More Australian retailers axe free returns after ‘reckoning’ of costs

Working for one of the world’s largest fast-fashion companies caused what Grace McClelland coins her “villain origin story”.

“That opened my eyes to the amount of over-consumption that was happening,” she said. It’s what pushed her to leave the industry and start creating content online about sustainable fashion. Like her, more Australian businesses are examining the poor shopping habits of their customers and trying to influence them for the better.

Grace McClelland said working for a fast-fashion company led to her making content about sustainable consumption.Credit: Steven Siewert

Data shows an increasing number of Australian retailers were unable to meet the cost of free returns and were axing the service, as well as deterring customers from “bracketing” – buying one item in a range of sizes, then returning those that don’t fit.

Data published this month from transport company Shippit found that 14 per cent of about 1617 Australian and 266 New Zealand retailers offer free returns – down from 49 per cent in 2018.

Australian Post’s eCommerce report for 2025 shows businesses were charging 30 per cent more for return shipping than the previous year. The postal service estimates 30 per cent of businesses offered paid-for returns, 15 per cent did not offer returns, and 34 per cent offered free returns.

Retailers’ free returns policies surged during the COVID-19 pandemic, as businesses competed for customers in a market dominated by online sales. With physical stores closed, customers could buy multiple sizes or variations of a single item and return anything that didn’t look good.

But a wake-up call came in 2023, according to Shippit chief executive Rob Hango-Zada.

“The cost of everything went up as everybody started to pass on the inflated cost of labour, petrol, rent ... and then we saw a bit of a reckoning where you saw businesses start to collapse,” Hango-Zada said.

Since then, businesses have found that free returns are financially unsustainable. In June 2023, high-profile online fashion retailer ASOS ended its years-long free returns policy in Australia. In the UK last week, ASOS started banning customers who repeatedly return large portions of their orders.

Some retailers allow free returns when customers drop off online purchases in a physical store.Credit: Dion Georgopoulos

But McClelland, whose videos on TikTok have gained popularity for promoting more sustainable consumption habits, said businesses could do more to mitigate the problem.

“I do think there needs to be a deterrent for those customers who are ‘repeat purchase and return’ customers … However, I do think as well that there should be some investment on the retail side into making sure that the product they’re selling is a product that customers actually want to keep,” she said.

More retailers could, for example, photograph clothes on models in a range of sizes.

“So consumers could then see, ‘OK, this is what it looks like on someone my size’, and then they can make a more informed decision about whether the product will look good on them.”

Other Australian brands try to incentivise shoppers to cover the costs of returns: Byron Bay-based sustainable clothing store Afends provides free returns when customers choose store credit instead of a refund. Others offer free returns for online purchases if the goods are dropped off at a physical store.

However, competition from Australian fashion retail giants The Iconic, David Jones and Myer, which offer free returns on all purchases, puts significant pressure on other retailers.

Australia Post e-commerce reports indicate that, overall, 65 per cent of shoppers value ‘friction-free’ returns, with this figure rising to 72 per cent for Gen Z and Millennial customers.

Ben Wapling, the head of marketing for sporting goods retailer Intersport, said the company was constantly trying to strike the right balance between costs and customer experience: “We want to reduce as many barriers as possible.”

He said the costs of returning products ranged between $7 and $11 an order.

“You’ve got to weigh that up, but you also weigh up the potential of the customer saying ‘oh look, it’s all a bit too hard, I’m not going to make a purchase’,” he said.

While Intersport manages to integrate all their stock back into inventories to be sold again, unless items have been damaged, some companies that offer free returns send brand-new goods to landfills because it’s cheaper.

A report published by charity Good360 last month found that 30 per cent of clothing bought online and returned in 2024 was sent to landfills instead of being resold.

Melbourne-based small business owner Imara Seneviratne said her passion for sustainability as a consumer bled into her business practices.

Seneviratne runs Adamo, which sells sustainably sourced tote bags. Adamo does require customers to cover the cost of returns if they’ve changed their mind, but not if the item is damaged.

“As both a consumer and a business owner, I’m just trying to find a balance, like making the experience fair and flexible but also encouraging people to buy less and choose better,” she said.

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