In 2018, roughly half of Australian retailers offered free returns. By 2025 the figure had fallen to about one in seven.
That is not a gentle drift. It is a collapse, and it happened while ecommerce volumes were growing. Something in the arithmetic stopped working.
What returns actually cost
Australian return rates run at roughly ten to thirty per cent depending on category. Apparel sits near the top, because size and fit cannot be resolved before purchase. Electronics, toys, cosmetics and homewares cluster in the middle.
A ten per cent return rate on a hundred orders is ten parcels a month coming back. At thirty per cent it is thirty. The number that matters is not the percentage — it is what happens to each of those parcels after it arrives.
Published Australian ranges put returns processing at roughly $3.00 to $8.00 per returned item. That covers receiving, inspection, grading and either restocking or setting aside. It does not cover the return postage, and it does not cover the original outbound postage, which you have already paid and will not get back.
So a returned $60 order that cost $9.50 to ship out and $8.00 to process has consumed close to $18 before you consider whether the item can be sold again. If you also paid for the return leg, add that.
The costs that never make it onto a spreadsheet
Three of them, and they are the reason the free-returns model broke.
Warehouse space held by stock you cannot sell. A returned item that is damaged, opened, or out of season occupies a location. It is counted, moved and stored like sellable stock, and it earns nothing while it sits there. In apparel, seasonal returns arriving after a range has ended are effectively dead on arrival.
Staff time that arrives in waves. Returns do not spread themselves evenly. They cluster after peak, and they arrive as a queue of individual decisions — is this resellable, is it the right item, is the packaging intact. That is slower and more error-prone than picking, and it lands exactly when everyone is already tired.
The margin nobody attributes. Returns cost is usually recorded against fulfilment rather than against the products or channels generating it. A category returning at thirty per cent can look profitable in a report while quietly subsidising itself from everything else.
The January and February problem
Returns peak after Christmas. The sharpest rises in Australia come from fashion, electronics, toys, cosmetics and homewares — which is to say, most of what people give as gifts.
The timing is the difficulty. December is your highest outbound volume, so January arrives with the largest possible pool of orders eligible to come back. You are processing the returns of your busiest month during the month your revenue drops.
Anyone planning capacity on average monthly volume will be short in January. It is worth planning that period on its own numbers rather than on the annual average.
What to do instead of free returns
Removing free returns is not the only option, and for some brands it is the wrong one — a paid return can cost you the second purchase as well as the first.
The more useful levers:
Reduce the returns you can prevent. A meaningful share of returns are avoidable: wrong size, wrong expectation, wrong item picked. Detailed sizing guidance, honest photography and accurate measurements do more for your returns rate than any policy change. So does getting the pick right the first time — a wrong item is a return you caused.
Price the return into the product, not the policy. If your category returns at twenty-five per cent, that cost exists whether or not you name it. Building it into pricing is more durable than a free-returns promise you may have to withdraw later.
Set a window you can actually staff. A generous return window that arrives as an unmanageable January queue serves nobody. A shorter, clearly stated window is easier to honour well.
Grade returns consistently. The difference between "resellable" and "not" needs to be a standard rather than a judgement call that varies by who is on shift. Inconsistent grading is how good stock gets written off and how damaged stock gets sent to a customer.
Know your true return rate by SKU. An overall figure hides the problem. Usually a small number of SKUs generate a disproportionate share, and they are fixable individually — a sizing note, a better photograph, or discontinuing the line.
What this means if you outsource
Returns are where fulfilment providers differ most, and where the quote tells you least.
Worth asking directly: what is the per-item returns charge, and what does it include? Who decides whether an item is resellable, and against what standard? How quickly is returned stock made available to sell again — same day, or when someone gets to it? And what happens to items graded unsellable: are they held, returned to you, or disposed of, and who pays for the space in the meantime?
The last one catches people out. Unsellable returns can accumulate in a warehouse for months, billed as storage, while nobody has decided what to do with them.
Where we sit
We are a fulfilment provider, so read this accordingly.
Returns are processed against a written grading standard rather than a case-by-case judgement, and returned stock that passes grading goes back into the sellable count rather than waiting for a batch. How returns are handled sets out the actual steps, including what happens to items that fail grading.
If you want to see the cost lines rather than read about them, the calculator includes returns processing at published Australian market ranges, so you can put your own return rate against it before anyone quotes you.