In 2024, U.S. retailers faced a staggering $890 billion in returned merchandise, accounting for approximately 16.9% of total retail sales (NRF 2024). While many retailers still view returns as a cost center, the truth is that returns are a vast value reservoir waiting to be tapped.  For retailers facing inflation uncertainties – rising costs, shrinking margins, unpredictable tariffs, and consumer expectations – returns management is more than a back-office function—it’s a critical lever for financial resilience and customer retention.

The Inflation Effect

Inflation drives up costs across the board—production, salaries, logistics, and warehousing.  Traditional cost-cutting tactics can only go so far, especially when consumer expectations remain high. Retailers need to be more strategic, and one of the most overlooked opportunities lies in a forward-thinking returns management plan.

An efficient returns management platform that combines automation, data-driven decision-making can support margin protection and customer satisfaction. By viewing returns through the lens of opportunity, not just expense, retailers can turn every return into a revenue opportunity.

Rethinking the Returns Effect

Returns touch every corner of the retail business: cash flow, customer experience, inventory levels, and logistical impact. Instead of treating returns as a drain, retailers should view them as an uncertain economic buffer and optimize accordingly.

Here are three areas where a smart returns strategy makes a meaningful difference:

1. Cost and MarginManagement

Returns are expensive and, according to Parcel Magazine, processing often eats up 20% to 39% of an item’s value due to inspection, repackaging, and write-offs. These costs can be mitigated with intelligent return routing, early assessment of non-resellable items, and resale on secondary marketplaces.

Strategies to consider:

·       Automate return approvals to minimize manual processing

·       Use dynamic routing to send returns to the most cost-effective or highest-value location

·       Flag non-resellable items early to reduce unnecessary transport

·       Resell through appropriate secondary channels to recapture value

Optimizing the return path from the point of initiation through refurbishment and resale helps protect margins, especially when procurement costs are unpredictable due to inflation and tariffs.

2. The CustomerExperience

When budgets are tight, shoppers become more cautious and trust brands that provide them with great service. With significant shifts in consumer behaviour and the retail industry’s approach to handling returns, retailers have greater insight into how a poor returns experience can negatively impact the customer experience. As noted in ReturnPro’s 2025 Insider’s Guide forRetail Returns, 76% of consumers consider free returns a key factor in their purchasing decisions, prompting retailers to refine their returns strategies.

Refinements include:

·       Offering self-service returns portals with real-time tracking

·       Establishing trusted customers and “keep it” policies, giving customers instant credit and/or customized return options

·       Integrating return processes seamlessly into existing eCommerce platforms and branded environments

Integrating innovations in returns technology and consumer insight reduces friction and improves brand perception, which is vital when winning and retaining customers during economic volatility.

3. InventoryOptimization and Resale

Let’s state the obvious: “Returned products represent a substantial inventory reserve.” Return products are not waste, they are inventory waiting to be optimized. Imagine the billions of dollars in returns sitting in warehouses waiting to be sorted, dispositioned, refurbished, and resold. Every day, this happens, and every day, those items lose more value.  

Effective returns management can:

·       Improve inventory turnover by reselling “Like New”or “Open Box” items

·       Reintegrate eligible items into sellable inventory within days, not weeks

·       Reduce storage costs by speeding up inspection and getting items out the door faster

·       Identify common return reasons to inform future purchasing and product development decisions

·       Lower reliance on newmarket-impacted inventory by maximizing existing assets

Every day that returned inventory sits in a warehouse, its value declines. Fast reintegration and resale are essential advantages when inflation raises the cost of every new SKU.

Real-World Impact

Consider a retailer that implemented a forward-thinking, AI-powered returns management system, reducing processing time by 30%. This efficiency can lead to:

• Cost savings through reduced handling and warehousing
• Improved customer satisfaction via faster, more transparent return processes
• Financial gains through refurbishment and secondary market sales

By treating returns as an extension of the supply chain rather than an isolated loss center, these businesses are not only weathering the market, they’re gaining competitive ground.

From Cost Sink to Strategic Lever

As inflation continues to challenge traditional retail models, every efficiency counts. Retailers can’t afford to leave billions in returned inventory idle or billions more in savings and customer goodwill untapped.

Retailers can buffer against inflation and sharpen their competitive edge by:

• Protecting profit margins through smarter returns routing and automation
• Building customer loyalty with seamless return experiences
• Creating value through refurbished inventory

Returns management turns a supply chain burden into a source of operational agility, customer insight, and financial efficiency.

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