Why fulfillment & returns are the next frontier in loyalty

For more than a decade, retailers have invested heavily in building faster, more seamless online experiences. Search has improved. Checkouts have shortened. Omnichannel integration has strengthened. The objective has been clear: remove friction, increase conversion, and drive efficient digital growth. 

At the same time, fulfilment and returns have largely been optimised for efficiency - designed to reduce cost, minimise waste and protect margin. 

But as competition expands across marketplaces and international entrants, and customer switching becomes increasingly frictionless, retention has taken on renewed strategic importance. 

Increasingly, retention is influenced after checkout. 

Reliable delivery, seamless click-and-collect and fair return windows are no longer evaluated solely through the lens of operational efficiency. They are becoming deliberate drivers of loyalty - shaping trust, reducing hesitation and influencing whether a customer chooses to transact again. 

What was once treated primarily as operational infrastructure is now influencing customer preference and choice. In a market where acquisition investment must work harder, the economics of the last mile are increasingly intertwined with the economics of retention. 

Fulfilment can no longer be viewed solely as a cost centre to optimise. It is a defining layer of the customer experience - shaping repeat purchase behaviour and ultimately lifetime value. Leading retailers are beginning to treat the post-purchase experience not just as an operational function, but as a core component of loyalty strategy. 

Returns: from cost centre to retention engine 

Returns now sit at the centre of purchase decision-making. 

Multiple studies consistently show that ease of returns shapes future purchase behaviour, and that introducing return fees can materially reduce repurchase intent. 

At the same time, reverse logistics costs carry real financial weight. It is estimated that returns can cost upward of 20 to 30 percent of an item’s sale price once transport, handling, inspection and markdown risk are accounted for. 

In categories like fashion where return rates can frequently exceed 25 percent, the natural instinct to tighten policy is understandable as wastage erodes margin and ultimately places upward pressure on pricing. 

However, the strategic challenge is not whether returns should be controlled. It is how intelligently they are designed to deliver value to both the retailer in terms of loyalty from the customer and the shopper.  

Done well, returns policy becomes more than a safeguard for shoppers; it becomes a confidence mechanism that supports conversion and strengthens retention. 

Delivery & pick-up performance is a trust signal

In Australia, the challenge often associated with delivery is speed. Geography, infrastructure, and scale make same-day national fulfilment unrealistic for many businesses.

Yet speed is not the primary determinant of loyalty in many categories unless the customer needs the product immediately. Predictability is.

Peak parcel volumes continue to grow, with Australia Post delivering more than three million parcels on its busiest day last season. Yet broad delivery windows and inconsistent communication remain common friction points.

Uncertainty erodes trust faster than delay. 

Customers are more likely to forgive a longer but accurate delivery or pick up timeframe estimate than a missed promise. When fulfilment timeframes are vague, the perceived risk of transacting with the brand increases, even if the product itself meets expectations. 

Click and collect was originally positioned as a solution to this tension, offering convenience without the cost of home delivery. In theory, it gives customers immediacy and certainty without the associated delivery expense. In practice, however, execution often undermines the promise. Orders marked “ready” are not always available.

Inventory discrepancies create confusion. Store teams struggle to locate items efficiently and out of stocks create avoidable disappointment. 

These are not isolated operational issues. They are credibility gaps. When digital intent and physical execution are misaligned, customers reassess the brand’s reliability — reinforcing the earlier point that predictability, not speed alone, underpins trust. 

Retailers that tightly integrate store systems, inventory accuracy, and digital workflows consistently demonstrate stronger repeat behaviour. This is not a coincidence. When fulfilment performs as promised, perceived risk reduces and confidence improves over time. Fulfilment performance is no longer a background KPI. It is a visible expression of organisational competence. 

Retailers such as Anaconda demonstrate how tightly integrated store and online systems can support a stronger customer experience and improved repeat behaviour. Beyond simply showing whether a product is in stock or out of stock, Anaconda provides an indicator of stock depth - flagging items as either “available” or “low stock” to help manage expectations across fulfilment methods. 

Items marked “low stock” signal a heightened risk of sell-through and potential fulfilment constraints. For customers who need a product urgently, this level of transparency reduces uncertainty and supports more confident decision-making.  

Retaining revenue without disappointing the customer 

As last-mile optimisation accelerates, innovative solutions are emerging that allow retailers to issue refunds or exchanges more quickly - helping to retain revenue from the original transaction while improving the customer experience. 

Retailers such as VRG GRL reported a significant uplift in repurchase rates after implementing the Refundid platform, which enables instant exchanges and near-immediate refunds. By reducing the time lag between return initiation and replacement purchase, retailers minimise purchase disruption and keep customers engaged within their ecosystem. 

We are also seeing brands introduce incentives within the returns journey, to allow customers to opt for store credit rather than a cash refund. Retailers such as Princess Polly offer bonus credit on exchanges and store credit selections ($5), creating a small but meaningful reward for customers who remain within the brand. 

These approaches shift returns from being purely reactive cost events to structured retention mechanisms. When designed thoughtfully, the returns journey can reduce revenue leakage, protect margin and strengthen customer goodwill simultaneously.

Going beyond one size fits all

Perhaps the most significant blind spot in fulfillment and returns strategy is uniformity. 

Many retailers apply identical delivery and return policies across a highly segmented customer base. High-value, low-risk customers experience the same restrictions as first-time buyers or habitual returners. 

This approach is administratively simple but strategically blunt. 

Australian retailers hold increasingly sophisticated behavioural data through loyalty ecosystems and first party

data assets. Purchase frequency, category mix, return ratios, and lifetime value are measurable at individual levels. 

While some retailers embed free delivery into loyalty programs - either universally or for higher tiers - a far greater opportunity exists to differentiate the last-mile experience based on customer value and behaviour. 

High-value customers can receive enhanced delivery transparency, more flexible return windows, faster click and collect, or a defined number of complimentary returns per year. Higher-risk behaviour can be managed without penalising loyal cohorts. 

In a data-rich environment, blanket policy represents missed opportunity. 

The organisations that integrate loyalty data with fulfilment systems will create differentiated experiences that protect margin while strengthening retention. 

 Going beyond one size fits all

The next phase of competitive advantage will not come from incremental improvements to shipping speed or isolated policy changes. It will come from integration. 

Three structural shifts are emerging: 

First, replacing optimistic delivery and click and collect promises with data-informed precision using real-time inventory visibility and carrier performance analytics and clearer communication reduce the expectation gap that erodes trust. 

Second, connecting loyalty intelligence with fulfilment and returns systems. Customer value, purchase behaviour and risk profiles will increasingly inform delivery benefits, return flexibility and service prioritisation dynamically rather than a blanket policy. 

Third, embedding shared accountability across marketing, digital, operations and supply chain and logistics is where brands will win. If retention is a strategic priority, post-purchase performance cannot sit solely within operations. It must be treated as a cross-functional growth lever. 

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At Arktic Fox, we work with retailers and brands to identify friction across the omni-channel experience. If you would like to explore how your omni-channel experience is impacting retention and lifetime value, we would welcome the conversation.