April may be the cruelest month in the minds of poets, but January is the cruelest month for retailers.
January, also known as Returnuary in retail circles, can be a month when merchants see their margins melt due to product returns.
According to the holiday edition of ReturnPro’s Returns Report, more than half of retailers (52%) expect sales growth during the 2025 holiday season. However, much of that growth is price-driven rather than volume-driven, leaving margins exposed to return costs.
Inventory scarcity and later promotions mean more holiday purchases will be concentrated in the October-December window, creating a surge in returns in January, the report explained.
Because of that, it warned, “Returns will be less spread out and more disruptive, testing reverse logistics and recovery systems.”
“You get a little bit of a lift in returns after Black Friday, but most of those gifts are going to people through Christmas, so right now is when you start to see the volume pick up,” explained Wes Berry, executive vice president of client partnerships and success for Miami-based ReturnPro, a full-lifecycle returns management and reverse logistics company.
Fast Not Always Smart
Online shopping is also contributing to the growing volume of returns, Berry added. “Every year, more and more shoppers are buying online,” he told the E-Commerce Times. “Online returns percentages outpace those of in-store.”
“2025 proved that online shopping is fast, but not always smart,” added Doug Straton, CMO of Bazaarvoice, a global platform for user-generated content, ratings, and reviews.
“Our data shows that while 75% of holiday purchases happened online, shoppers were nearly five times more likely to experience regret compared to in-store buyers,” he told the E-Commerce Times.
“In a time when budgets are tight, and consumers are making every dollar count, impulse buying is no longer a luxury they can afford,” he said. “Going into 2026, brands that focus solely on speed and convenience will struggle, while those that prioritize trust, transparency, and shopper confidence will lead the next wave of e-commerce growth.”
Dramatic Perception Shift
Despite rising returns, the report noted there are signs that retailers are getting a handle on the problem.
Four years of survey data reveal a dramatic shift in perception of returns as a business problem, it noted. In 2023, nearly half (49%) of executives said returns were a severe problem, marking the greatest strain on the industry, but by 2024 that share had dropped to 28%, and in 2025 it fell even further to just 6%. Meanwhile, it continued, the number of retailers calling returns a minor issue has tripled in two years, rising from 11% in 2023 to 37% in 2025.
Chart Source: ReturnPro
“This progression [in executive sentiment] suggests that investments in returns management, policy enforcement, and technology are paying off,” it reasoned. “Returns have not disappeared as a challenge, but they are increasingly viewed as manageable.”
Manageable or not, returns are becoming more complex. “We’re seeing increased volume, more sophisticated fraud, tighter labor availability, and rising transportation costs collide at once,” observed Gaurav Saran, CEO of ReverseLogix, a returns management company in Burlingame, Calif.
“That combination is turning returns from a back-office function into a front-line profitability issue,” he told the E-Commerce Times. “The retailers that will win are the ones treating returns as a strategic lever, not a necessary evil.”
“Returns are now a margin line item, not just a CX issue,” he said. “Every routing decision, inspection delay, and fraudulent return now has a measurable impact on gross margin and earnings.”
The ReturnPro report noted that returns are influencing pricing strategies. In 2024, 60% of retailers acknowledged raising prices to offset inflation and rising returns costs, it explained. In 2025, even more executives say margin growth depends less on volume and more on pricing adjustments, with fulfillment costs and tariff exposure continuing to erode profitability.
Pay to Return
As part of their efforts to manage returns, retailers are tightening up their return policies. According to the report, 65% of retailers are implementing measures to monitor or prohibit excessive return patterns this holiday season.
“More stringent requirements for returns following the holiday season don’t come as a surprise, given how much is returned per person: 80% of retailers said the average person returned [US]$51 or more worth of goods,” the report noted. “Nearly half (44%) of retailers said $101 or more.”
“We’ve started seeing even the big retailers quietly changing their return policies,” ReturnPro’s Berry said. “They are really using data to hone their policies as they move forward because the cost of returns continues to grow.”
One swing in return policies is not-so-quiet. “Right now, we’re seeing a big trend in retailers charging for returns,” said Amrita Bhasin, co-founder and CEO of Sotira, a reverse logistics company in San Francisco.
“These are retailers who have never charged for returns before,” she told the E-Commerce Times. “Even items that are unopened, basically brand new, in perfect condition, and even in-store returns are being charged for now. For some categories, like electronics, that can be quite expensive.”
“Retailers aren’t eliminating free returns, they’re conditioning them,” maintained Amber Brooner, chief revenue officer at Xtel, a global technology solutions provider.
While in-store returns remain free, others are tying free returns to loyalty programs, she explained.
“This shift is intentional and strategic,” she told the E-Commerce Times. “By tying free returns to loyalty membership or in-store activity, retailers gain higher customer retention and lifetime value, better data capture through loyalty ecosystems, lower reverse-logistics costs through consolidation of in-store returns, and incremental in-store purchases from return visits.”
Redesigning Returns
Many retailers are redesigning the return experience from the ground up, added Jordan Shamir, vice president of business development and customer experience at NoFraud, a fraud prevention technology company in New York City.
“Retailers are changing when and how refunds are issued by delaying refunds until items are received, requiring verified drop-offs or routing high-risk returns through stricter flows instead of instant approvals,” he told the E-Commerce Times.
“The era of ‘one return policy for all’ is ending,” he continued. “Good customers receive faster refunds and fewer hoops, while high-risk customers face friction like restocking fees, shorter windows, or in-store returns only.”
Retailers are also actively removing unprofitable customers. “Retailers are increasingly blocking, banning or ‘firing’ customers whose behavior consistently drives losses, even if those customers generate revenue on paper,” Shamir explained.
“Customer support teams are also being retrained to move away from unconditional approvals,” he added. “Agents are taught to identify manipulation, escalate suspicious claims, and follow risk-based guidelines instead of defaulting to ‘yes.’”
In addition, retailers are using data and automation to support hard decisions, he noted. Risk scoring, behavior tracking, and historical return analysis give teams the confidence to enforce policies without relying on gut instinct or agent discretion.
“End-of-year returns are still high, and retailers are balancing customer-friendly policies with stronger controls,” Shamir said. “Businesses are no longer accepting return fraud as a cost of doing business. The trend is toward smarter, risk-based returns, making it easy for good customers while reducing exposure to repeat abusers.”
