Online shopping has made it easier than ever for customers to make a purchase or request a refund, but that convenience may come at a cost to retailers. Nearly one in four e-commerce purchases now gets returned, leaving brands with rising shipping costs and inventory stuck in limbo. When you add tariffs and slowing consumer spending into the mix, every return cuts deeper into already thinning margins.
With economic uncertainty and tariff volatility, flat growth has become a win for many retailers. To get back to profitable growth, brands need to use their data with focus on margins and long-term customer value.
Flat Growth Changes How Brands Should View Lifetime Value
As growth slows and return rates increase, lifetime value (LTV) becomes more important than ever. A customer who returns frequently can end up draining profit rather than adding to it. On the other hand, customers who keep purchasing and come back to buy again can bring more stability to a brand’s margins.
It’s important to remember that the most valuable customers may not always be the ones who purchase the most items or units. Brands can gain a more holistic view of their customers by understanding behaviors of those who stay loyal and have fewer costly returns.
Using first-party analytics, brands can pinpoint how high LTV customers differ from those that cut into margins. Identifying these groups, their attributes, and behaviors allows brands to acquire and retain more customers who will add value.
First-Party Data Reveals Loyalty vs. Return Risk
Brands already own their most valuable marketing asset: first-party data. Patterns in product and persona pairings can reveal which items build loyalty and which send customers straight to the return label. Retailers can refine merchandising decisions, adjust campaigns, and allocate ad spend more effectively by analyzing those patterns. Not only will it optimize profitability and reduce returns, but it can improve the overall customer experience.
KPIs That Matter in a High-Return Environment
Revenue alone doesn’t tell the whole story. Leaders should pay close attention to four areas when it comes to maximizing profitability.
- Return rate by product SKUs or categories. Understand which drive losses and which products may not be worth continued investment.
- Lifetime value after returns reveals true customer profitability once acquisition costs, refunds, reshipping, and support costs are factored in.
- Repeat purchase rate based on products purchased and persona shows whether customers are satisfied enough to come back and is an early indicator of LTV.
- Purchase history can help pinpoint which types of products a customer is and is not likely to purchase and keep. Additionally, market basket analysis can be used to analyze whether some products perform better as a pair and can be bundled.
When tracked together, these KPIs highlight where growth is sticking and where margin is leaking. Teams may find that products and campaigns with strong top-line performance eat heavily into margins once returns are accounted for. Addressing those issues can highlight the true contribution margin and create more value than chasing the next short-term lift in sales.
With the right metrics in place, brands can move from measuring return risk to actively lowering it.
Campaign Optimization Makes Returns Less Likely
Personalization powered by first-party data gives retailers a clear edge. Customers who are most likely to return certain products should not be served ads that highlight them. By identifying those who show preference for certain product categories, brands can identify customers less likely to return those products.
Campaign optimization is about connecting the right products to the right audiences in the right way, and at the right time. Additionally, guiding customers to better sizes or variants reduces returns, protects margins, and maintains brand loyalty. Over time, these tactics not only lower returns but also raise customer lifetime value.
Lowering return rates through personalization and creative optimization is only part of the solution. Loss prevention, merchandising, and marketing teams need democratized access to the data to align on where problems are happening.
Aligning Loss Prevention with Merchandising and Marketing
With returns come operational errors, which can negatively impact loss prevention teams. Products can get lost in transit, never returned, or a number of other factors. Loss prevention teams hold valuable insight that strengthens customer outcomes when shared upstream—like return reasons, claim patterns, and SKUs that drive outsized costs.
Marketing can then redirect spend from those products and toward items with lower return risk and higher repeat purchase rates. Regular reviews and access to shared data and analytics across LP, merchandising, and marketing keep everyone aligned, identifying what to fix and what to retire.
Collaboration also creates the guardrails needed to stop policy abuse before it erodes profit. Bracketing patterns, repeated “item not received” claims, cross-channel return mismatches, and unusually high return rates from specific cohorts all point to abuse that needs closer monitoring. Simple checks such as tracking abuse rate, claim frequency per household, and address risk score make it easier to tighten policies for chronic offenders while keeping loyal customers friction free.
Profitability Over Volume
Customer growth without profit no longer works in a market where costs keep rising. The brands that win will protect margin and deepen relationships with customers who bring strong LTV. Coordination between marketing, product, and loss prevention teams lowers returns, extends customer lifetime value, and builds a healthier business.
Leaders in retail and loss prevention can drive change by pushing for better use of customer data and a sharper view of returns across the business.
Cary Lawrence, CEO of Decile, helps consumer brands rethink their approach by using first-party data to actively reduce returns and optimize for long-term profitability.
