By Ellie-Rose Davies, Content Manager at IMRG
With consumers thinking more carefully about every purchase, retailers are under pressure to keep fulfilment costs under control without compromising the customer experience.
Increasingly, the focus is on preventing unnecessary costs in the first place, whether that’s helping customers choose the right product, encouraging more profitable basket sizes or improving delivery accuracy.
In this blog, we explore how retailers are reducing fulfilment costs by:
- Helping customers buy right the first time
- Using technology to improve purchase decisions
- Encouraging more profitable baskets
- Using data to prevent unnecessary costs
- Optimising fulfilment and delivery operations
Help customers buy right the first time
One of the biggest drivers of fulfilment costs isn’t delivery itself, but when a customer receives a product that wasn’t quite right in the first place.
Returns, exchanges and customer service enquiries all create additional operational costs, meaning every incorrect purchase has an impact that extends well beyond the original order.
For that reason, many retailers are shifting their attention towards the point of purchase.
Helping customers choose the right product first time not only improves the customer experience but can also reduce one of the largest avoidable costs within the fulfilment journey.
Aaron Stephens, Senior Vice President – Global Retail and Hospitality / Head of NA Market at PXP, believes retailers are often focusing on the wrong part of the returns process, explaining:
‘Retailers who treat returns purely as a logistics cost miss the opportunity to address the upstream decision that caused them.’
‘The most effective interventions happen at the point of purchase: accurate product information, realistic imagery, and size or fit guidance all reduce the likelihood of a mismatch that ends in a return.’
Aaron notes how ‘Free returns have conditioned shoppers to over-order and select out at home, and more retailers are now introducing conditional policies such as charging for postal returns, tightening windows on sale items, or restricting eligibility for high-frequency returners.’
He says: ‘Prevention is consistently cheaper than processing. This preventative approach extends beyond product information alone.
Rather than introducing blanket charges that risk frustrating customers, retailers are increasingly looking for ways to reduce avoidable returns while maintaining a positive post-purchase experience.
Reflecting this shift, fulfilmentcrowd has observed retailers taking a more strategic approach to returns, saying that ‘As post-purchase costs only trend upwards, many retailers are shifting towards prevention rather than correction.’
‘Cost-saving strategies aren’t necessarily about charging more for delivery or returns – which can damage conversion – but reducing the volume of avoidable returns or failed deliveries in the first place.’
fulfilmentcrowd are ‘seeing large brands like ASOS using returns data to identify behavioural patterns and create fairer, more sustainable returns policies across the board.’
‘Combined with tactics like free delivery thresholds to increase basket values, strategic approaches to sensitive areas such as returns help retailers protect margins while maintaining customer experiences that drive repeat purchases.’
Use technology to improve purchase decisions
Retailers are looking at how technology can support better purchasing decisions, giving shoppers greater confidence before they reach the checkout.
By removing uncertainty and providing more personalised guidance, brands can reduce unnecessary returns and limit costs.
As Will Newman, VP EMEA at Crescendo highlights, ‘For decades, customer support and commerce have been treated separately: one built to resolve issues, the other to drive revenue.’
‘But the moments that offer the greatest opportunity in the customer journey rarely happen during discovery or ad targeting. They happen in conversations, when the customer already has intent and is seeking help. These aren’t only support moments, but decision moments.’
Will reflects on how ‘Until now, no CX system has been built to capitalise on them. AI agents are changing that.’
‘By combining personalisation and memory with business context, an AI assistant can guide a customer to the products that genuinely fit their needs within a single conversation.’
Will says, ‘That doesn’t just protect conversion; it heads off one of the biggest drivers of post-purchase cost, the wrong product reaching the customer in the first place.’
‘With the AI insights and influence capabilities available today, costly returns can be averted proactively, helping brands cut fulfilment spend while still growing revenue.’
While AI is transforming how retailers guide purchasing decisions, many are also introducing practical tools that tackle common reasons for returns within specific product categories.
In health and beauty, for example, helping customers identify the right product before purchasing can have a significant impact on both customer satisfaction and operational costs.
Jessica Lawrence, Global Account Manager at Awin, highlights how retailers are reducing returns while simultaneously encouraging higher-value purchases.
Jessica describes how ‘One of the biggest drivers of returns in the health and beauty industry is mis-matched shades.’
‘Many multi-retailers are working to find solutions and a great example is Findation shade matching.’
‘Shoppers can enter a product and shade they already use to get a more accurate recommendation, which is helping set expectations and reduce unnecessary returns.’
‘On the basket side, retailers can also look at driving AOV through incentives such as gift cards or rewards via affiliate partners. When these are linked to completed purchases, customers only receive the reward if they keep their product.’
Jessica says, ‘This helps protect margin and encourage more considered purchase decisions overall.’
Encourage more profitable baskets
Retailers are also taking a closer look at how incentives influence purchasing behaviour.
Free delivery remains one of the most effective ways to encourage conversion, but many brands are moving away from blanket offers in favour of strategies that increase basket value while protecting profitability.
As Dan Bond, VP of Marketing at RevLifter encourages this approach, revealing ‘Free delivery thresholds are one of the most underused tools in a retailer’s margin toolkit.’
‘Set too low and you’re subsidising small baskets. Set them intelligently, relative to your actual average order value, and they become a reason for customers to spend more.’
Dan reflects on how ‘Stretch-based offers work on the same principle: show a shopper they’re £8 away from free delivery, and many will add another item to get there.’
‘The key is showing those nudges to the right people. High-intent shoppers don’t need the incentive. Targeting it at hesitant or low-basket visitors keeps fulfilment costs in check without blanket giveaways.’
Free delivery thresholds form part of a wider pricing and promotional strategy, and regularly reviewing how they compare against customer behaviour and competitor activity can help retailers avoid giving away margin unnecessarily.
As Hemang Nathwani, Sales Director at Price Trakker tells us, ‘One of the biggest opportunities for retailers is ensuring they are not giving away margin unnecessarily.’
‘Free delivery thresholds should be carefully reviewed against average order values and customer purchasing behaviour, rather than being treated as a fixed marketing tool.’
‘Clear product information, accurate stock visibility and realistic delivery expectations can also help reduce returns and failed deliveries.’
Hemang says ‘Retailers should regularly monitor competitor pricing and promotions to ensure they remain competitive without over-discounting.’
‘In a market where consumers are increasingly price conscious, protecting margin is just as important as driving conversion, and both need to be considered together.’
Together, Dan and Hemang explore how retailers are increasingly combining personalised shopping experiences with smarter promotional strategies to encourage more profitable purchasing decisions.
Use data to prevent unnecessary costs
Reducing fulfilment costs isn’t just about changing processes, it’s also about making better use of data.
From understanding customer intent to improving delivery accuracy, retailers are increasingly using insights to identify friction throughout the customer journey and make better decisions before costs arise.
For John Stewart, VP, Corporate Communications at Algolia, that starts with creating more intentional shopping journeys:
‘Retailers can’t cut their way to a great customer experience; they need to make every journey more intentional, says John.
‘Better search, discovery and relevance help shoppers find the right product faster, with clearer sizing, availability, delivery options and complementary recommendations that lift basket value naturally.’
‘That means fewer mis-buys, fewer returns, fewer failed fulfilment attempts and less margin lost after checkout.’
‘Free delivery thresholds should be dynamic and data-led, nudging customers toward genuinely useful additions rather than arbitrary spend.’
According to John, ‘When retailers match real intent with the right products and promises, they protect conversion while reducing the expensive friction that happens after purchase.’
Customer feedback can be just as valuable, helping retailers understand why purchases go wrong and where product information can be improved.
Romain Fouache, CEO at Akeneo, believes creating a continuous feedback loop between shoppers and product teams is key.
He says, ‘Retailers that look to protect margins are trying to cut fulfilment costs by understanding why customers make poor purchasing decisions in the first place.’
‘Customer feedback provides a valuable source of insight, helping retailers identify gaps, inaccuracies or inconsistencies in product information that can contribute to returns, exchanges and customer service enquiries.’
‘By creating a continuous feedback loop between shoppers and product teams, retailers can improve product experiences over time, to ensure that content reflects the questions and concerns customers actually have, particularly now that those customers have the power of AI search.’
Romain notes how ‘Rich, accurate and relevant product information not only increases conversion but also helps customers choose with confidence.’
Optimise fulfilment and delivery operations
While many opportunities to reduce fulfilment costs begin before checkout, operational decisions remain just as important.
From improving delivery accuracy to positioning inventory closer to demand, retailers are continuing to refine their fulfilment strategies to reduce unnecessary costs while maintaining the service levels customers expect.
For Barley Laing, UK Managing Director at Melissa, improving fulfilment starts with accurate customer data:
‘As part of an under pressure supply chain reducing fulfilment and delivery costs needs to be a top priority for retailers today.’
Barley says, ‘A good first step to achieve this is to have access to accurate customer contact data – particularly address data. Doing so helps to reduce fulfilment and delivery costs by supporting fast, accurate first-time deliveries.’
‘Also, having access to such data generates valuable insight for more personalised marketing activity, better upselling opportunities, and overall provides a standout customer experience.’
‘Once you have an accurate address this can be used to generate geocodes which enhance last-mile delivery efficiency, further reducing delays in delivery and costly returns.’
‘The key benefit of geocoding technology is that it provides latitude and longitude – rooftop level – coordinates, which is important when different properties may share an address, such as a plot of land or the street edge of a driveway.’
‘It enables retailers to plan the most efficient delivery routes, further supporting their efforts in speeding up fulfilment, delivery, and in avoiding costly failed deliveries.’
For retailers selling internationally, fulfilment efficiency also depends on where inventory is held.
With changes such as the EU customs reforms introduced on 1 July adding further complexity to cross-border trade, many retailers are reassessing how they position stock to balance delivery speed, cost and customer experience.
Reflecting this shift, Daphne Oldenburger, Product Manager Fulfilment (Europe) at Spring GDS, explains
“In cross-border eCommerce, balancing origin and destination fulfilment is becoming key to controlling post-purchase costs.’
‘Shipping from origin markets can simplify inventory and reduce upfront investment, but can lead to higher last-mile costs, longer delivery times and added customs friction.’
‘Positioning stock closer to demand through destination fulfilment can reduce these challenges, improving delivery reliability and customer confidence.’
This reflects findings from recent IMRG research, which explored how localisation strategies could help retailers reduce the impact of the new customs charges introduced on goods entering the EU.
Daphne shares that ‘For the right retailer profile and scale, value lies in the right mix.’
‘Increasingly, retailers are exploring hybrid models, using demand insights to place inventory more strategically, specifically across Europe, helping to protect margins while maintaining a consistent, high-quality international customer experience.’
Collectively, these examples demonstrate how operational decisions can reduce avoidable costs, improve delivery performance and strengthen the post-purchase experience without compromising customer expectations.
In summary
Reducing fulfilment costs is no longer just about finding efficiencies within logistics.
As this discussion has shown, retailers are increasingly taking a preventative approach, helping customers make better purchasing decisions, using data more effectively and refining fulfilment strategies to reduce unnecessary costs before they occur.
While no single tactic will deliver the answer, the common thread is clear:
The retailers best placed to protect both margin and customer experience will be those that view fulfilment as part of the wider customer journey, rather than simply what happens after checkout.
Want to read more? Here are some other recently published IMRG blogs:
How retailers can spot market opportunities before their competitors – IMRG
Ecommerce in H2: Forecasts and growth strategies – IMRG
The importance of moving retail from linear to circular supply chains – IMRG
IOSS and EU customs changes: Five action points retailers should consider before July 1st – IMRG
Product Discovery: Why reviews and trust matter more than ever – IMRG
Published 20/07/26
