UK brands and retailers are jeopardizing customer loyalty by failing to prioritize exchanges as part of their returns strategy in UK retail. According to a recent report from Loop Returns, a staggering 78% of returns culminate in refunds, underscoring the need for a more effective approach.
The “Loop Returns 2025 State of Ecommerce Returns Report” reveals that while returns are a common challenge across the board, their effects in the UK are particularly pronounced. With a return rate of 17.5%, the UK nearly doubles that of the US at 11% and Australia at 10.9%. Furthermore, UK merchants experience a refund ratio of 78.1%, indicating that the majority of returned products do not contribute to the brand’s bottom line. Alarmingly, the uptake of exchanges in the UK stands at just 5.8%, the lowest among all regions, while the US and Australia show exchange rates of 17.1% and 13.2%, respectively. This translates to a revenue retention rate of merely 21.9% for UK merchants, compared to 23.9% in the US and 45% in Australia, highlighting a critical loss of long-term customer loyalty.
Additionally, the financial burden of returns significantly impacts profit margins in the UK, even though the average return cost is relatively low at £5.70 ($7.05). This places the financial responsibilities largely on the brands themselves. Approximately two-thirds (66.1%) of merchants now implement return fees, and this strategy, contrary to expectations, appears to positively influence customer loyalty.
“Ecommerce is evolving rapidly, and consumers are gravitating towards brands that understand their needs. Such brands are leveraging data effectively to enhance their operations. They proactively provide recommendations, streamline the return and exchange processes, and improve overall customer service,” stated John-David Klausner, GM International at Loop.
“The statistics in this report illustrate the significant revenue potential for brands that invest in the often-overlooked aspects of their ecommerce operations. These are the areas that customers tend to notice the most.”
The report addresses the broader landscape for ecommerce in 2025, where factors such as tariff shocks, inflation, and heightened customer expectations compel brands to reevaluate every element of the post-purchase journey.
In this challenging market, UK merchants particularly need to transition from refund-heavy practices to exchange-focused strategies that foster customer retention and loyalty. It is evident that the prevailing returns strategy in UK retail must shift to better meet customer expectations and enhance satisfaction.
Globally, the report indicates that businesses adopting more sophisticated returns management are already witnessing tangible benefits by utilizing return data to refine their product development and marketing efforts. On average, brands can retain an additional £100,000 in revenue annually by enhancing their returns processes. In 2025 alone, Loop merchants collectively saved over £381.7 million in revenue through various post-purchase improvements, which included shortening return periods, personalizing returns policies, and promoting exchanges.
As brands contend with economic fluctuations and increasing consumer scrutiny, the report emphasizes that achieving excellence in the returns strategy in UK retail has become a vital competitive advantage, rather than merely an operational necessity.
