As the UK retail sector approaches another challenging Christmas trading period, UK retailers face a stark reality: falling discretionary sales, cautious consumers and a challenge from high-cost ecommerce returns.
Retail sales data from the crucial Christmas period indicated a drab finish to 2025, with total retail sales up only modestly and non-food sales declining, suggesting consumers were pinching pennies on everything from fashion to gadgets. According to the British Retail Consortium, UK retail sales grew by just 1.2% year-on-year in December, well below last year’s 3.2% growth, with non-food sales down 0.3% over the same period. Marks & Spencer’s fashion, home and beauty division reported total sales of £1.27bn in the 13 weeks to 27 December 2025, down around 2.5% year-on-year.
One structural issue stands out as both a threat and an opportunity: the way returns are handled. A new 2026 Global Ecommerce Retention Report from Loop, based on 23.4 million return transactions across more than 4,000 brands, reveals that returns don’t have to be an operational headache, they are a critical loyalty and revenue lever where UK retailers are trailing global peers and losing margin as a result.
The benchmarks show shifts in how returns are managed globally, with most brands moving beyond simple refund-first policies and experimenting with exchanges, credits and targeted incentives that retain revenue and encourage repeat purchasing.
The data from the Loop report shows that around 73.6% of global merchants now offer exchanges, and nearly half (49.2%) have adopted “Shop Now” options that allow shoppers to convert potential refunds into new purchases, often sweetened with bonus credits. More than half of those using Shop Now pair it with incentives averaging around £8.25 ($11.28), demonstrating how brands are actively steering customers toward outcomes that keep revenue in the business.
UK sports fashion brand, ThruDark treats returns as a loyalty signal, rewarding high-value customers when trust matters most. The premium British high-performance clothing brand, founded by former UK Special Forces operators Anthony “Staz” Stazicker and Louis Tinsley, offers refunds, store credit and exchanges, and waives return fees for its VIP customers. While it charges fees on standard refunds, it removes them for exchanges and store credit, encouraging customers to stay engaged with the brand. The result is a 48% repeat purchase rate, showing how a thoughtful returns strategy can directly support retention. ThruDark is not alone. Across the market, brands are increasingly using returns policies as a strategic lever, balancing customer experience with margin protection.
Another interesting point to note is how fraud and abuse are being tackled differently. Across all merchants, roughly 11.4% of return value is flagged as high-risk, with data-driven tools increasingly identifying abuse early in the process. Taking a proactive approach to fraud, rather than blanket restrictions, enables brands to keep flexible policies for legitimate shoppers while protecting margins.
What’s clear from the report is that returns are no longer a back-office afterthought; they’re a strategic pivot point for retention. Leading brands treat returns as a moment to reinforce loyalty, through exchanges, instant credits, transparent communication and flexible options that keep customers engaged. Meanwhile, UK retailers who cling to rigid, refund-only approaches risk not only shrinking margins, but also eroding customer loyalty just when repeat business matters most. Returns strategy may not be headline-grabbing, but in 2026 it’s shaping up to be one of the most important levers for sustainable ecommerce growth.
- Risk & Resilience