Author: Subhro Chakraborty, CRO at Locus
Online sales in the UK accounted for 29.4% of retail spending in June, their highest share since April 2021, as warm weather and promotions helped push retail sales volumes up 1%.
The shift means more parcels entering delivery networks and, in time, more products coming back through them. That growth carries a cost, and retailers are tightening their returns policies in an effort to contain it.
Boohoo, New Look, Next and H&M have all introduced return fees of £1.99–£2.50, and earlier this year ASOS went further, introducing an additional handling fee for its most frequent returners to £9.90. By discouraging unnecessary returns, retailers hope to reduce the number of parcels entering an expensive reverse logistics process.
For couriers, online sales growth creates parcel volumes moving in both directions. Return fees may reduce the number coming back, but they do not make each return cheaper to collect or process.
Those costs depend on how efficiently collections can be worked into existing routes and how quickly returned stock can move through the network.
The cost remains after the fee
Fees may reduce the total volume of returns, but they do little to change the cost of handling each one. Outbound supply chains have been optimised for decades, while reverse logistics still suffers from outdated systems and limited integration with fulfilment.
The proportion of shoppers identified as serial returners has fallen from 12% to 8% over the past year, reducing the forecast value of returns by £1.7 billion. Although significant, that figure reflects the value of returns avoided rather than a reduction in the cost of handling each item. Retailers and couriers still face the cost of moving every remaining return through the network and back into saleable stock.
Passing more of that cost to customers carries its own risk. Sizing inconsistencies also push online shoppers to order multiple sizes with the intention of returning what does not fit.
Analysis from Locus suggests that stricter return policies could put £34.1bn of annual UK retail spend at risk. Slow return-to-shelf cycles tie up working capital, delaying resale and increasing the likelihood of a markdown.
Reducing the cost of the journey back therefore matters as much as reducing the number of items entering it.
Managing returns as part of the delivery network
Managing returns starts with planning forward and reverse logistics together. Both depend on the same delivery network, yet returns are often managed as a separate process once the outbound journey is complete.
When a return enters the system as a standalone job, the courier may make an additional journey to an address already covered by a delivery route. Dynamic routing can compare the request with live orders and available capacity, adding the collection to a nearby run when practical. Within an agentic TMS, routine adjustments can be carried out according to rules set by the operator, while dispatchers handle the exceptions.
A return still has to be verified once it is collected. At the doorstep, the courier can photograph the item and have it checked against the seller’s catalogue image before the collection is accepted. Where the two do not match, the courier is told what differs, whether that is the colour, the design or a photo too unclear to judge. A mismatch caught at the door costs one conversation. The same mismatch caught at the warehouse costs a wasted collection, a return journey and a dispute to settle.
Where the item is confirmed, an accurate status passes to the warehouse. RFID tagging can then help move it towards inspection and back into inventory, reducing the time it remains unavailable for sale.
These changes lower the cost of returns that still happen and help retailers recover more value from the stock coming back.
A better fix than fees
Return fees may still have a role in discouraging habitual over-ordering, but they cannot compensate for a fragmented returns process.
For couriers, the opportunity lies in managing outbound and reverse parcels as part of the same live network. Retailers benefit when stock returns to sale more quickly, without adding friction that could cost them the customer’s next order.
As online retail takes a larger share of spending, returns will remain part of the parcel market. The task now is to make the journey back as efficient as the delivery.