Retailers project, 15.8 per cent of their annual sales, worth a staggering $849.9 billion- will be returned this year, according to the 2025 Retail Returns Landscape report by the National Retail Federation (NRF) and Happy Returns, a UPS company.

The report estimates, 19.3 per cent of all online sales will be returned in 2025.

Katherine Cullen, Vice President-Industry and Consumer Insights, NRF, notes, returns are now a key strategic area. They provide an opportunity for retailers to create a positive experience for customers and can translate to brand loyalty, she adds.

Gen Z is also driving volume. Consumers between the ages of 18 and 30 averaged 7.7 returns of online purchases over the past year - more than any other generation.

Consumer expectations for the returns process are sharply increasing:

Around 82 per cent of shoppers now cite free returns as a major consideration when buying something, a significant rise from 76 per cent last year. Almost 76 per cent of them are more likely to choose a return option that offers an instant refund or exchange, valuing immediacy.

However, a bad experience can severely impact future business. Approximately 71 per cent of consumers say they are less likely to shop with a retailer after a poor return experience, and four out of five will share that negative story with family and friends.

Retailers are struggling to meet these high customer expectations while grappling with rising operational costs and external pressures like tariffs. Returns fraud remains a major issue, accounting for 9 per cent of all returns. Retailers report increases in costly incidents, including overstated quantity of returns, empty box or ‘box of rocks’ returns and decoy returns, such as sending back counterfeit items.

To combat this, 85 per cent of retailers are now employing Artificial Intelligence (AI) to detect or prevent fraud.

Meanwhile, around two-thirds consumers admit to ‘wardrobing’ (wearing and returning) or ‘bracketing’ (buying multiple sizes/colors to return what doesn't fit), and 45 per cent believe ‘bending the truth’ is acceptable when making a return.

Looking ahead, retailers anticipate, 17 per cent of holiday sales will be returned. To manage the spike and potential fraud, they plan to increase focus on third-party logistics, hire seasonal staff, and extend return windows.