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(WASHINGTON) – Retailers estimate that 15.8% of their annual sales will be returned this year, totaling $849.9 billion, according to the 2025 Retail Returns Landscape report recently released by the National Retail Federation and Happy Returns, a UPS company. The returns rate is in line with 16.9% last year, when returns totaled $890 billion.
“Returns are no longer the end point of a transaction,” NRF Vice President of Industry and Consumer Insights Katherine Cullen said. “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.”
While overall return rates may remain steady, some areas are facing more pressure than others. According to the report, an estimated 19.3% of online sales will be returned in 2025.
Additionally, as Gen Z’s influence grows, so does their impact on returns. Those between the ages of 18 and 30 made 7.7 returns of online purchases in the last 12 months, on average, more than any other generation.
Consumer expectations are increasing around returns. Free returns are a major draw for shoppers, with 82% citing them as a major consideration when making a purchase, up from 76% last year. Consumers also value immediacy, with 76% saying they are more likely to choose a return option that provides an instant refund or exchange.
Still, a poor returns experience can deter future purchases. About 71% of consumers say they are less likely to shop with a retailer again after a poor experience, up from 67% in 2024. And four out of five said they will share their negative experience with friends and family, potentially amplifying the impact.
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 like tariffs. Retailers surveyed indicate their top priorities for 2026 are increasing online sales and reducing return rates. The top reasons retailers charge for returns are increases in the cost of operations to process returns (40%), increases in carrier shipping costs (40%) and economic uncertainty and risk of tariffs (33%). Overall, nearly two-thirds (64%) of merchants say updating their returns process in the next six months is a priority.
Return fraud is an ongoing concern. The report found that 9% of all returns are fraudulent. Retailers that track such incidents noted increases in practices like overstated quantity of returns (71%), empty box or “box of rocks” (65%) and decoy returns such as counterfeit items (64%). Technology offers partial relief, with artificial intelligence being a popular option – 85% said they are employing AI to detect or prevent return fraud.
Meanwhile consumers, especially younger consumers, continue to make returns choices that are costly to retailers. Close to two-thirds of consumers admit to participating in at least one costly returns behavior, from wardrobing and “bracketing” to sending back different items or empty boxes. Just under half (45%) 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, co-founder and CEO 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 winter holiday season, the report also found that retailers expect 17% of holiday sales to be returned, consistent with previous years. Retailers plan to manage holiday returns and fraudulent activity by increasing focus on third-party logistics partners (49%), hiring seasonal staff to handle returns (43%) and extending return windows (37%).
About the Survey
NRF and Happy Returns, a UPS company, conducted two surveys this summer to understand the dynamics of online returns from both consumers and ecommerce professionals. The first survey included responses from 2,006 consumers who had returned at least one online purchase within the past 12 months, exploring their shopping preferences, return experiences and expectations for the upcoming 2025 winter holiday season. The second survey engaged 358 professionals involved in ecommerce for large (over $500 million in revenue) U.S. merchants representing a mix of verticals to gather insights into their return rates and operational challenges associated with returns processing.
View the 2025 Retail Returns Landscape report here.
As a leading authority and voice for the retail industry, NRF conducts research throughout the year, staying on the pulse of the industry and consumer behavior as they evolve.
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