What: Faced with rising costs from fraudulent returns, retailers are tightening policies, but new AI-driven tools in 2025 enable tailored approaches that protect margins while maintaining customer satisfaction.

Why it is important: Strict return policies risk alienating loyal customers, but AI technologies offer a solution by identifying and rewarding trustworthy shoppers while curbing abuse, allowing retailers to sustain long-term loyalty and profitability.

As online retail stabilises post-Covid, the once-generous return policies that drove customer loyalty are now a financial burden due to widespread abuse, often amplified by dark web forums and fraud kits. Retailers have responded with stricter measures, such as shorter return periods, return fees, or offering credits instead of refunds, but these changes frustrate loyal customers and risk damaging long-term relationships. In 2025, advanced AI technologies are emerging as a viable alternative, enabling retailers to adopt personalised return policies.

These systems analyse customer behaviours to reward dependable shoppers with flexible return options while limiting abusive behaviour. Collaborative platforms further integrate insights across teams, optimising customer experience and fraud prevention simultaneously. Retailers who embrace these innovations can deliver a seamless, trust-based experience for loyal customers while safeguarding profitability and protecting against abuse.

IADS Notes: As reported in January 2024, US retailers faced USD 743 billion in merchandise returns, with online purchases showing a significantly higher return rate of 17.6%. By December 2024, this figure had escalated to USD 890 billion, demonstrating the rapid growth of the problem. The trend is particularly concerning given that September 2024 data revealed that 39% of consumers return online purchases monthly, with each return costing retailers USD 25-30. These findings underscore the urgency of implementing sophisticated, AI-driven solutions to manage returns while maintaining customer loyalty.

The returns and refunds saga: how can retailers regain control?