No other European country returns more packages than Germany, creating a massive financial and logistical problem for retailers including Amazon.com Inc.—by far the country’s top online shopping destination—followed by Otto Versand, and Zalando SE.

Germany also has Europe’s highest rate of invoice transactions— meaning customers only pay for goods once they decide what to keep after delivery. That makes it easier to abort a purchase and return the product before any money changes hands.

Fashion retailer Zalando is trying to cut down on returns—about half its sales are sent back—by posting videos of models wearing the apparel and using machine learning technology to match shoppers with the right sizes. Mr. Spex, a German spectacle retailer backed by Goldman Sachs Group Inc., lets customers “virtually” try on glasses, placing frames over clients’ headshots as they browse its website. And Amazon has introduced augmented reality tools so that shoppers can see how a piece of furniture looks in their home before they decide to click the “buy now” button.

Creating a more efficient return system is becoming increasingly important as the EU’s online retailers vye for customers try to keep expenses in check. Germans returned about 5.5 billion euros worth of goods last year, a study by the University of Bamberg found. 

Deutsche Post AG, the German postal service, agrees that more needs to be done. 

“At the moment, in terms of volumes, we’re benefiting from this trend as we carry a lot of return shipments,’’ said Deutsche Post Chief Financial Officer Melanie Kreis. “We have to find more sustainable solutions to optimise the whole returns process.”

The situation in Germany, where the 10 biggest online shops account for about a third of all web sales, is particularly pronounced. Buying clothing online is popular in Europe’s largest economy, but it’s also the category that gets returned the most because many shoppers buy more than they need to try on different garments in the comfort of their own home. 

Companies are being forced to get creative in order to keep costs down. Amazon has threatened to charge German vendors more if they refuse to streamline packaging in a bid to cut waste and shipping costs. Zalando has invested in Magazino, a Munich-based robotics startup to make warehouse sorting more efficient. 

Down the road, retailers will have to come up with new ways to take the pain out of returns—like offering shoppers the option of returning items in actual stores, said Lars Hofacker, an analyst at EHI Retail Institute in Cologne.

“That’s more convenient for customers and it gives the retailer an opportunity to talk to them in person, improving retention,” he said.

Sometimes, returns can even turn into a marketing asset. 

Nok, a Berlin startup, works with retailers to let shoppers trial select tech gadgets, such as testing a Krups kitchen machine for three to seven days after a same-day delivery in the German capital. If they don’t like it, Nok picks it up again, free of charge. Even when a product isn’t kept, shoppers will have experienced a smooth delivery and return process, said Bobby Wann, Nok’s managing director.

“You don’t always have to buy something to like a brand,” he said.

While Germany leads EU countries in the share of online shoppers who return goods—just more than half—the Netherlands is close behind, followed in a gradual descending order by France, Spain, Italy, the U.K., Belgium, and Poland, with around 30%, according to 2018 PostNord data.

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