Since my work is OOAK, I don't do exchanges but I allow returns on RTS items. If the item arrived damaged, then as soon as receive the item back, I refund the price + shipping; of course, I also require photos to show me the damages. If they simply changed their minds, or it didn't fit as they thought it would (I give detailed measurements), then I refund purchase price but not shipping once I receive the item back. I figure, getting it to them in one piece is my responsibility. Deciding whether or not it fits is theirs. And of course, there's a time limit on returns.
When it comes to custom, made to order items aren't returnable or refundable. However, if there's an issue with sizing, then I pay for them to send it back to me so I can fix the problem because that would be my fault.
I have yet to have a return, so I don't know if this is the best way for my online shop yet. In my offline business, I offer in-person fittings for custom.