Big brands are starting to automate their returns processes. Are you?

Retail giant Next has recently introduced automated self-scanning lockers for customer returns in response to the rising cost of hiring new staff.

But beyond labour costs, the move reflects a wider shift across the retail sector, where ecommerce businesses are under pressure to process returns faster than ever before.

As a result, many retailers are investing in automated returns platforms, self-service portals, and AI-powered fraud detection tools to improve efficiency, reduce refund losses, and maintain customer loyalty at the same time.

Why manual returns are becoming unsuitable for online stores

While Next’s new self-scanning lockers were introduced to cut back on staffing costs, manual returns have become one of the biggest operational and profitability challenges for smaller ecommerce stores.

Statistics from Clickpost reveal that online stores face a return rate of nearly 30%, compared to just 8.89% for physical shops. Naturally, this high number has come with significant burdens for ecommerce retailers.

In particular, the average time to process a manual return ticket is over 20 minutes, which can add up significantly for businesses with a large number of return orders. 

Businesses are also taking a financial hit from returns as well, as processing a single return can cost around 30% of the item’s original price after all operating expenses. For example, an ecommerce brand shipping 5,000 orders each month with a 20% return rate and an average handling cost of £12 per return would spend roughly £12,000 every month managing returns alone.

As a result, three quarters of UK businesses – including big names like Zara, ASOS and H&M – now charge return fees of around £2-£4 to help offset rising logistics, processing, and restocking costs that come with high return volumes.

What are the benefits and risks of automated return systems?

Automated returns are designed to streamline the product and exchange process for ecommerce businesses. Through a specialised software, they can automatically approve return requests, generate shipping labels, and issue refunds based on pre-set policies.

Unsurprisingly, this kind of technology is expected to become more common in ecommerce over the next few years, with 60% of UK retailers expected to automate these kinds of tasks with artificial intelligence (AI) by 2035. 

For businesses, automated returns come with several advantages. This includes cutting back on time to process refunds, fewer labour costs, and a smooth customer experience through a 24/7 self-service portal. 

Some tools can also use smart prompts to offer customer exchanges or store credit before a refund is approved, and gather data on why products are being returned (like wrong size, colour not the same as online, etc.) to help businesses find any systemic product quality issues or change product descriptions to minimise returns in the future. 

That said, it does come with risks as well, particularly with the rise of refund abuse from fake AI-generated receipts. With AI-manipulated documents now accounting for over 20% of false evidence for refund and chargeback disputes, an automated system may not know the difference between a fake and genuine receipt, thus risking the likelihood of fraudulent returns.

Additionally, as automated systems instantly approve returns based on tracking scans rather than physical inspection, there’s more risk of fraudsters mailing back empty boxes or counterfeit items. Over-relying on automation also means losing the “human touch” that comes with good customer service, particularly with three-quarters of UK consumers preferring human support.

How ecommerce businesses can use automated returns effectively

As return volumes continue to rise – as well as customer expectations for fast service – using automated returns effectively can help streamline the returns process and maintain customer loyalty.

To start, businesses should audit their current returns policy to determine whether it’s easy to find, clearly written, and aligned with actual operations. 

From there, implementing a low-cost automated returns platform – such as Loop Returns and Shopify Returns – that encourages customers to choose store credit or exchanges over cash refunds can help retailers retain revenue, protect short-term cash flow, and create a faster and more convenient returns experience for shoppers.

Moreover, businesses can reduce logistics costs by automatically charging return shipping for low-margin items, offering paperless QR-code returns, routing returns to the nearest warehouse, or preventing unnecessary returns for very low-cost products by issuing a “keep the item” refund.

In terms of tackling potential refund abuse, businesses should stop relying on just uploaded receipts as proof of purchase. Instead, they should verify purchases directly against order IDs, payment records, customer accounts, and shipping data stored in your ecommerce platform or Enterprise Resource Planning (ERP). 

AI-powered fraud detection tools like Ravelin and Wyllo can also analyse behavioural signals and metadata to identify any suspicious return activity, detect fake receipts, or flag high-risk customer accounts.

Put together, these measures can protect your profit margins, minimise fraud risk, and turn the returns process from a costly administrative burden to a more efficient and customer-friendly part of the online shopping experience.