How Much Do Returns Really Cost Retailers? Data, Factors & 2026 Insights

TL/DR summary

Returns remain a nine‑figure line item. NRF and partners project $849.9 Bn in 2025, with online purchases returning at 19.3%. Free returns and instant refunds matter to consumers, but fraud and handling costs scale quickly. The win is to meet expectations while engineering the economics.

Key points

• Size of the problem: retail returns at $849.9 Bn projected; return rates near last year; fraud at 9%.

• What drives costs: transport, handling, markdown risk, and policy abuse.

• What customers expect: simple return process, fast money back, and clear rules.

• What works: selective free returns, strong content, omnichannel drop‑offs, precise fraud controls.

• What to track: return rates, processing times, fraud flags, repurchase after return, and margin impact by policy.

Design returns as a competitive capability. When retailers combine great experiences with disciplined cost control, they enhance customer satisfaction and protect growth—without giving away the store.

Data summary

Introduction

“How much do returns cost retailers?” is now a budgeting question, not a niche operations query. Retail returns represent a significant, predictable drain on annual sales, and the impact shows up across reverse logistics, warehouse operations, refund processing, and hidden costs like markdown risk.

The National Retail Federation reports that return rates are holding near last year’s levels, with a 2025 projection of $849.9 billion in merchandise returned to the system (15.8% of annual sales), after $890 billion in 2024. For leaders growing online channels, the pressure is higher: online returns are expected to reach 19.3% of online sales.

The data below breaks down where the money goes, why consumer expectations keep rising, and which levers protect margin without hurting customer satisfaction.

The cost structure of retail returns

A shared vocabulary helps teams quantify what appears as “lost sales.”

Where return costs accumulate

Return costs roll up from several buckets: reverse logistics transport, returns processing checks, reconditioning, repack, and restocking fees decisions, plus the operational challenges of handling exceptions. On top of that sits lost revenue when goods cannot be resold at the item's original price. In apparel and electronics, markdowns and disposal add an environmental impact as well.

The returns process touches conversion rates and brand loyalty. A fast, transparent return process can improve customer satisfaction and increase loyalty, but it also introduces cost. The goal is operational efficiency without training customers to rely on endless free returns.

The 2025 numbers to work with

Below are the headline figures and how to read them inside a P&L.

How big is the problem?

• $849.9 Bn projected retail returns in 2025 (15.8% of annual sales, National Retail Federation and Happy Returns, a UPS company).

• 2024 closed at $890 Bn (16.9%). Some trackers still cite “nearly 890 billion” for 2025, reflecting conservative scenarios. Either way, the scale remains in the hundreds of billions.

Treat returns as a controllable cost center with executive visibility, not just a queue in warehouse operations.

Where do returns happen?

• Online channels face higher pressure: 19.3% of online sales are expected to return in 2025.

• Brick-and-mortar stores see lower rates on average because try‑before‑buy reduces uncertainty, though holiday returns spike throughout the year after the peak.

Map costs by channel and set channel‑specific return policies.

What do customers expect?

• Consumers value control and speed. 82% consider free returns a key factor; 76% prefer instant credit. Shoppers check return options at product pages and during checkout.

• A poor returns experience reduces intent: 71% say they will not return to the retailers involved; word‑of‑mouth amplifies the hit to merchandise sales.

Clarity on fees, methods, and the time to issue a refund can enhance customer satisfaction without promising unlimited free returns.

What about fraud and policy abuse?

Return fraud is estimated at 9% of all returns; retailers cite growth in empty‑box claims, counterfeit swaps, and receipt manipulation. Many retailers deploy AI and rules engines to screen risky patterns.

Balance frictionless experiences with verification. Use identity checks, serial capture, and behavior scoring.

US Retail Returns — Estimated Cost (USD Billions).

Category and behavior drivers

Numbers tell you where to intervene; behavior explains how.

High‑return categories

Fashion, footwear, and consumer electronics account for the highest return rates due to fit issues, specification confusion, and damage in transit. Multiple sizes ordered for bracketing increase touches in returns processing and inflate processing costs.

Policy‑driven behaviors

Long return windows and unconditional free returns lift conversion rates but also invite bracketing. Tight windows and fees reduce noise, yet risk customer satisfaction. The key factor is clarity: state what qualifies, the methods allowed, and the net time to refund.

Content and imagery

Product descriptions, size guides, and high-quality images reduce mismatch and curb return rates. Clear specs lower the need to return and support better purchasing decisions for online shoppers.

Reducing return costs without losing customers

Practical moves that align consumer behavior with healthy economics.

Make policy a growth lever

Publish simple, tiered return policies that explain methods, restocking fees where applicable, and exceptions. Offer free returns selectively for loyalty members, high‑margin lines, or first online purchase, while testing small fees on bulky or low‑margin items. This balances return costs and customer expectations.

Improve accuracy before the buy

Invest in detailed product descriptions, better imagery, and size/fit tools. Encourage reviews and fit notes. These inputs lower return rates and return costs retailers carry later.

Streamline the mechanics

Give clear options across online returns and in‑person drop‑offs at physical stores or brick-and-mortar stores. Use label‑free QR flows to cut refund processing time. Partnerships like ClickPost help centralize and accelerate aggregation.

Price the friction fairly

Where bulk and damage risk are high, add transparent restocking fees or packaging standards. Signal fees early so consumers can decide without surprise. Done well, this can improve customer satisfaction by eliminating ambiguity.

Fight fraud with precision

Target return fraud with device fingerprinting, serial capture, and rules for high‑risk SKUs. Many retailers combine rules and AI to protect annual sales while keeping good customers moving.

Close the loop operationally

Tie returns processing data to replenishment and markdown engines. This protects retail sales by routing resaleable goods quickly and quarantining damaged stock. Over time, this raises operational efficiency and protects profit margins.

Closing the loop, not the wallet

Returns are not just a problem to push downstream; they are a system of choices that shape trust and cash flow. The numbers show the cost is massive, but the same returns process that drains margin can also increase loyalty when designed with speed, clarity, and fairness. 

The right mix (clear return policies, selective free returns, fast returns processing, and targeted fraud controls) lets retailers protect margin while delivering a positive experience. Treat returns as a designed product, not a penalty box, and the business earns back dollars, time, and customer loyalty.