For many apparel retailers, sales numbers are only half the story. The other half is the cost of returns. While returns are part of doing business in fashion, especially with the rise of e-commerce, the true impact on profitability can be staggering.
Why Returns Hurt More in Apparel
Apparel is one of the most returned categories in retail. According to The National Retail Federation (NRF), the overall retail return rate in 2023 totaled $743 billion, representing about 14.5% of all U.S. retail sales.
Online return rates climb to 17.6%, while brick-and-mortar averages around 10%.
But, when it comes to return rates in clothing and footwear, they often exceed 20% to 30%, far higher than electronics or home goods, according to the Financial Times.
Several factors drive this:
Fit and sizing issues: Every brand has its own interpretation of “medium” or “size 8.”
Consumer behavior: Shoppers often order multiple sizes or colors with the intent to return most of them.
Impulse and occasion buying: Fashion is emotional. Purchases for events or trends may be sent back once the moment passes.
The True Cost of Returns
Returns are far more expensive than the refund itself. Retailers must consider:
– Reverse logistics: Shipping, handling, and processing can cost two to three times more than outbound shipping.
– Labor and inspection: Each garment must be checked for damage, re-tagged, and re-shelved—or marked as unsellable.
– Inventory depreciation: Fashion moves fast. By the time an item is returned, it may already be out of season, forcing markdowns.
– Shrinkage: Not all returned items make it back into stock. Some are damaged, worn, or simply disappear in transit.
According to 2022 NRF data, returns cost apparel retailers $5 – $10 for every $100 in sales, eating directly into margins. For smaller retailers, where cash flow is tighter, this can mean the difference between profit and loss.
What’s more, e-commerce can make returns even costlier since customers can’t try on garments before purchasing, so they “bracket” orders (buying multiple options and sending back what doesn’t fit).
What Retailers Can Do
The cost of returns isn’t unavoidable. Smart retailers are finding ways to mitigate the damage:
Merchandising Strategies:
1. Prioritize Fit Accuracy
– Consistent sizing: Use standard size blocks and avoid irregular grading between styles. Inconsistent sizing is the #1 cause of returns (53% of apparel returns are size-related: Coresight Research.)
– Digital fit tools: Merchandisers can invest in AI-powered size recommendation engines or virtual try-ons that integrate into product pages.
2. Enhance Product Presentation
– Detailed imagery: Offer multiple high-resolution images (front, back, side, close-up) and on different body shapes. Many returns stem from “this doesn’t look like the photo.”
– Videos & 360° views: Showing garments in motion helps set realistic expectations for drape and fit.
– Accurate product descriptions: Be clear about fabric feel, weight, stretch, and care instructions—words like “oversized” or “slim fit” matter
3. Data-Driven Merchandising
– Analyze return data: Identify which SKUs have the highest return rates and look for patterns—fit issues, misleading photos, or quality complaints. Adjust buys and marketing accordingly.
– Size availability: Ensure the “core sizes” are always in stock—substitutions often lead to returns.
– Refine assortments: Scale back on products with historically high return rates (e.g., tricky fabrics, inconsistent sizing).
– Test and learn: Small-batch introductions before wide rollout reduce exposure to problematic products.
Other Strategies:
4. Flexible return policies – While leniency encourages purchases, structured policies (like shorter windows for occasion wear or restocking fees on high-return items) can balance the scales.
5. Resale and outlet strategies – Returned items that can’t go back to shelves may still generate revenue in secondary channels.
7. Partnering with Reverse Logistics Experts – Streamlines returns processing to reduce cost and speed recovery.
8. Training staff – In brick-and-mortar, well-trained associates can help customers find the right fit and reduce returns upfront.
Returns will always be part of the apparel business, but they don’t have to drain profitability. Retailers who take a proactive approach—investing in better fit solutions, smarter logistics, and customer education—can transform returns from a cost center into an opportunity to improve customer satisfaction and loyalty
