UK online retailers lose revenue as returns outpace exchanges

A recent benchmark study has revealed significant trends in returns and exchanges among UK online retailers, highlighting challenges with customer retention and revenue loss.

The analysis, based on 13.8 million returns from over 4,000 Shopify merchants across the UK, US, Australia, New Zealand, and Europe, shows that UK retailers are experiencing the highest return rates and lowest exchange adoption globally. The findings come from Loop's 2025 State of Ecommerce Returns Report.

Return rates and revenue at risk

According to the report, the return rate for UK merchants stands at 17.5%, which is notably higher than the US rate of 11% and Australia's 10.9%. The data also reveals that 78.1% of returned value in the UK results in refunds, meaning much of the potential revenue is not retained by brands. In contrast, the refund ratio is marginally lower in the US (76.1%) and substantially lower in Australia (55%).

Exchange adoption in the UK is at 5.8%, the lowest of all surveyed regions, while the US and Australia report exchange rates of 17.1% and 13.2% respectively. As a result, UK retailers retain only 21.9% of revenue through exchanges or alternative return solutions, compared to 23.9% for the US and 45% for Australia. This indicates a particular struggle for UK merchants in maintaining long-term customer loyalty through existing returns strategies.

The impact of refund-heavy policies

Ecommerce is changing quickly, and customers are gravitating towards the brands who 'get them'. These brands are gathering data and using it to operate in a smarter way. They're proactively sharing recommendations to their customers, automating the return and exchange process, and making customer service more seamless,

said John-David Klausner, General Manager International at Loop.

The numbers in this report show the incredible revenue opportunities for brands that invest in the "boring" parts of their eCommerce businesses, which are really the parts that customers notice the most.

Return fees and processing costs

The report also covers the cost of returns, finding that UK merchants face lower average returns costs at GBP £5.70 (USD $7.05) per return. Around 66.1% of UK retailers now impose return fees, a proportion similar to the US (70.2%) and Australia (73.1%). Despite initial concerns, the implementation of return fees does not appear to harm customer loyalty.

Return processing times are also documented in the report, with the average time from return initiation to final processing standing at 9.97 days. The average UK return spends 3.96 days in transit, followed by an average of 6.31 days to final delivery, highlighting the operational expectations for merchants and customers alike.

Industry context and merchant strategies

The report sets the findings within the wider challenges of 2025's eCommerce environment, citing tariff changes, inflation, and rising customer expectations as factors forcing UK retailers to revise their post-purchase processes. With most return value lost through refunds, the report identifies an "urgent need" for brands to adopt exchange-first strategies and leverage returns data for customer retention and development.

Globally, some merchants have successfully reduced refund rates and increased retained revenue by adjusting return windows, customising policies, and actively promoting exchanges. The report estimates that, on average, brands optimising their processes are able to retain up to GBP £100,000 each year in revenue that would otherwise be lost. In the last year alone, Loop merchants collectively retained over GBP £381.7 million in revenue through post-purchase strategies including encouraging exchanges and shortening return timeframes.

The findings underline that excellence in the post-purchase phase can act as a competitive differentiator for merchants facing challenging economic circumstances and close consumer scrutiny.

Regional comparison and report methodology

The 2025 State of Ecommerce Returns Report is based on data collected from January to August 2025, covering more than 13.8 million returns by over 4,000 merchants in ten eCommerce categories. The UK and European section includes data from 183 UK brands and 84 from across mainland Europe. Return rates, refund ratios, and revenue retention were analysed by region, business size, and sector.

The findings draw attention to the need for UK merchants to address refund-heavy returns processes and explore exchange-first models, with evidence suggesting significant potential for improved customer retention and revenue.