of picking, packing, and delivery. Pure economic waste costs the industry hundreds of billions of dollars in profits each year. Industry estimates suggest cutting returns in half could boost profits by 25%. Effectively managing returns is thus essential for ecommerce profitability and sustainability and a well-designed returns program with a customer-friendly policy, streamlined process, and responsive communication can enhance customer satisfaction and loyalty leading to higher lifetime value and lower financial loss due to returns.

Minimizing Returns

Improving product descriptions, providing size guidance and high-quality visuals, and leveraging AI to offer virtual try-on tools as well as identify “serial returners” before orders are shipped, are some of the strategies companies are adopting to reduce return rates. The effort is worth the investment because effectively managing ecommerce returns is not just to improve the bottom line, but also to build a positive brand reputation, foster customer loyalty, and drive repeat business.

Integrating ecommerce returns management with sustainable commerce practices, like product refurbishment, donation, and resale programs, can also help minimize waste and environmental impact. As consumers become more conscious of sustainability, retailers that demonstrate responsible reverse logistics can enhance their brand reputation.

Customers shopping online are more prone to making impulse purchases, which coupled with the convenient and lenient return policies offered by many ecommerce brands, can inadvertently encourage higher return rates.

Frequent returns can also damage brand reputation and erode customer trust, leading to higher cart abandonment. Businesses must strike a balance between intentionally attracting high-value customers with customer-centric returns policies and limiting sales, and thus growth, by being too restrictive in this area.

Summary

Changes in consumer behavior, such as the preference for easy returns and free return shipping, are driving higher return rates, which has significant operational and financial implications for any ecommerce business, forcing them to tackle the problem head-on as it can no longer take a back seat.

The challenges and strategies associated with customer returns in ecommerce include managing the negative impact on profitability and enhancing customer experiences through effective return policies and streamlined processes.

A multi-pronged approach focused on enhancing customer experience, optimizing reverse logistics, and leveraging data-driven insights can transform this liability into a competitive advantage. Offering incentives like extended return windows, store credits, or free exchanges instead of refunds can encourage customers to retain their purchases and prevent revenue erosion.

By getting returns right with clear returns policies, demographic-tailored solutions that don’t compromise business objectives, and proactive customer support, retailers can build customer loyalty, improve profitability, and contribute to more sustainable commerce. If done well, customers will buy again. Done poorly, and they will never look back.

Actively gathering customer feedback through various channels, such as email and social media, is crucial for improving ecommerce practices. Understanding the customer journey in relation to minimizing return rates is also essential. This trend has significant operational and financial implications for online retailers. High return rates burden ecommerce operations, increasing processing and restocking costs. Keeping customers informed about the status of their returns through proactive communication methods, such as email updates, is crucial for maintaining customer satisfaction and loyalty.

Frequently Asked Questions

Who Pays for Return Shipping?

The Seller or the Customer can pay return shipping costs, based on the Return Policy specified by the Seller.

How are Refunds Provided to Customers?

Based on the Return Policy, sellers commonly refund the payment method used, or issue store credit.

How Much Does Returns Cost Sellers?

This depends on industry and product category but returns usually cost around 17% to 30% of the product price. Hence the need for sellers to optimize return processing.

The era of free ecommerce returns is undergoing increasing scrutiny as many retailers reassess and adjust their return policies as they face mounting financial pressures, environmental concerns, and changing consumer behaviors. Once a hallmark of customer convenience, free and unlimited returns became the cornerstone upon which customer trust and loyalty was earned and purchases derisked. Now, these retailers are part of a growing trend where about 40% of retailers are now charging return fees, up from 31% in 2022, according to Narvar research. This shift could redefine the industry, marking a pivotal moment in the relationship between online shoppers and retailers.

The Financial Burden of Returns

Returns have become one of the most challenging financial burdens in e-commerce. Projections for 2024 suggest U.S. retailers will endure losses exceeding $100 billion annually due to returns, contributing to an estimated $890 billion global economic impact. Processing returns often incurs costs surpassing 30% of the product’s original price, encompassing transportation, restocking, and operational expenses. Seasonal and rapidly obsolescent items, as well as items damaged in transit, further exacerbate these losses and erode profitability, compounding the financial strain.

The rapid growth of ecommerce through the pandemic has intensified this issue, but now that the online shopping rate is returning to the mean, the returns rate hasn’t followed suit. Categories such as apparel and electronics are particularly affected where sizing issues and unmet expectations drive higher returns.

The Environmental Impact

Beyond financial implications, the environmental impact of returns is staggering. In the United States alone, returned goods generate an estimated 9.5 billion pounds of landfill waste annually and contribute 24 million metric tons of carbon dioxide emissions. Many returned items cannot be resold as new, often ending up in liquidation channels or being discarded entirely. This unsustainable cycle is prompting retailers to factor eco-friendly considerations into their return strategies.

Evolving Returns Policies

To mitigate these challenges, retailers are tightening return policies. Strategies include shorter return windows, fees for mail-in returns, and restocking charges. Leading brands like American Eagle, DSW, and H&M are at the forefront of these changes, signaling a departure from lenient practices of the past (see a larger list of retailers charging e-commerce return fees in December 2025, which is by no means exhaustive, at the bottom of this article). Even Amazon started charging $1 for certain return types.
Some retailers are also exploring innovative solutions to mitigate return rates. Technologies like augmented reality (AR) and virtual try-on tools aim to improve purchasing accuracy, reducing the likelihood of returns. Enhanced product descriptions, interactive sizing guides, and AI-driven recommendations are further helping customers make more informed choices.

Another emerging trend is the adoption of “returnless refunds,” where customers are allowed to keep items that are not economically viable to process as returns. While this reduces logistical costs, it raises questions about waste and sustainability, as well as abuse by bad actors, highlighting the need for balanced approaches. But there are very real instances where the “Keep It” approach makes sense. Low-cost/low-margin items, for example. Or, when there are sanitary concerns and items cannot be resold; such as food, undergarments, and pillows.

Avoid Policies That Are Too Strict

Many online stores are simultaneously making their return rules stricter to stave off returns fraud. They might ask for proof of purchase, shorten the return window, or create tough return conditions. While this sounds like a good way to prevent financial losses, it often backfires.

Customers really care about how easy it is to return things. If a store makes returns too difficult, many shoppers will simply stop buying from that store. These practices may be intended to deter wardrobing and bracketing that lead to returns without question, but they frequently alienate customers by failing to account for shopping histories and past loyalty. Plus, people get frustrated when returns are complicated, take too long, or seem unfair. Even customers who used to love a brand might walk away if they have a bad return experience. And inconsistent policy enforcement undermines trust and deters repeat purchases, even among previously loyal customers.

The good news is that stores can protect themselves from fraud without pushing customers away. The best approach is to use smart technology to understand different types of customers, monitor patterns, etc. Some shoppers return items more often than others, but that doesn’t mean they’re trying to cheat the system. By creating flexible return policies that treat loyal customers well, stores can actually make more money in the long run. The key is finding a middle ground. When stores get this right, customers feel valued and are more likely to maintain brand affinity.

Aligning Customer Expectations and Merchant Realities

While consumers remain attached to the convenience of free returns, their expectations are gradually adapting to new retail realities. Surveys reveal that flexibility and transparency are more valued than free returns. Clear communication about return policies, quick refund processing, and multiple return options are becoming critical components of the post-purchase experience, and ultimately, customer satisfaction. And when return fees are employed, the key is to make them reasonable; perhaps introduce them slowly and increase them over a long period of time.

Retailers are also leveraging behavioral insights to enhance return strategies. The “refund effect”, where customers receiving swift refunds are more likely to make additional purchases, is a key consideration. By optimizing refund processes such as offering incentives for exchanges, or offering gift cards that have a slightly higher value than the original purchase to keep the item, rather than return it, retailers can retain customer loyalty while mitigating costs.

A Balanced Approach

The future of ecommerce returns lies in finding equilibrium between consumer convenience and economic sustainability. Retailers are expected to continue refining policies, potentially introducing tiered return structures where loyal customers or higher-value purchases receive more lenient terms. Technologies that predict return likelihood based on purchase history or provide real-time feedback during the buying process may further reduce return rates.

Environmental sustainability will also play a more prominent role in shaping returns strategies. Partnerships with recommerce platforms, investments in circular economy initiatives, and improvements in reverse logistics can help align business objectives with environmental responsibility.

A Sustainable Path Forward

The e-commerce return ecosystem is not collapsing but evolving toward greater efficiency and balance. Retailers are navigating a delicate path, aiming to uphold customer satisfaction while safeguarding profitability and addressing ecological concerns. The era of unrestricted, free returns is giving way to a more nuanced model that prioritizes thoughtful consumption and sustainable practices.
As this transformation unfolds, the key to success will lie in innovation, transparency, and adaptability. By embracing these principles, retailers can forge stronger connections with consumers while fostering a more sustainable and economically viable future for e-commerce.

Table 1. Returns Fees Charged by Well-Known Retailers in December 2024.

Retailer/Brand	Returns Fee
Abercrombie & Fitch	All customers: $7.00
American Eagle Outfitters	All customers: $5:00: (excluding specific categories)
boohoo	All customers: $6:00
Dillard’s	All customers: $9.95
DSW	Non-Members: $8.50; Gold or Elite members: Free
H&M	Non-Members: $5.99; H&M Members: $2.99
JCPenney	All customers: $8.00
J.Crew	All customers: $7.50
Kohl’s	All customers: Kohl’s does not pay return shipping costs
Macy’s	Non-Members: $9.99; Star Reward Members: Free
Oh Polly	All customers: From $2.99 for store credit to $9.99
PrettyLittleThing	All customers: $7.00
REI Co-op	All customers: $7.99
Saks Fifth Avenue	All customers: $9.95
T.J. Maxx	All customers: $11.99
Urban Outfitters	All customers: $5
Zara	All customers: $4.95

The holiday shopping season accounts for approximately 30% of annual retail e-commerce revenue, which represents enormous potential. Success during this crucial period demands meticulous preparation and strategic execution across multiple operational areas. To capitalize fully, businesses must avoid critical e-commerce mistakes in website performance, marketing, inventory, fulfillment, and overall strategic planning.

Website Performance and User Experience

The backbone of holiday sales lies in seamless website functionality. Shoppers expect pages to load within milli-seconds, and delays can drive potential customers to competitors. To optimize performance, businesses must conduct thorough load testing to prepare for traffic surges, ensuring infrastructure stability. Streamlining the checkout process by simplifying forms, enabling guest checkouts, and optimizing mobile experiences is crucial. Enhancing trust by prominently displaying security badges and providing competitive shipping options, such as 2-day delivery, can reduce cart abandonment. All development updates should be concluded by early to mid-November to allow for stability testing, ensuring the site operates flawlessly as peak demand ramps up over the Black Friday/Cyber Monday weekend and through the end of the year.

Craft a Comprehensive Marketing Strategy

A successful holiday campaign starts long before the season peaks, not just during BF/CM. Effective marketing strategies should begin early, launching email campaigns months ahead to build anticipation and engage shoppers. Leveraging exclusive offers through pre-sale codes, early deal announcements, and limited-time discounts fosters loyalty. Expanding social media outreach with shareable promotions and influencer collaborations amplifies brand visibility organically. Overreliance on major shopping days like BF/CM can lead to unnecessary operational strain. Staggering promotions throughout the season, however, captures both early planners and last-minute buyers while spreading out the workload.

Avoid Stockouts and Overstock

Inventory mismanagement is one of the most detrimental holiday mistakes. Both stockouts and excess inventory pose financial and reputational risks. Retailers should analyze historical data to forecast demand accurately and use real-time tracking systems to monitor stock levels across all sales channels. Early communication with suppliers ensures adequate inventory procurement and avoids last-minute (expensive) shortages.

Streamlining Fulfillment Processes

Fulfillment challenges often peak during the holiday season due to increased order volumes. Early preparation is essential to mitigating risks such as late shipping that leads to late deliveries and fulfillment defects. Establishing fulfillment partnerships and distributing inventory well before October ensures adequate capacity and rapid scalability. Multicarrier shipping solutions can optimize shipping costs and delivery timelines by comparing real-time rates across carriers and services.

Pricing and Product Presentation

Holiday shoppers demand clear, compelling product details and competitive pricing. Dynamic pricing tools allow businesses to adjust prices based on market trends and competitor activity while maintaining profit margins. Product listings must use high-quality images, multi-angle photography, and detailed descriptions that convey value and utility. Accuracy in these areas prevents abandoned carts and unnecessary returns.

Leveraging Technology for Operational Efficiency

The integration of advanced technologies transforms holiday operations enabling scalability and precision. Warehouse Management Systems streamline and optimize the movement of goods within a warehouse, ensuring efficient and cost-effective management of inventory by tracking its location, quantity, and movement throughout the receiving, storage, picking, packing, and shipping workflows, ultimately enabling overall warehouse productivity and fulfillment accuracy. Inventory and Order Management Systems are the central nervous system of your omnichannel retail operations, providing visibility and control of orders, inventory, customers, products, and more. Analytics platforms provide real-time insights into traffic, sales, and operational performance. Regular maintenance of automation systems and software minimizes downtime, ensuring uninterrupted operations.

Communication and Customer Support

Transparent communication builds trust any time of the year, but getting to trust quickly during the holiday rush increases the chances that customers buy from the well-prepared brands. Clearly displaying shipping cutoff dates and/or date-certain delivery dates, as well as making return policies easy to find and clear, using simple language, effectively manages customer expectations and increases conversion. Post-purchase, providing real-time updates about shipping delays, stock issues, or delivery changes reassures customers and demonstrates brand accountability and commitment to the customer relationship. Expanding support channels with chatbots, live agents, and comprehensive FAQs ensures customers have access to assistance when needed, and how they like to engage.

Summary

To thrive during the holiday season, retailers must adopt proactive measures. Monitoring competitor advertising, promotions, and pricing allows businesses to adapt dynamically. Ensuring seamless experiences across channels (webstores, marketplaces, apps), social media, and physical stores through omnichannel integration, including normalized product data using current high-resolution images and descriptions, encourages a delightful customer journey.

Time should be spent on building brand awareness and trust long before fourth quarter. Time should be spent analyzing data, procuring sufficient inventory, and finalizing marketing strategies. Software systems should be soak tested (especially if any parts of the tech stack are new) and fulfillment partner relationships established prior to the October start to the season. Seasonal staff need to be hired and trained to address the increased fulfillment and customer service demand.

The holiday season presents an exciting growth opportunity for ecommerce businesses. Not just a higher volume of one-time transactions, but the opportunity to create long-term relationships with loyal customers that may bear fruit for many years to come.

The peak holiday season is the most critical time of the year for e-commerce businesses, characterized by intense order volumes, high consumer expectations, and operational complexities. In particular, e-commerce sellers that fully outsource their fulfillment operations require different preparations that retailers and brands that own their fulfillment workflows don’t have to consider. A proactive approach focused on forecasting and planning for logistics needs, customer service demand, and supportive technologies is essential for navigating this high-stakes period effectively.

2024 Important Dates

The holiday peak season typically spans from October to December, encompassing key shopping events like Black Friday (November 29th), Small Business Saturday (November 30th), and Cyber Monday (December 2nd). With Thanksgiving falling on November 28th this year (which is the latest it can fall relative to Christmas), the 2024 holiday shopping season is the shortest that it can possibly be for shoppers who don’t start browsing or buying until November 29th.

Daily shipment volumes can increase by 1,000% or more in ‘normal’ years, placing significant strain on fulfillment operations. However, some will see even higher spikes in demand this year due to the unusually late Thanksgiving Day. So the shipping deadlines below will feel tighter this year as carrier network capacity is constrained to fewer days. Consequently, e-commerce retailers will want to be more conservative with their delivery promises to customers needing to receive their orders before holiday events.

Carrier Published Shipping Deadlines to Ensure Delivery on or Before Christmas Eve

Carrier / Service	Contiguous U.S. (lower 48 states)	Alaska, Hawaii, International, Military
USPS Ground Advantage	December 18	usps.com/holiday/holiday-shipping-dates.htm
USPS Priority Mail	December 19
USPS Priority Mail Express	December 21
UPS 3 Day Select	December 19	ups.com/ctc
UPS 2nd Day Air	December 20
UPS Next Day Air	December 23
FedEx Ground Economy	December 13	fedex.com/en-us/holiday/last-days-to-ship.html
FedEx Express Saver	December 19
FedEx 2Day & 2Day AM	December 20
FedEx SameDay	December 24

Strategic Demand Analysis, Forecasting, and Marketing Execution

Accurate forecasting is the foundation of successful holiday operations. Analyzing historical sales data to identify trends, understanding seasonal consumer behavior, and mapping inventory needs help prevent both stockouts and overstock situations. Collaborating with suppliers well in advance to secure production and delivery schedules is critical. Factoring in extended lead times for manufacturing and transportation ensures inventory is positioned where it is most needed.

Taking the time to carefully plan promotions, new listings for bundle and/or kit SKUs, multi-packs, etc. can all help to increase revenue opportunities.

Optimizing Fulfillment and Logistics

Meeting increased demand during the holiday season requires a well-structured fulfillment strategy. Distributing inventory across multiple warehouses using fully outsourced fulfillment partners such as Cahoot can significantly reduce shipping costs and transit times and increase on-time delivery performance. Fulfillment partners offer advanced tools and infrastructure to rapidly scale operations while delivering exceptional customer experiences for the brand.

Make sure to review third-party receiving deadlines and blackout dates and plan to have inventory inbounded and fulfillment-ready long before it needs to be. Communicate emergency contact info, volume forecasts, (especially if any big spikes are expected from special promotions or sales such as Good Morning America Deals & Steals), and most importantly, make sure providers have enough stock on hand (including a buffer) to ship all orders on time, including any specialty items such as inserts or branded packaging materials.

Leveraging Technology

Make sure third-party fulfillment partners can successfully deliver quick and efficient pick/pack operations with minimal fulfillment defects. Retailers need to make sure to manage inventory and listing visibility across channels and marketplaces, and communicate with customers in real-time about order status and tracking. Automated returns systems simplify post-purchase processes (which can also be outsourced), and enhance customer satisfaction and the likelihood of repeat purchases and increased lifetime customer value.

Elevating the Customer Experience

Providing an exceptional customer experience is a competitive differentiator during the holiday rush, especially post-holiday when customer-initiated return requests will peak. Transparent communication about shipping deadlines and potential delays fosters trust. Branded tracking pages that include upsell and cross-sell ideas, as well as other promotional and/or discount offerings can help encourage repeat purchases and increase customer lifetime value. Offering Delivery Date Promises using tools such as Fenix Commerce or ShipperHQ or Order Management systems like Pulse Commerce where the customer can place an order knowing the estimated delivery date helps increase conversion. Offering real-time order tracking and flexible shipping options reduces cart abandonment. Lastly, personalized packaging, branded unboxing experiences, and thoughtful details like gift notes or sample products can leave a lasting impression.

Preparing Customer Support Teams

The holiday season places heightened demands on customer service infrastructure. Expanding support teams and equipping them with training tailored to holiday-specific scenarios enables quicker, more accurate resolution of customer inquiries, and helps retain revenue when employees are trained to offer exchanges or gift cards rather than refunds for return requests. Comprehensive self-help FAQs and automated chat solutions provide additional support layers, ensuring seamless communication using the customer’s desired method of outreach.

Managing Returns Effectively

Returns are always a headache. But with returns rates during the holiday season approaching 30%, investing in an efficient returns process is a critical component of the overall peak season strategy. Clear, easily accessible return policies reduce customer frustration and cart abandonment. Advanced systems for processing returns and restocking inventory minimize revenue losses and improve operational efficiency.

Contingency Planning for Unforeseen Challenges

Even with thorough preparation, unexpected challenges such as extreme weather or carrier delays can arise. Working with fulfillment partners that offer distributed inventory options ensures continued operations during local disruptions. Active management of marketplace shipping templates associated with listings based on regional disruptions can prevent the over-promising of delivery commitments that customers rely on for a great experience.

Ensuring Scalability and Sustainability

Scalable solutions are essential to handle the dramatic increase in holiday orders. Fulfillment partners that employ scan verification and next-generation shipping software minimize fulfillment defects leading to higher overall margins and happier customers. Sustainable practices, including eco-friendly packaging options and carbon-neutral shipping methods, appeal to environmentally conscious consumers while aligning with long-term business goals and increasing brand reputation.

Converting Challenges into Strategic Wins

Peak season preparation should begin months in advance. Early steps include finalizing demand forecasts, optimizing inventory positioning, and testing technical solutions for peak performance. Maintaining clear communication with all stakeholders and monitoring performance metrics ensures a smooth operation.

The holiday season presents a unique opportunity to build customer trust that leads to lasting relationships. By focusing on strategic planning, leveraging technology, and prioritizing the customer experience, businesses can transform the challenges of peak season into a powerful growth opportunity. The most successful organizations approach this period with adaptability, innovation, and a commitment to delivering excellence.

The peak holiday season is the most critical time of the year for e-commerce businesses, characterized by intense order volumes, high consumer expectations, and operational complexities. A proactive approach focused on forecasting and planning for logistics needs, customer service demand, and supportive technologies is essential for navigating this high-stakes period effectively.

2024 Important Dates

The holiday peak season typically spans from October to December, encompassing key shopping events like Black Friday (November 29th), Small Business Saturday (November 30th), and Cyber Monday (December 2nd). With Thanksgiving falling on November 28th this year, (which is the latest it can fall relative to Christmas), the 2024 holiday shopping season is the shortest that it can possibly be for shoppers that don’t start browsing or buying until November 29th.

In ‘normal’ years, daily shipment volumes can increase by up to 1,000% or more, placing significant strain on fulfillment operations. But some will see even higher spikes in demand this year due to the unusually late Thanksgiving Day. So the shipping deadlines below will feel tighter this year as carrier network capacity is constrained to fewer days, and thus, ecommerce retailers will want to be more conservative with their delivery promises to customers needing to receive their orders before holiday events.

Carrier Published Shipping Deadlines to Ensure Delivery on or Before Christmas Eve

Carrier / Service	Contiguous U.S. (lower 48 states)	Alaska, Hawaii, International, Military
USPS Ground Advantage	December 18	usps.com/holiday/holiday-shipping-dates.htm
USPS Priority Mail	December 19
USPS Priority Mail Express	December 21
UPS 3 Day Select	December 19	ups.com/ctc
UPS 2nd Day Air	December 20
UPS Next Day Air	December 23
FedEx Ground Economy	December 13	fedex.com/en-us/holiday/last-days-to-ship.html
FedEx Express Saver	December 19
FedEx 2Day & 2Day AM	December 20
FedEx SameDay	December 24

Strategic Demand Analysis, Forecasting, and Marketing Execution

Accurate forecasting is the foundation of successful holiday operations. Analyzing historical sales data to identify trends, understanding seasonal consumer behavior, and mapping inventory needs helps prevent both stockouts and overstock situations. Collaborating with suppliers well in advance to secure production and delivery schedules is critical. Factoring in extended lead times for manufacturing and transportation ensures inventory is positioned where it is most needed.

Taking the time to carefully plan promotions, new listings for bundle and/or kit SKUs, multi-packs, etc. can all help to increase revenue opportunities.

Optimizing Fulfillment and Logistics

Meeting increased demand during the holiday season requires a well-structured fulfillment strategy. Distributing inventory across multiple warehouses using outsourced fulfillment partners such as Cahoot can augment existing operational capacity and reduce transit times, lower transportation costs, and increase delivery reliability. Third-party partners offer advanced tools and infrastructure to rapidly increase scalability while simultaneously enabling the positioning of products closer to high-demand areas, ensuring faster delivery and better customer experiences. Additionally, diversifying shipping carriers mitigates risks associated with carrier delays or capacity shortages.

Make sure to review third party receiving deadlines and blackout dates and plan to have inventory inbounded and fulfillment ready long before it needs to be. Communicate emergency contact info, volume forecasts, (especially if any big spikes are expected from special promotions or sales such as Good Morning America Deals & Steals), and most importantly, make sure providers have enough buffer stock on hand to ship all orders on time, including any specialty items such as inserts or branded packaging materials.

Leveraging Technology

Leveraging technology is key to maintaining efficiency during peak periods and earning customer trust that can lead to loyalty and future orders. Enterprise Order Management Systems like Shopify, Pulse Commerce, and BigCommerce enable quick and efficient pick/pack operations, practically eliminate fulfillment defects, manage inventory and listing visibility across channels and marketplaces, and communicate with customers real-time about order status and tracking. Automated returns systems simplify post-purchase processes, enhancing customer satisfaction and operational efficiency.

Elevating the Customer Experience

Providing an exceptional customer experience is a competitive differentiator during the holiday rush, especially post-holiday when customer-initiated return requests will peak. Transparent communication about shipping deadlines and potential delays fosters trust. Branded tracking pages that include upsell and cross-sell ideas, as well as other promotional and/or discount offerings can help encourage repeat purchases and increase customer lifetime value. Offering Delivery Date Promises using tools such as Fenix Commerce or ShipperHQ or Order Management systems already mentioned like Pulse commerce, where the customer can place an order knowing the estimated delivery date helps increase conversion. Plus, offering real-time order tracking and flexible shipping options reduces cart abandonment. Lastly, personalized packaging, branded unboxing experiences, and thoughtful details like gift notes or sample products can leave a lasting impression.

Deliver Packages Safely the First Time

Win loyalty and increase the likelihood of future orders by taking the time to prepare for safe and accurate delivery the first time. A bad experience during a time-sensitive situation can push the customer away. So make sure to include enough dunnage (void fill) to prevent damage in transit. Ship with the proper hazmat designation so orders are not returned to sender (and this also ensures that carrier accounts are kept in good standing). Create international shipments for validated addresses using the correct HTS Code, goods description, and compliance according to each destination country’s regulatory requirements. Most importantly, get organized and make sure to hand over packages to the correct carriers. Margins go out the window if orders have to be double-shipped to arrive on time OR customers return orders because they were delivered late, not to mention the reputation risk for the brand.

Preparing Customer Support Teams

The holiday season places heightened demands on customer service infrastructure. Expanding support teams and equipping them with training tailored to holiday-specific scenarios enables quicker, more accurate resolution of customer inquiries, and helps retain revenue when employees are trained to offer exchanges or gift cards rather than refunds for return requests. Comprehensive knowledge bases and automated chat solutions provide additional support layers, ensuring seamless communication.

Managing Customer Returns Effectively

Returns rates during the holiday season can approach 30%, making an efficient returns process a critical component of overall strategy. Clear, easily accessible return policies reduce customer frustration. Advanced systems for processing returns and restocking inventory minimize revenue losses and improve operational efficiency.

Contingency Planning for Unforeseen Challenges

Even with thorough preparation, unexpected challenges such as extreme weather or carrier delays can arise. Flexible contingency plans, including diversified carrier options and alternative fulfillment strategies, (such as partnering with a solution provider that supports distributed ecommerce fulfillment service as discussed above), ensure continued operations during local disruptions. Active management of marketplace shipping templates associated with listings prevent the over-promising of delivery commitments that customers rely on for a great experience.

Prepare hardware such as shipping label printers by cleaning printer heads to avoid blurry barcodes that will be returned to sender or otherwise delay delivery. Stock plenty of label paper, thermal transfer ribbon and the like. Consider procuring backup printers, barcode scanners, and packing slip pouches for international customs documents.

Ensuring Scalability and Sustainability

Scalable solutions are essential to handle the dramatic increase in holiday orders. Investments in automation, such as robotic picking systems or conveyor technologies, improve efficiency and accuracy. Implementing simple scan verification and next generation multi-carrier shipping software into the fulfillment workflow achieve a similar result without the large capital expense. Sustainable practices, including eco-friendly packaging options and carbon-neutral shipping methods appeal to environmentally conscious consumers while aligning with long-term business goals and increased brand reputation.

Converting Challenges into Strategic Wins

Peak season preparation should begin months in advance. Early steps include finalizing demand forecasts, optimizing inventory positioning, and testing technical solutions for peak performance. Training teams and conducting trial runs of fulfillment processes help identify and address potential issues before order volumes surge. Maintaining clear communication with all stakeholders and monitoring performance metrics ensure a smooth operation.

The holiday season presents a unique opportunity to demonstrate operational excellence and build lasting customer relationships. By focusing on strategic planning, leveraging technology, and prioritizing the customer experience, businesses can transform the challenges of peak season into a powerful growth opportunity. The most successful organizations approach this period with adaptability, innovation, and a commitment to delivering excellence.

Amazon’s decision to freeze referral and Fulfillment by Amazon (FBA) fees for 2025 in the US has been met with mixed reactions, and a closer look suggests that this move may be more self-serving than it appears on the surface. A slew of new fees were already introduced in the first and second quarters of 2024, which squeezed Sellers to the max, so one could argue there’s nothing left to get.

New charges in 2024 included inbound placement fees, low inventory fees, and aged inventory fees. Sure, inbound placement fees were waived if Sellers split the inventory into several inbound shipments themselves and shouldered the burden of the added labor and freight costs. But the costs weren’t waived, just shifted. The fees were introduced to enable Amazon’s shift from a single, national fulfillment center to a regionalized network of 8 fulfillment centers intended to position inventory closer to the customer for faster delivery. The new model requires the positioning of more inventory in more locations, hence the latest fees. So, while Amazon now positions itself as easing the burden on Sellers, the freeze comes after Amazon has lowered its cost of doing business at the expense of third-party Sellers.

The freeze’s timing appears less of an act of generosity and more of a calculated pivot necessitated by external pressures. With limited room left to increase fees without alienating its Seller base, Amazon is using the 2025 strategy to fortify its dominance while attempting to stave off competition from emerging rivals like Temu, which is aggressively recruiting US-based Sellers and Temu is challenging Amazon’s dominance in the budget-friendly market segment.

To its credit, Amazon will be reducing inbound placement fees for certain large and bulky items, with the average decrease being $0.58 per unit, starting January 15, 2025. It will also introduce incentives to encourage Sellers to launch new parent ASINs that qualify for the FBA New Selection Program, such as waived inbound placement fees for up to 100 inbounded units per product from now through March 2025.

With discretionary spending under strain, household staples and personal care items are expected to drive sales in 2025. By incentivizing Sellers to stock these categories and products that Amazon identifies as essential or underrepresented in its catalog, Amazon ensures a robust selection for consumers while positioning itself for continued growth. Amazon’s focus on essentials is part of a broader strategy to ensure its platform remains indispensable. While framed as a benefit to Sellers, the program serves Amazon’s interests by enhancing its marketplace’s appeal to price-conscious consumers – a demographic likely to grow significantly amid economic pressures such as inflation and higher tariffs.

However, let’s not forget that third-party Sellers will ultimately gravitate toward platforms that attract consumers, making Amazon’s efforts as much about retaining customer trust as Seller satisfaction.

Reactions from industry observers suggest cautious optimism. Observers like Eva Hart from Jungle Scout have praised Amazon’s decision as a “welcomed pivot toward easing seller costs.” In contrast, others, such as Tyler Wallis of TripleLine, have urged Sellers to seize this opportunity for strategic planning.

Summary

Amazon’s 2025 fee strategy for third-party Sellers reflects a carefully orchestrated effort to ensure continued growth and self-preservation rather than altruism. The freeze and accompanying incentives are less about easing Seller burdens and more about aligning Sellers’ efforts with Amazon’s strategic goals. As rivals like Temu gain traction despite the launch of Amazon Haul, Amazon’s latest move underscores its reliance on a model that shifts the operational and financial pressures onto Sellers while safeguarding its margins and market share. For many Sellers, though, the freeze offers a momentary reprieve that allows them to shift focus from managing costs to seizing opportunities for new growth.

The peak holiday season is the most critical time for e-commerce businesses due to spikes in order volumes, high consumer expectations, and operational complexities. Proactively forecasting with clients, planning logistics needs, and supporting technologies are essential for effectively navigating this high-stakes period. The risk of losing clients due to operational issues that lead to late shipments, late deliveries, and damaged shipments is high.

2024 Important Dates

With Thanksgiving falling on November 28th this year (which is the latest it can fall relative to Christmas), the 2024 holiday shopping season is the shortest that it can be for shoppers who don’t start browsing or buying until November 29th.

Daily shipment volumes can increase by 1,000% or more in ‘normal’ years, placing significant strain on fulfillment operations. However, some will see even higher spikes in demand this year due to the unusually late Thanksgiving Day. So, the shipping deadlines below will feel tighter this year as carrier network capacity is constrained to fewer days. Thus, 3PLs will want to be more proactive in preparing for fulfillment this year (i.e. advancing ship dates as early as possible).

Carrier Published Shipping Deadlines to Ensure Delivery on or Before Christmas Eve

Carrier / Service	Contiguous U.S. (lower 48 states)	Alaska, Hawaii, International, Military
USPS Ground Advantage	December 18	usps.com/holiday/holiday-shipping-dates.htm
USPS Priority Mail	December 19
USPS Priority Mail Express	December 21
UPS 3 Day Select	December 19	ups.com/ctc
UPS 2nd Day Air	December 20
UPS Next Day Air	December 23
FedEx Ground Economy	December 13	fedex.com/en-us/holiday/last-days-to-ship.html
FedEx Express Saver	December 19
FedEx 2Day & 2Day AM	December 20
FedEx SameDay	December 24

Strategic Demand Analysis, Forecasting, and Marketing Execution

Accurate forecasting is the foundation of successful holiday operations. Working with clients proactively to assess year-over-year sales increase expectations will be key (especially if any big spikes are expected from special promotions or sales such as Good Morning America Deals & Steals). Collaborating with clients well in advance to secure early inbound shipment creation and delivery, including any specialty items such as inserts or branded packaging materials, is critical to prevent stockouts and canceled orders, which impacts all three parties negatively (Sellers, Customers, and 3PLs).

Investing the time (well in advance) to learn about the timing of client promotions and the configuration and accurate put away of new SKUs, new bundles and/or kits SKUs, multi-packs, etc., can help increase fulfillment workflow efficiency.

Optimizing Fulfillment and Logistics

Meeting increased demand during the holiday season requires a well-structured fulfillment strategy. Partnering with third parties such as Cahoot can augment a 3PLs existing operational capacity and benefit their clients by offering distributed inventory options that reduce transit times, lower transportation costs, and increase nationwide on-time delivery reliability. Cahoot’s advanced tools and infrastructure enable 3PLs to rapidly increase scalability to support their growth targets while taking advantage of shipping carrier discounts that can become new profit centers. Likewise, 3PLs can join the Cahoot fulfillment network and create a new revenue stream by fulfilling orders for Cahoot clients.

Transparency and Communication

3PLs should transparently communicate inbound receiving deadlines and blackout dates, including inventory prep and work order (e.g., FBA Prep), and plan to have the staff available to get new inventory inbounded and fulfillment ready by Monday, November 25^th. Get containers, FTL, and LTL tracking info and ensure clients send updates on estimated delivery dates on time. Communicate emergency contact info expectations clearly and well in advance.

Leveraging Technology

Leveling up tech stacks is critical to maintaining efficiency during peak periods and earning customer trust, which can lead to long-term mutual success. Warehouse Management Systems streamline and optimize the movement of goods within a warehouse, ensuring efficient and cost-effective inventory management by tracking its location, quantity, and movement throughout the receiving, storage, picking, packing, and shipping workflows, ultimately enabling overall warehouse productivity and fulfillment accuracy.

Scalable solutions are essential to handle the dramatic increase in holiday orders. Investments in automation, such as robotic picking systems or conveyor technologies, improve efficiency and accuracy. Implementing simple scan verification and next-generation shipping software into the fulfillment workflow achieves a similar result without considerable capital expense.

Elevating the Customer Experience

Third-party Logistics providers work for the merchants but ultimately answer to the end customer.  It’s the customer experience that the merchants are paying for. Beyond just retention of the client, providing an exceptional on-time shipping and delivery experience can result in growth for merchants, which benefits their fulfillment providers by way of volume growth—offering real-time order tracking and flexible shipping options results in a high degree of transparency that decreases the customer support burden. Lastly, supporting personalized packaging, including eco-friendly options, branded unboxing experiences, and thoughtful details like gift notes and/or sample products during the fulfillment workflow can leave a lasting impression on customers that increases their lifetime value, which again, trickles down to the fulfillment partner in the form of increased revenue.

A bad experience related to a time-sensitive order can push customers away. Include enough dunnage (void fill) to prevent damage in transit. Ship with the proper hazmat designation so orders are not returned to Sender (and this also ensures that carrier accounts are kept in good standing). Create international shipments for validated addresses using the correct HTS Code, goods description, and compliance per each destination country’s regulatory requirements. Get organized and hand over packages to the correct carriers, another source for potential delays, not to mention the reputation risk for the client/brand.

Preparing Customer Support Teams

The holiday season places heightened demands on 3PL customer service. Merchants are busy supporting their customers, increasing the support required by the fulfillment partner. Expanding support teams and equipping them with the tools and training needed enables quicker, more accurate resolution of inquiries. Comprehensive Help Center self-service content and automated chat solutions provide additional support layers, ensuring seamless communication using the customer’s desired outreach method.

Managing Returns Effectively

Returns rates during the holiday season can approach 30%, a revenue opportunity for fulfillment partners. Establishing an efficient returns processing workflow with clear and easily understandable guidelines is critical to the overall strategy as it reduces client frustration and customer support inquiries. Advanced returns processing and restocking inventory systems minimize revenue losses and improve operational efficiency.

Contingency Planning for Unforeseen Challenges

Even with thorough preparation, unexpected challenges such as extreme weather or carrier delays can arise, negatively impacting a client’s performance metrics and/or customer experience. Flexible contingency plans, including diversified carrier options and alternative fulfillment strategies (such as partnering with a solution provider that supports distributed fulfillment as discussed above), ensure continued operations during local disruptions.

Prepare hardware such as shipping label printers well in advance by cleaning printer heads to avoid blurry barcodes that will be returned to sender or delay delivery. Stock plenty of label paper, thermal transfer ribbon, and the like. Consider procuring backup printers, barcode scanners, and packing slip pouches for international customs documents.

Converting Challenges into Strategic Wins

Peak season preparation should begin months in advance. Early steps include finalizing demand forecasts with clients, optimizing inventory positioning, hiring seasonal labor to match the anticipated demand, and testing technical solutions for peak performance. Training teams and conducting trial runs of fulfillment processes help identify and address potential issues before order volumes surge. Maintaining clear communication with all stakeholders and monitoring performance metrics ensures a smooth operation.

The holiday season presents a unique opportunity to demonstrate operational excellence and build lasting client relationships. By focusing on strategic planning, leveraging technology, and prioritizing the customer experience, third-party fulfillment partners can transform the challenges of peak season into a powerful growth opportunity. The most successful organizations approach this period with adaptability, innovation, and a commitment to excellence.

Offer 1-day and 2-day shipping at ground rates or less.

Related Blog Posts

The U.S. Consumer Product Safety Commission (CPSC) has recently taken decisive action against Amazon regarding hazardous products sold through its platform. In a unanimous decision, the CPSC ruled that Amazon is a “distributor” under the Consumer Product Safety Act (CPSA), thereby making it legally responsible for defective and/or dangerous items sold by third-party Sellers via its Fulfilled by Amazon (FBA) service. Amazon must notify purchasers and the public about the hazards, offer refunds or replacements, and take remedial actions to remove the dangerous products from consumers’ homes (recalls).

This ruling affects over 400,000 potentially dangerous products, including malfunctioning carbon monoxide detectors, unsafe hairdryers, and children’s sleepwear, violating flammability standards.

What it Means for Third-Party (3P) Sellers

Amazon will not want to be held responsible for any damages caused by products fulfilled by FBA nor the subsequent lawsuits and claims filed against them. So we expect a mass cleansing of the product catalog, which can be deleterious for Sellers of such products. Still, this shift could benefit Sellers who already comply with safety regulations, as non-compliant competitors might face removal, improving the marketplace’s overall safety, trustworthiness, and profitability. However, it also means that getting new products vetted and approved for sale on the marketplace could get more complicated and time-consuming. Carriers such as UPS, FedEx, and USPS have issued new and updated guidelines on hazmat shipping.

The Rub

If a Seller’s products are unsafe, Amazon may swiftly remove them from the marketplace and halt sales. The enforcement of such policies could hurt third-party Sellers who might unknowingly sell non-compliant products, leading to loss of revenue and damaged reputation.

Amazon already has an Unsuitable Inventory Policy that aims to crack down on items considered unsafe, illegal, or otherwise unsuitable for sale on the Amazon platform to protect customers’ safety and maintain trust. This new action by the CPSC is a natural extension of Amazon’s existing philosophy, but making it mandatory rather than simply accepting that Amazon’s self-imposed and self-regulated policy is sufficient to protect consumers from dangerous goods. The Unsuitable Inventory Policy has recently impacted hundreds, possibly thousands of FBA Sellers. Seller Accounts have been deactivated, and Amazon seized and/or disposed of much of the inventory, taking a guilty-until proven-innocent approach. Without the inventory in hand, these Sellers aren’t able to sell on non-Amazon channels, effectively destroying businesses. For Sellers knowingly violating the FBA policies, that’s the risk they took. For Sellers forced into insolvency through no fault of their own, it’s scary to appreciate how much power Amazon has and how little recourse Sellers have.

Seller Agreements Will Need to Evolve

Sellers will likely receive more explicit guidelines on product safety requirements and recall procedures, ensuring they know exactly what standards they must meet to avoid penalties or product removal.

Perhaps more importantly, Amazon may raise fees for storage, fulfillment, and compliance management to offset the cost of stricter safety oversight. Sellers using the FBA service could see higher operating costs as Amazon enforces more rigorous processes. Smaller Sellers might struggle with the increased compliance costs and operational burdens, potentially risking their livelihoods.

Have a Plan to Mitigate Risk

To be unequivocally trusted by consumers and avoid unscrupulous activity, Amazon has historically taken a shoot-first and ask-questions-later approach to anything that could damage its customer relationship. This allows Amazon to arrest harmful activity while investigating situations and resolutions implemented.

While a reasonable strategy for consumers, it can be brutal to the business health of brands and resellers selling compliant products. However, it is unfairly included in adverse actions taken by Amazon. To ensure business continuity, Sellers should have alternative fulfillment strategies in place, even if dormant, that can help mitigate these risks. This new ruling does not govern seller-fulfilled orders because Amazon is not the ‘distributor’ for non-FBA fulfillments.

One example would be to have the warehouse infrastructure, inventory, and staff available that can take over the fulfillment of Amazon orders in a pinch (it is this author’s opinion that ALL Amazon 3P Sellers should be selling FBM, Fulfilled by Merchant, aka MFN, Merchant Fulfillment Network because it increases sales by increasing discoverability of products).

If in-house operations are not feasible, partner with a highly rated 3PL or 4PL to quickly ramp up Amazon FBM fulfillment. Third-party logistics companies can often receive inventory faster than FBA and cost less, besides having far fewer hassles. 

If the Prime badge is important, partner with a fulfillment services provider that can support the Seller Fulfilled Prime (SFP) Fulfillment Program.

Consumer Protection is the Focus

The decision is rooted in consumer safety and aims to prevent dangerous products from reaching consumers, but it also establishes Amazon’s accountability to help remediate the situation when they do.

And while this new ruling signals a shift toward greater scrutiny of online marketplaces and their role in ensuring product safety, it’s also a wake-up call for all Amazon Sellers. It’s not just about avoiding penalties—protecting your customers and building a sustainable, trustworthy business and brand.