Returns continue to be a thorny issue for online retailers, but they could provide an opportunity to create brand loyalty for customers.
Retailers estimate that 15.8 percent of their annual sales will be returned this year, totaling $849.9 billion, according to the 2025 Retail Returns Landscape report released today by the National Retail Federation and Happy Returns, a UPS company. That compares to last year’s total, which was $890 billion, or 16.9 percent of sales.
“Returns are no longer the end point of a transaction,” said Katherine Cullen, NRF vice president of industry and consumer insights. “They provide an opportunity for retailers to create a positive experience for customers and can translate to brand loyalty. Retailers are constantly evolving and working to meet customer expectations, and they recognize the importance the returns process plays.”
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While overall return rates are somewhat steady, some areas are facing more pressure than others. According to the report, an estimated 19.3 percent of online sales will be returned in 2025.
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In addition, as Gen Z’s influence grows, so does their impact on returns. On average, those between the ages of 19 and 30 made 7.7 returns of online purchases in the last 12 months, more than any other generation.
Return expectations are a hot topic for shoppers. Free returns are a major draw for shoppers, with 82 percent citing them as a major consideration when making a purchase, up from 76 percent last year. Consumers value immediacy, with 76 percent saying they are more likely to choose a return option that provides an instant refund or exchange.
Some 57 percent of shoppers will not shop with a retailer after being charged for a return, a rate that has sharply increased from 40 percent in 2024, according to the survey.
However, a poor returns experience can deter future purchases. Some 71 percent of consumers said they are less likely to shop with a retailer again after a poor experience, up from 67 percent in 2024. And, four out of five said they will share their negative experience with friends and family, potentially amplifying the impact.
According to the survey, retailers are faced with balancing customer expectations and the need to grow online channels against the rising operational costs associated with returns as well as pressures from external factors such as tariffs. Retailers surveyed indicated their top priorities for 2026 are increasing online sales and reducing return rates.
The top reasons why retailers charge for returns are increases in the cost of operations to process returns (40 percent), increases in carrier shipping costs (40 percent) and economic uncertainty and risk of tariffs (33 percent), the survey showed. Overall, some 64 percent of merchants said updating their returns process in the next six months is a priority.
Return fraud continues to be an ongoing problem for the industry. The report found that 9 percent of all returns are fraudulent. Retailers that track such incidents cited increases in practices such as overstated quantity of returns (71 percent), empty box or “box of rocks” (65 percent) and decoy returns such as counterfeit items (64 percent).
Some 85 percent said they are employing AI to detect or prevent return fraud.
Meanwhile, consumers, especially younger ones, continue to make return choices that are costly to retailers. Close to two-thirds of consumers admit to participating in at least one costly returns behavior, such as wardobing and “bracketing” (buying multiple colors and sizes of an item with the intention of keeping only one and returning the rest) to sending back different items or empty boxes. Just under half (45 percent) believe “bending the truth” is acceptable when making returns, especially if they are unsatisfied with their purchase.
“Return policies and their overall process have transformed into a strategic touchpoint for retailers, influencing how younger consumers shop from the outset,” said David Sobie, cofounder and chief executive officer of Happy Returns. “To stay competitive amid rising return rates and behaviors like bracketing, retailers must modernize their reverse logistics to enhance customer satisfaction, reduce fraud and safeguard their operations in today’s high-pressure retail landscape.”
Ahead of the holiday season, the report also found that retailers anticipate 17 percent of holiday sales to be returned, consistent to previous years. Retailers plan to manage holiday returns and fraudulent activity by increasing focus on third-party logistics partners (49 percent), hiring seasonal staff to handle returns (43 percent) and extending return windows (37 percent).
The NRF and Happy Returns conducted two surveys this summer to understand the dynamics of online returns both from consumers and e-commerce professionals. The first survey included responses from 2,006 consumers who had returned at least one online purchase within the past 12 months, and asked their shopping preferences, return experiences and expectations for the upcoming 2025 holiday season. The second survey polled 358 professionals involved in e-commerce for large (more than $500 million in revenue) U.S. merchants to gather insights into their returns rates and operational challenges associated with returns processing.