Addressing Return Opportunities Across the Retail Journey

The retail industry faces an increasingly complex returns challenge that impacts both operational efficiency and bottom-line profitability. With online return rates averaging 15.2 percent – triple the rate of in-store purchases – and returns accounting for $743 billion in lost sales in the US alone last year, retailers need innovative solutions to address this growing challenge while maintaining customer satisfaction and loyalty.

The Returns Paradox: Building Customer Loyalty While Managing Costs

What makes the returns challenge particularly complex is its connection to customer loyalty. Research shows that high-value customers, representing the top 20 percent of a retailer’s customer base, return approximately $253 worth of merchandise annually. In contrast, the bottom 1 percent only return about $11 worth of goods per year. This presents retailers with a delicate balance: how to reduce costly returns while preserving the positive experience that drives future purchases.

The stakes are high, and the challenge is multifaceted. While legitimate returns are a crucial part of the customer experience – with seven out of ten consumers making additional purchases following a positive return experience – the growing threat of returns fraud has become a significant concern for retailers. Returns fraud and abuse now accounts for $13.70 in losses for every $100 in returned merchandise, totaling $101 billion annually. This fraudulent activity takes various forms, from wardrobing (wearing and returning) to receipt fraud and return of stolen merchandise, creating a complex web of challenges that retailers must navigate while maintaining customer-friendly return policies.

Return Optimization Through Innovation

At AWS, we’re helping retailers prevent returns before they happen through innovative technology solutions that enhance the shopping experience. Below we highlight a few examples where AWS and AWS Partners can help retailers re-imagine their shopping and return process end-to-end.

Product Information Enhancement
The quality of product information dramatically influences return rates. Using Amazon Bedrock, retailers can create detailed, accurate product descriptions that set proper expectations. Beyond basic descriptions, AWS Partners like Hexa and Threedium can help retailers create enhanced product imagery and 3D visualizations. AI-powered review summaries highlight key information about fit and quality, while improved size charts provide actual measurements rather than generic sizing. This comprehensive approach to product information helps shoppers make more confident purchasing decisions, and according to Convertcart, 87 percent feel product content is most important when deciding to purchase an item online.

The Very Group’s success story illustrates the tangible benefits of AWS solutions in transforming online shopping experiences. Using AI-powered technology, they streamlined their product content creation process from days to hours, enabling rapid scaling across their entire product catalog. This investment in enhanced product descriptions and size recommendations helps their shoppers make more confident buying decisions with detailed, accurate information. With better informed shopping, customers like The Very Group can realize fewer size-related returns and higher customer satisfaction rates. This experience shows how smart application of AI technology can simultaneously address operational efficiency and the costly challenge of retail returns

Generative AI is also transforming how customers interact with product information through intelligent shopping assistants. Amazon’s recent launch of Rufus, an AI-powered shopping assistant, demonstrates the potential of this technology. These AI assistants can understand and respond to complex shopping queries, comparing products, explaining features, and offering personalized recommendations based on the customer’s specific needs. For instance, a customer might ask, “What’s the difference between these two running shoes?” or “Which dress would be better for a summer wedding?” The AI assistant can analyze product details, customer reviews, and historical data to provide comprehensive, contextual answers.

Figure 1 – Improving the Shopping Experience to Help Reduce Returns

Retailers can now leverage Amazon Bedrock or AWS Solution Guidance to create their own AI shopping assistants that understand their unique product catalog and brand voice. These AI powered tools can help customers navigate large product selections, understand size and fit nuances, and make better-informed purchase decisions.

Virtual Try On: The Future of Retail
The intersection of artificial intelligence and augmented reality is revolutionizing the online shopping experience, bringing the personalized touch of in-store assistance to digital platforms. These sophisticated systems go far beyond simple product recommendations. By analyzing customer preferences, purchase history, and real-time browsing behavior, virtual stylists can provide truly personalized style recommendations. They offer detailed guidance on sizing and fit, create complete outfit suggestions, and even guide customers through measurement processes, creating a shopping experience that rivals, and in some cases surpasses, in-store assistance.

A standout feature in this new landscape of virtual shopping is Virtual Try On (VTO) technology. Amazon, leveraging its vast experience in e-commerce and cutting-edge AWS technology, has been a pioneer in this space. The Amazon Shopping app now offers VTO for shoes, allowing customers to see how footwear looks on their feet from multiple angles, simply by pointing their smartphone camera at their feet. This technology isn’t limited to footwear. Amazon’s AR-powered “L’Oreal Makeup” and “L’Oreal Hair Color” services allow customers to virtually try on makeup and hair colors before making a purchase. Retail customers can also leverage VTO technologies from partners like Threedium.

Figure 2 – Amazon Virtual Try On

One of the most significant challenges in fashion retail is fit-related returns, accounting for 50 percent of all returns. Working with partners like Bodd, AWS helps retailers implement sophisticated 3D Sizing & Scanning devices in store that allow shoppers to get their right fit when they want it. AWS Partner Realift also helps footware retailers provide “Find your shoe size with a quick scan”.

Figure 3 – AWS Partner Bodd 3D Sizing & Scanning In-Store

The potential of these technologies extends beyond fashion and beauty. Furniture retailers are using similar AR technologies to allow customers to visualize how items will look in their homes, dramatically reducing returns due to size or style mismatches.

The impact of these technologies on the shopping experience and return rates is significant. Early adopters of VTO technology have reported:

• Up to 40 percent reduction in return rates for products with VTO options
• 25 percent increase in conversion rates for items with virtual try-on capabilities

Post-Purchase: Optimizing the Returns Process with Data-Driven Strategies
While prevention is crucial, managing returns effectively when they do occur is equally important. AWS and our partners offer comprehensive solutions for returns management that start with smart authorization systems. These systems use data-driven insights to implement tiered return policies that identify and manage serial returners while protecting valued customers. Working with 3PL partners and leveraging AWS IoT and machine learning services, retailers can optimize returns routing decisions and automate much of the inspection and sorting process. Partners like Xemelgo provide specialized solutions for returns tracking and analytics powered by Radio-Frequency Identification (RFID) technologies, helping retailers improve recovery rates on returned merchandise while reducing processing costs and time.

Figure 4 – AWS Partner Xemelgo leveraging RFID Solutions for Inventory & Return Tracking

The key to long-term returns management success lies in data analytics. AWS analytics and machine learning services help retailers understand return patterns at a deeper level, identifying high-risk products and categories while predicting return probability. This information allows retailers to adjust marketing strategies for high-risk customers and optimize pricing and promotion strategies to reduce return likelihood. Using AWS analytics services like Amazon QuickSight and Amazon SageMaker, retailers can uncover patterns that might otherwise remain hidden. The power of data extends beyond product-level insights. Through AWS’s machine learning capabilities, retailers can:

• Predict return probability at the time of purchase
• Identify correlations between marketing campaigns and return rates
• Understand the lifetime value impact of different return experiences
• Track the effectiveness of return reduction initiatives

As retailers collect more data and AI capabilities continue to advance, the potential for intelligent returns management grows. Emerging technologies like computer vision for automated quality inspection and predictive analytics for return forecasting are already showing promising results in early adoptions. The key to success lies in combining these technological capabilities with a customer-centric approach. Retailers must use data not just to reduce returns, but to create better shopping experiences that naturally lead to fewer returns. This might mean adjusting product development based on return patterns, customer data, and refining marketing strategies to better match products with customers, or implementing more sophisticated size and fit recommendations.

By leveraging AWS’s comprehensive suite of analytics and machine learning services, retailers can transform their returns management from a reactive cost center into a proactive driver of customer satisfaction and profitability. The future of retail returns lies not just in processing them more efficiently, but in using data to prevent them while maintaining the flexible, customer-friendly policies that drive loyalty and repeat purchases.

Building a Better Returns Future

Success in managing returns requires a comprehensive approach that balances prevention with efficient processing. Retailers should focus on three key areas: prevention through better product information and sizing tools, optimized processing through automation and smart routing, and continuous improvement through data analytics. The results can be transformative. Retailers implementing these solutions have seen return rates drop by up to 30 percent in certain categories, while maintaining or improving customer satisfaction scores. With 92 percent of shoppers likely to buy again after an easy return experience, investing in the right solutions is crucial for long-term success.

As we look to the future, technology will continue to play an increasingly important role in balancing cost control with customer experience. The most successful retailers will be those who embrace these innovations while maintaining focus on customer satisfaction and loyalty.

To learn how AWS can help transform your returns management strategy, contact your AWS account team or visit aws.amazon.com/retail.

About AWS Partners

AWS Partners form the cornerstone for innovation that AWS customers need. Whether you build, buy, or need a combination, there’s an AWS Partner who can help. Here is a list of the AWS Partners featured in this blog:

• Hexa can create high-fidelity 3D Assets for eCommerce, augmented reality, virtual try-on, and more.
• Threedium provides an AI-powered 3D Commerce infrastructure enabling brands or agencies to launch real-time 3D high fidelity Product Experiences with Immersive Ad Formats while tracking behavioral patterns.
• Bodd specializes in 3D body scanning technology and data insights, capturing a comprehensive set of body data in a short 30-60 second scan, which can be used to help reduce returns with more accurate apparel fit measurements.
• Realift uses machine learning to help reduce footwear returns by using an innovative and fast scanning process, ensuring shoppers receive a personalized fit recommendation on footwear product pages.
• Xemelgo provides a platform that works for both Smart Manufacturing and Modern Retail by leveraging the now-ubiquitous use of RFID technology to track products throughout the supply chain.

You can find more resources in the AWS Marketplace and the AWS Solutions Library.