USPS Return Shipping Labels: How to Create and Use

Returns are part of online selling. Roughly 20 to 30 percent of e-commerce orders come back, and how painlessly you handle that process determines whether those customers buy from you again. USPS offers several return label options, each designed for different business sizes and return volumes. Picking the right one can save you thousands of dollars annually while keeping customers happy enough to reorder.

Prepaid Return Labels

The simplest option is generating a return label when you ship the original order and tucking it into the box. The customer peels it off, sticks it on the package, and drops it at any USPS location or blue collection box. No printing, no account creation, no friction.

The downside is cost. You pay for the label at creation whether or not the customer uses it. Since 70 to 80 percent of orders never get returned, you're buying labels that go straight into the recycling bin. For a business shipping 1,000 orders per month at an average return label cost of $6, prepaid labels that go unused cost about $4,200 monthly in wasted postage.

Prepaid labels make sense in two narrow scenarios: for products with extremely high return rates (like clothing and shoes where return rates exceed 40 percent) and for VIP or loyalty customers where absorbing the cost is a deliberate retention strategy. Outside those cases, scan-based return labels are almost always the better choice.

Scan-Based Return Labels (Pay on Use)

Scan-based return labels — sometimes called pay-on-scan or PORS — are the standard for most e-commerce businesses. You generate the label and provide it to the customer, but USPS only charges you when someone actually scans the package into the mail stream. Unused labels cost nothing.

This changes the math dramatically. You can include a return label with every single shipment at zero risk. Labels remain valid for up to a year, so even if a customer decides to return something three months later, the label still works. Available services include Priority Mail, Ground Advantage, and Parcel Select Ground, giving you flexibility on speed and cost.

The only requirement is using a shipping platform that supports scan-based returns — USPS doesn't offer this directly through their retail systems. Platforms like atoship generate scan-based return labels as part of the standard label creation workflow, so there's no special setup involved.

Merchandise Return Service

For large retailers processing thousands of returns monthly, USPS offers Merchandise Return Service (MRS). This is a permit-based program where you pay an annual fee of $265 (2026 rates) plus a per-piece handling fee of about $0.85 on top of applicable postage. You provide customers with pre-addressed return labels tied to your permit number, and USPS delivers returned packages to your facility.

MRS works well for businesses with dedicated returns-processing operations and the volume to justify the permit cost. The per-piece fee adds up at low volumes, though. If you process fewer than 50 returns per month, the overhead of the permit fee and per-piece charges makes scan-based labels more economical.

Package Pickup for Returns

USPS offers free Package Pickup through their carrier network, which works for both outbound and return shipments. Customers can schedule a pickup at usps.com or through the USPS app, and their regular mail carrier will collect the package the next delivery day. This is a significant advantage over UPS and FedEx, which typically charge for residential pickups.

For return labels, this means your customers never need to leave their house. They stick the label on, schedule a pickup, and leave the package by their front door. Combined with scan-based return labels, this creates a genuinely frictionless return experience that rivals anything Amazon offers.

Creating Return Labels in Practice

The actual process of generating USPS return labels depends on your shipping platform, but the workflow is similar everywhere. You provide the customer's address as the origin (since they're the one shipping), your business address as the destination, the package weight, and the service level. The platform generates a label with the correct return routing and a unique tracking number.

Most platforms offer two delivery methods for the return label. You can email a PDF that the customer prints at home, or you can include a pre-printed label in the original shipment. Email is cheaper and works for most customers, but including a printed label reduces friction and is worth considering for product categories with high return rates.

Tracking works identically to outbound shipments. You get an acceptance scan when the customer drops off the package, processing scans as it moves through the USPS network, and a delivery scan when it arrives at your returns facility. This visibility helps you process refunds or exchanges promptly, since you can see the package is in transit before it arrives.

Setting Up Return Policies That Work

The return label is just one piece of a broader returns strategy. Smart sellers set different policies by product category — free returns on clothing where try-on is expected, paid returns on electronics where returns indicate actual problems, and prepaid labels only for defective items where the return is your fault.

Some businesses offset return shipping costs by deducting a flat fee (typically $5 to $8) from the refund amount. Others offer free returns but use the cheapest available service — Parcel Select Ground for non-urgent returns saves significantly over Priority Mail and most customers don't mind waiting since they're not eagerly anticipating a return.

Using atoship, you can generate return labels alongside your outbound shipping labels with a single click. Scan-based return labels are the default, so you only pay for returns that actually happen, and the tracking integrates directly with your order management workflow.