From high cash-on-delivery (COD) return rates to tag-loop checks, brands across India are tightening the reins on customer returns to protect margins and maintain service integrity.
New Delhi: In India’s ever-competitive retail battlefield, where customer satisfaction often trumps profitability, a quiet but firm consensus is beginning to form: it’s time to get tough on returns.
With a growing number of brands reporting return rates that eat into their margins, the industry is waking up to the real cost of leniency. From digitally native direct-to-consumer (D2C) startups to legacy designer labels, fashion brands are now deploying data-driven strategies and stricter return protocols to combat mounting losses while trying not to alienate their most loyal customers, representatives of certain fashion brands told IndiaRetailing.
“The Indian market strongly values flexible return policies,” noted Anil Pradhan, Business Head at TechnoSport, a Tiruppur-based fashion brand. “But when a small percentage of customers begin abusing the system, it significantly impacts profitability.”
This balance between convenience and control is becoming increasingly delicate, and brands are forced to pick sides.
D2C brands tighten their grip
At TechnoSport, where return rates have now dropped to around 4% thanks to AI-powered monitoring systems, the shift is reactive and proactive. “We’ve implemented automation tools that flag high-risk accounts and identify return patterns. This helps us take necessary actions, like prompting with better size recommendations or limiting return eligibility,” Pradhan explained.
The problem is more acute at Mashroo, a Mumbai-based fashion brand. Junaid Khan, Co-Founder and Chief of Designs, revealed that COD returns account for nearly 60% of orders, compared to nearly zero for prepaid.
“Every returned COD order means losses on shipping, lost sales opportunity, and wasted effort,” Khan said. “It’s our biggest pain point.”
To address this, Mashroo has imposed a strict no-return, exchange-only policy, with clear communication around size or preference-based exchanges, for which customers must bear courier costs. It’s not always popular, Khan admitted, but it’s effective—especially when coupled with interventions like captcha verification, partial advances, and confirmation calls. These moves, he said, have had a marked impact in Tier 2 and Tier 3 cities.
Yet, Khan was sceptical about whether stricter policies could become the industry standard. “Many VC-funded brands are willing to absorb return losses just to scale quickly. So, while stricter norms would help, a collective shift feels unlikely in the near term.”
Harsh Somaiya, Co-Founder of The Bear House, shared a similar viewpoint but saw more immediate traction in balancing customer experience with operational efficiency. “As a brand with a strong marketplace presence, our overall return rate—including Return to Origin (RTO) and Return to Vendor (RTV)—stands at approximately 30%, which is significantly lower than comparable brands,” he said. “On our website, we’ve implemented an Rs 100 reverse logistics fee for returns. The response has been largely positive—customers appreciate the transparency, and we have seen a noticeable reduction in unnecessary returns without compromising satisfaction.”
The Bear House has also introduced ‘No Return’ tags and blocks COD orders from customers with a high return history, significantly reducing operational friction. “We do foresee a future where brands collectively adopt stricter policies to protect margins,” Somaiya noted. “But the key will be ensuring that policies remain transparent and customer-friendly.”
Made-to-order labels say ‘No more’
Some brands, however, have zero tolerance for returns—and for good reason. At Gargee Designers, a New Delhi-based menswear brand, where every outfit is made-to-order, returns don’t even feature in the business model.
“There is no option for cash-on-delivery. Production starts only after payment,” said Creative Director Ravi Gupta. “Even for modifications or exchanges, we absorb courier costs—because we believe in customer-first service.”
Gupta noted that this tight model ensures profitability and avoids inventory waste, a major issue with return-heavy brands. “Our stringent policy not only strengthens margins but enhances customer loyalty. Our clients understand the value of craftsmanship and rarely seek unwarranted changes.”
Looking at the broader industry, Gupta expects a paradigm shift. “Especially in designer and premium segments, we foresee a move towards zero-return norms. Even the ready-to-wear segment is questioning the sustainability of free returns.”
The Sportswear Challenge
For performance-driven categories like sports fashion, the stakes are arguably even higher. At Bengaluru-based sportswear brand Xtep India, where returns account for 6–8% of total revenue loss, Founder & CEO Vijay Chowdhary calls it “a growing operational and financial concern.”
“Online channels see returns of up to 14%, compared to just 2–3% in stores,” Chowdhary shared. “Delayed returns damage freshness, turning inventory into aged stock with reduced resale value.”
To tackle this, Xtep has implemented AI-powered sizing tools, shorter return windows, and a tag loop mechanism to prevent returns of worn items. For repeat offenders, store credits have replaced refunds, and return shipping charges apply beyond a set threshold. Yet, customer experience remains sacred. “We communicate transparently and focus on educating customers around sustainability and integrity,” he said. The approach is already paying off—Xtep reports an 18% reduction in returns over the last two quarters.
Chowdhary has also anticipated broader industry alignment. “We’ll likely see standardisation of return policies, especially in online retail, and flexible terms linked to loyalty. It’s about promoting responsible shopping without breaking trust.”
Returns as a retention lever
Chirag Taneja, Founder & CEO of GoKwik, a Delhi-based e-commerce enabler company, warned that Indian e-commerce brands could face revenue losses ranging between $20–30 billion by 2025 due to product returns. “Fashion and footwear sectors see returns soaring up to 30–35%, primarily due to size and fit issues,” Taneja said. While introducing penalties for frequent returners may deter abuse, Taneja believes it’s a double-edged sword. “Returns are part of the e-commerce experience—removing them altogether isn’t realistic.”
Instead, Taneja has suggested softer interventions like offering limited free returns, nudging shoppers toward exchanges, and converting refunds into store credits to retain customer loyalty. “Returns might seem like a problem on the surface, but they’re a high-stakes moment to build trust,” he added. “With the right mindset and systems, returns can shift from being a margin killer to a retention driver.”
Responsible retail
With razor-thin margins, rising logistics costs, and increasingly savvy customers, Indian brands can no longer afford to treat returns as an afterthought.
Whether it’s through AI-led moderation, exchange-only protocols, or made-to-order precision, the message is clear: returns must be controlled, not coddled.
Yet, this doesn’t mean abandoning empathy. “The key,” said Anil Pradhan of TechnoSport, “is finding a middle ground—one that protects margins while keeping the customer journey frictionless.”
