E-commerce has transformed how we shop, with retailers continuously expanding online offerings and delivery options to meet evolving consumer preferences. Yet as digital shopping becomes more sophisticated, one persistent challenge threatens to undermine its efficiency: returns.

According to CapitalOne Shopping, the average return rate for e-commerce purchases last year was 26.4%. It rose 7.22% from 2022, while in-store returns fell nearly 20%. This disparity has significant financial implications, with the National Retail Federation reporting that retailers lost $101 billion last year in returns abuse and fraud alone.

Retailers need to reimagine the exchange economy to meet consumers’ needs without sacrificing revenue. This isn’t just another incremental improvement in retail logistics. It’s a fundamental shift in how retailers and consumers think about the post-purchase experience. Instead of the traditional “buy-return-refund” cycle that has dominated e-commerce, we’re moving toward an “exchange-first” model that prioritizes getting customers the right product over processing returns. A driver could deliver the right item while picking up the one a customer wants to send back.

The shift makes intuitive sense. CapitalOne Shopping reports that 58% of online shoppers already routinely purchase multiple sizes of the same item, planning to return those that don’t fit. Rather than treating this behavior as a problem to be solved, forward-thinking retailers can embrace it as an opportunity to reimagine the entire customer journey. The result is a new paradigm that promises to reduce costs, enhance customer satisfaction, and create more sustainable retail operations.

As we look ahead to 2025, the exchange economy isn’t just coming — it’s already taking shape, driven by evolving consumer expectations, technological capabilities, and economic imperatives. 

A Perfect Storm

While e-commerce has grown into an industry set to surpass $6 trillion in sales this year, we have yet to solve the world of returning orders. Retail dynamics are changing, which makes 2025 a critical turning point in getting it right. 

For starters, the traditional direct-to-consumer playbook is being rewritten. What began as a wave of online-only retailers has evolved into a complex hybrid model, with many brands opening physical locations to better manage returns. Yet this stopgap solution highlights a deeper truth: The future of retail requires rethinking the entire post-purchase experience, not just where it happens.

The economics are also reaching a tipping point. While retailers have long absorbed return costs as a necessary evil of e-commerce, the combination of rising shipping costs, increasing labor expenses and growing return rates, is making the current model unsustainable. The exchange economy offers a path to transform these costs into opportunities — turning what was once a pure expense into a chance for customer retention and additional sales.

Technology and logistics capabilities have finally caught up to consumer expectations. New routing algorithms and consolidated delivery models make it possible to coordinate exchanges in ways that weren’t economically viable even a few years ago. What once required separate pickup and delivery transactions can now be combined into efficient, orchestrated operations. Once the exchange has been initiated, technology like Happy Returns can help determine whether the initial product should go back on the shelf, to a secondary supplier or another location.

The Economics and Operations of Exchange

At its core, the exchange economy transforms what was traditionally a two-part process — a return followed by a new purchase — into a single, coordinated transaction. While a standard return involves multiple touchpoints, separate transactions, and redundant shipping costs, an exchange can combine these elements into a streamlined operation.

Unlike initial purchases, where rapid delivery often drives consumer satisfaction, exchanges can operate on a more flexible timeline. This shift in expectations opens up new possibilities for operational efficiency.

Different product categories present varying levels of complexity. Apparel and footwear, with their high return rates and standardized sizing, best fit this model. Oversized items like furniture and appliances introduce additional complexities but also greater opportunities for cost savings through coordinated exchanges.

Rather than immediately processing refunds and losing sales, retailers can maintain revenue within their ecosystem while reducing transaction costs. A shift from refunds to exchanges could fundamentally change retail economics.

How to Make It Work

As retailers look toward 2025, the path forward will largely depend on their product mix and market sector. What works for an apparel retailer won’t necessarily work for a furniture company, but there are multiple ways to approach the exchange economy.

Rethinking pickup logistics is a crucial first step. Instead of sending drivers on one-off return pickups, retailers should consider establishing designated pickup days in specific areas, to dramatically reduce the cost per return while improving efficiency. This approach can make a big difference in rural communities that may be otherwise underserved. Not every return needs to happen immediately, and customers are often willing to wait a few days for a pickup if it means avoiding a trip to the store or shipping center. This flexibility opens up opportunities for more efficient routing and better use of delivery resources.

The financial side needs attention, too. While many retailers currently default to immediate refunds, offering store credit for returns — maybe with a bonus discount to incentivize adding other items to an order — could help maintain revenue while encouraging customers to find the right product rather than just returning items.

Different products will need different approaches. Clothes and shoes might work well with consolidated pickup routes, while couches and big-screen TVs could benefit from coordinated delivery-and-pickup exchanges. The key is matching the strategy to the product category rather than forcing everything into the same model.

This isn’t something retailers need to figure out alone. As the economics of e-commerce continue to evolve, logistics partners can provide the infrastructure and expertise needed to make the exchange economy both manageable and cost-effective.

Returns don’t have to be retail’s billion-dollar headache. The exchange economy offers a practical path forward — one that acknowledges how people actually shop online and builds solutions around that reality. For retailers willing to rethink their approach, 2025’s challenges could become opportunities.

Dennis Moon is chief operating officer at Roadie.