Retail Returns Climbed to $850 Billion Last Year — Try These 3 Fixes Before Your Profit Margins Disappear

While consumers might not think twice about sending back an ill-fitting pair of jeans or a duvet cover that isn’t the color they’d envisioned, retailers are thinking long and hard about returns. They’re lying awake at night mulling over how to protect margins as high volumes of returns pile up in their warehouses.

And they’re right to be worried. As much as returns are an unavoidable part of retail operations, volumes are increasing and placing a heavy burden on fulfillment teams and the bottom line. According to National Retail Federation (NRF) estimates, U.S. retailers processed a staggering $849.9 billion in returns in 2025, equivalent to 15.8% of annual sales.

Ecommerce retailers are especially vulnerable, grappling with even higher volumes of returns than the national retail average. The NRF estimates that more than 19% of online sales were returned last year. Similarly, Capital One research highlights the marked discrepancy between ecommerce returns, averaging 24.5% of sales, and the 8.72% return rate for merchandise purchased at brick-and-mortar stores.

Within online marketplaces, fashion retailers are particularly prone to returns challenges. In fact, a recent Statista survey revealed 25% of respondents returned clothing they bought online in the past 12 months, with some estimates suggesting return rates can soar as high as 40% in the fashion industry.

Such high return numbers are due in part to sizing inconsistencies and the ease of free returns. “Bracketing” (buying multiple sizes or colors with the intent of returning items) and “wardrobing” (buying items and returning after wearing once, like a bridesmaid dress) are also driving the flood of returns.

In addition, ecommerce retailers, particularly in the fashion industry, must contend with rapidly emerging — and equally rapidly fading — trends, especially amongst younger consumers influenced by TikTok and Instagram. This volatility contributes to shorter sales cycles, high volumes of returns and reduced resalability.

It comes down to wasted opportunity value

Optimized returns management is tied to the capacity to process returns as quickly as possible and get merchandise back into inventory for resale without delay. While this strategy sounds straightforward in theory, many ecommerce businesses struggle to execute it quickly and efficiently, sacrificing revenue opportunity, margins and the customer experience.

Consider the returns environment in a time-sensitive industry like fashion. Seasons change, demand fades and customer expectations shift quickly. Case in point: Reselling returned sandals (at full price) if Labor Day is fast approaching is an uphill battle. While retailers can relist the sandals on their website if they’re in good condition, decreased demand means they will take longer to sell. This delay ties up capital and, ultimately, pushes products towards discount channels, forcing retailers to incur a loss.

While not all ecommerce businesses are dealing with the same intense time sensitivity and rapidly shifting consumer demand as fashion brands, the overarching problem persists: The longer returns are left unprocessed, the more value is lost.

Consequently, the warehouse team is constantly under the gun to get returns unboxed, evaluated and ready for resale before the opportunity disappears — a serious challenge in the wake of peak season surges. And many retailers are faltering under the pressure, lacking the systems, standardized workflows and supporting technology to get the job done.

Speed matters; technology delivers

On the warehouse floor, the goal is to evaluate returns efficiently, classify conditions consistently and make inventory available for resale as fast as possible. Yet many ecommerce businesses lack standardized reverse logistics workflows; they still rely on spreadsheets, manual data entry and unclear definitions of “resale-ready” to drive the process — a crucial error given the relationship between the speed of returns processing and value retention.

Unfortunately for retailers clinging to a spreadsheet to manage returns, the complexity of reverse logistics demands is only getting more intense. Today’s ecommerce brands are selling merchandise (and generating returns) across a growing number of sales channels, marketplaces and third-party fulfillment services.

With returns coming in hot from across this complex web, retailers are turning to automation, defined returns workflows and warehouse management systems (WMS) to transform returns management from a daily fire drill to a manageable, repeatable process.

A purpose-built WMS can provide structured returns workflows, guiding warehouse teams through each stage of the returns process from receipt through inspection and disposition. Instead of relying on manual checks or tribal knowledge, retailers can standardize evaluations to reduce bottlenecks and prevent inventory from sitting idle. Merchandise gets back into available inventory faster and is approved for sale sooner, helping to generate revenue and protect the bottom line.

3 best practices changing the economics of returns

The impact of inefficient returns management can be felt across the business, disrupting picking, distorting inventory accuracy and slowing outbound fulfillment. Given the logistical and financial impact of sluggish, inconsistent returns handling, retailers need to treat returns management as an operational priority rather than a customer service afterthought.

Consider the following best practices every ecommerce business can adopt to manage today’s high-volume, high-velocity flow of returns and protect the bottom line:

1. Plan returns handling in advance. Forward-thinking ecommerce retailers treat returns as a predictable flow, eschewing reactive problem-solving in favor of structured workflows. They design processes around volume spikes, condition risk and shrinking resale windows, instead of reacting once returns start piling up in the warehouse. Returns should be planned for with the same rigor as outbound fulfillment.
2. Implement a defined intake and triage process. Does the item need repackaging or discounting? Should it go back to new inventory, recycling, or trash? This is where a WMS with defined returns workflows shines. Scanning returned items on arrival surfaces original order data, return reasons and condition criteria instantly. By automating the intake and triage process using guided inspection steps, the warehouse team can take advantage of clear system-driven outcomes that route items to restock, cleaning, refurbishment, quarantine or disposal — without manual decision-making.
3. Prioritize speed over perfection. The speed of returns evaluation and processing matters more than perfection. Waiting for flawless inspections or edge-case decisions often costs more than it saves. With structured workflows and defined guidelines to determine what “resale-ready” means, the warehouse team is empowered to make fast, consistent calls, keeping inventory moving and preserving resale value.

Final thoughts

Consumers continue to embrace online shopping, with global revenue in the ecommerce market projected to reach $3.88 trillion in 2026 and expand at an annual growth rate (CAGR 2026-2030) of 6.84%. While this is great news for retailers on the gross revenue front, more sales mean more returns.

As return volume grows, manual workflows and ad hoc decisions break down. The returns process quickly dissolves into chaos and ecommerce businesses watch helplessly as their warehouses fill with returned packages and losses pile up.

Preserving resale value requires strategic forethought and operational prioritization of returns management, supported by technology built for the job. By embedding clear inspection workflows, system-driven outcomes and real-time inventory updates into daily warehouse operations, retailers can manage returns at scale without sacrificing speed, control or profits.