How to Cut Returns Costs

Returns are a costly problem that you can't afford to ignore.

They eat into profits, frustrate customers, and complicate operations.

According to the National Retail Federation (NRF), in 2023 alone, retail returns cost the industry a staggering $743 billion—about 14.5% of all retail sales—and if nothing changes, margins are projected to drop another 8% by 2025.

And with the holiday season just around the corner, your returns are set to skyrocket.

So, what can you do to minimize the impact of returns on your bottom line?

To explore this, I spoke with Sylvia Ng, CEO of ReturnBear, an end-to-end ecommerce returns platform for brands selling across borders, and former GM at Shopify. 

Drawing from her extensive experience leading e-commerce initiatives, Sylvia shared invaluable insights on how to not only cut costs but also turn returns into a profit center.

Table of Contents:

• Breaking down cost drivers

• Four strategies to reduce costs

• Transform returns into revenue

• How ReturnBear does it

• Case Study: Mint Green Group

• Action Plan: Get started today

Let’s dive in 👇

Connect with ReturnBear here to see their demo in action.

Breaking Down Cost Drivers

To reduce returns costs, you first need to understand what’s driving them. 

Sylvia broke down the major culprits:

• Transportation Costs: According to Sylvia, shipping items back is one of the most visible—and costly—parts of the returns process. Shipping a returned item can cost anywhere from $21 to $46, with international returns climbing even higher due to customs duties and special handling fees.

• Labor Costs: Returns involve a lot of manual steps—inspecting items, processing refunds, and restocking inventory. These labor costs add up quickly without the right systems in place.

• Support Costs: Sylvia called support costs "invisible"—handling inquiries, updating customers, and managing disputes can drain resources if your process isn’t streamlined. Sylvia noted, "Support costs can be quite high. Your internal teams need to talk to end consumers, give them visibility, and discuss return policies—this adds up."

• Fraudulent Returns: And then there’s fraud. Without proper validation systems, fraudulent returns can slip through, costing retailers millions. "Validating items at the point closest to the consumer ensures we prevent fraud, reduce unnecessary logistics, and save a lot of hidden costs," Sylvia said.

Understanding these cost drivers is the first step to creating an effective returns strategy.

Strategies to Reduce Costs

Now that you know where the costs come from, how do you tackle them?

Sylvia shared four key strategies:

1. Verify Returns Close to the Customer

One of Sylvia’s most impactful pieces of advice: validate returns as close to the customer as possible. 

“We validate items to ensure they meet return criteria, preventing both fraud and unnecessary logistics,” she said. This means fewer products enter the system unnecessarily, saving both money and resources.

This approach also helps cut fraud at the source.

2. Consolidate Returns to Optimize Costs

Consolidation is another powerful cost-saving strategy—grouping returns at different stages to reduce costs.

For example, ReturnBear uses a two-level consolidation model, where returns are first grouped at local return points and then at regional hubs before heading to the central warehouse. Sylvia explained, “We consolidate not just at the return points but also at the hubs themselves—adding as many layers of consolidation as possible to reduce costs.”

Rather than managing multiple small shipments, consolidating returns into fewer, larger shipments reduces transportation frequency and overall shipping costs—especially for cross-border returns.

3. Reduce Return Distance

Reducing the distance that returns need to travel is another key strategy.

Imagine a customer in California returning an item that needs to travel all the way to New York. Not only does this delay restocking, but it also raises transport costs. Instead, consider keeping items at regional hubs. "Reducing the distance that these return goods need to go is very important, especially for cross-border. Less shipping back saves time and cuts costs significantly," Sylvia said.

Instead of directing all returns to a central warehouse, consider a strategy where items stay closer to the point of return. 

4. Reduce Returns in the First Place

Finally, Sylvia mentioned perhaps the most effective way to cut returns costs - stop returns from happening in the first place!

Sylvia shared a few strategies for doing this:

• Accurate Product Descriptions: Clear product pages help reduce returns by setting accurate expectations.

• Encourage Responsible Purchasing: Use incentives like discounts or loyalty points to discourage returns.

• Use Technology: Tools like AI-driven sizing assistance can help prevent issues like incorrect fit.

• Leverage Return Data: Track return reasons closely to identify patterns and use this data to improve product quality. For example, if a shirt is frequently returned due to a faulty zipper, share this feedback with your manufacturer to resolve the issue and reduce future returns.

Transform Returns Into Revenue

Returns don’t have to be a burden—they can become a powerful revenue driver when managed properly. 

While my conversation with Sylvia focused on cutting costs, she stressed that optimizing the returns process isn’t just about cost reduction; it’s about profit optimization. "A lot of people think of returns as a cost reduction thing. I see it as a profit optimization equation," she said.

Here are some strategies Sylvia shared to turn returns into profit:

1. Restock Quickly

Speed is key. The faster you get returned items back into inventory, the more revenue you can capture. Keeping items in a local hub rather than shipping them across the country can extend your selling season by months. “If you get your returns back fast enough that it's still within your selling season, it is pure profit,” Sylvia noted.

2. Leverage Secondary Markets

Not all returned items can be resold at full value, but they’re not worthless either. Tap into secondary markets for refurbished goods to generate profit from items that are out of season or have minor issues.

3. Sell to Eco-conscious Customers

Refurbishing returned items not only reduces waste but also attracts eco-conscious customers. “It's a brand driver to say that we are for sustainability. Refurbishing can create new profit avenues while attracting environmentally conscious consumers,” Sylvia pointed out.

4. Cross-Sell and Upsell

Returns are also an opportunity to boost sales. Offer incentives like discount codes or store credits at the point of return. This helps turn a negative experience into a positive one—and creates new revenue opportunities

5. Turn Data Into Revenue

The data collected during the returns process is invaluable. Analyzing why items are returned can help you refine product offerings, adjust marketing strategies, and improve sizing or product descriptions. "If done properly, optimizing the returns process is a longer-term investment, but it becomes a significant revenue driver," Sylvia explained.

How ReturnBear does it

Given the strategies Sylvia mentioned, I was curious to understand how ReturnBear implements them.

​​Sylvia said that building an efficient returns experience goes beyond just software. "We are pixels and parcels. You can only solve so much with software in a real-world problem like returns."

That’s why ReturnBear is building an ​​end-to-end ecommerce returns platform for brands selling across borders. They provide both the software and logistics required to streamline the entire returns process.

Key features of their platform include:

• A Nationwide Return Point Network: ReturnBear operates a coast-to-coast network of return points in Canada, allowing for package-free, label-free returns. They process ​​returns instantly, providing exchanges, store credits, or refunds in just 90 seconds.

• Regional Consolidation Centers: ReturnBear consolidates returns at specialized centers, where items are inspected, repacked, and quality-checked. This centralization enables batch shipments, reducing costs and ensuring faster, consistent processing.

• Cross-Border Logistics: ReturnBear manages cross-border returns by providing customs-ready labels and rate shopping to minimize costs. 

• Micro Fulfillment: Their micro-forward fulfillment model redistributes items locally, reducing shipping distances and accelerating resale.

• Flexible Returns & Automated Processing: ReturnBear offers multiple return methods—from drop-offs to mail-ins—integrated into a single portal. AI-powered assessment determines the most efficient routing, whether for refund, resale, or recycling, and automates processing to speed up recovery.

Case Study: Mint Green Group

Sylvia also shared how Mint Green Group partnered with ReturnBear to manage the entire returns process for Palladium Boots.

The Challenge: Mint Green Group ships across Canada from Quebec. With returns traveling across the country, they saw an opportunity to  increase resale opportunities, especially with seasonal products like boots and sandals.

The Solution: With ReturnBear’s platform, Mint Green Group enabled:

• Instant Refunds: Customers receive instant refunds at local return points.

• Extended Selling Season: Instead of shipping items across the country, Mint Green Group trialed micro forward fulfillment. Returns are processed back to inventory locally and forward fulflilled to the next local customer—extending the selling season by two months.

As a result, Mint Green Group not only cut their logistics costs but also turned their returns into a profit driver, capturing sales they previously lost.

Manny Alamwala, Director of Ecommerce at Mint Green Group, shared the impact: “That first order was a great example showing the value of the program. It was for a sandal in a size that we didn't have in-stock. If we waited for the next return batch to our warehouse, then it being received back into stock, and back on the site - sandal season is nearly done.Instead we got that sale now.”

Action Plan: Get Started Today

If you’re looking to transform your returns process, here’s how you can start today:

• Identify Cost Drivers: Break down expenses in transportation, labor, support, and fraud. Set reduction targets for each.

• Verify Returns : Verify returns as close to the customer as possible.. This cuts shipping costs and fraud.

• Consolidate Returns: Adopt a multi-tier strategy for consolidation—local points, regional hubs, then central. This approach reduces transportation costs.

• Leverage Technology: Use AI to automate condition assessment and streamline restocking. Integrate returns with inventory systems for real-time updates.

• Reduce Return Volumes: Provide accurate product information, offer incentives for fewer returns, and use fit technology to prevent sizing issues.

• Consider Outsourcing: If returns management is overwhelming, partner with a returns specialist like ReturnBear. It can free you up to focus on core business operations.

In summary, returns are here to stay—but they don’t have to be a burden. 

With the right approach—validating early, consolidating smartly, and keeping items close to customers—you can turn returns from a cost centre into a revenue opportunity.

PS: Do you have any questions for Sylvia? Reach out to me at [email protected] and I can pass it on.