Retail Returns Costing Billions: NRF Estimates $75 Billion in 2025

The Growing Cost of Retail Returns

• 📈 The National Retail Federation (NRF) estimates that retail returns will cost retailers $75 billion in 2025.
• 💰 The cost to process a single return can range from 20% to 65% of its original value.
• 💡 Returns are a significant challenge, with nearly 16% of total retail purchases expected to be returned in 2025, totaling $850 billion.

Online Shopping and Return Rates

• 💻 Online shopping directly correlates with higher return rates, with 22% of online apparel purchases being returned, nearly four times the rate of in-store purchases.
• 🛍️ Consumers often engage in "bracketing", buying multiple sizes or colors with the intent to keep only one, expecting free shipping for all items.
• 📉 A substantial portion of returned items, nearly a third, cannot be resold and often end up in landfills.

Managing Returns and Improving Margins

• 🎯 Retailers that assign a dedicated owner to manage returns can see double-digit improvements in gross margin and sales.
• 📦 For apparel retailers, where up to one-third of inventory might be returned, managing returns is akin to managing their largest supplier.
• 🔒 In response to high costs, retailers are implementing tighter return policies, including charging for returns, shortening return windows, or offering exchanges instead of refunds.

The Role of AI in Returns Management

• 🤖 Artificial intelligence (AI) and software are increasingly used to determine the most cost-effective path for returned items, whether it's restocking, reselling, or disposal.
• 🤖 AI is also enabling more personalized returns management, sometimes facilitating direct person-to-person exchanges.