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The 2025 holiday season delivered the first trillion-dollar holiday in U.S. retail history, with online spending alone hitting $257.8 billion. But while the sales numbers made headlines, the returns story was more complicated.<\/p>\n
According to Adobe Analytics, returns were actually down 1.2% compared to last year during the core November to December shopping window. Then came the flood: returns surged 4.7% in the days immediately following Christmas, with volumes spiking at 25% to 35% leading up to the new year.<\/p>\n
That pattern of a brief reprieve, followed by an intense post-holiday wave, put a spotlight on what\u2019s really driving return costs: fraud, abuse and the operational strain of handling millions of items in a compressed window.<\/p>\n
In a year when operating margins are already thin, these behaviors are turning what used to be a customer service cost into a serious financial risk. Here\u2019s how merchants are preparing for that collision \u2014 all without alienating loyal shoppers.<\/p>\n
Data from the National Retail Federation estimated that retailers would process $849.9 billion in total returns during 2025, with online return rates hovering near 19.3%. Returns used to reflect uncertainty about a product; now they reflect uncertainty about spending power. Shoppers have begun using them to manage budgets, delay commitment or stretch cash flow through \u201cbuy now, return later\u201d behavior.<\/p>\n
And as consumers push for flexibility, opportunists are following close behind. For every legitimate return, others exploit refund loopholes, manipulate automation gaps or abuse lenient policies designed for loyalty rather than loss prevention.<\/p>\n
Against that backdrop, the stakes in 2026 are higher than ever.<\/p>\n
The shift toward early holiday promotions, starting as soon as October, meant return cycles opened before peak shipping weeks. Retailers faced a 10- to 12-week return horizon, up from the traditional four to six weeks, complicating inventory forecasting and resale timing well into February. And while return rates held steady during the shopping rush, the post-Christmas spike hit hard, Adobe predicted elevated levels through mid-January.<\/p>\n
Apparel remained the leader in returns, where \u201cbracketing\u201d (ordering multiple sizes or colors with the intent to send most back) has become a normalized shopping behavior \u2014 nearly two-thirds of online shoppers engage in this practice. For some fast-fashion retailers, return rates topped 30%, with a growing share of those tied to \u201cwear once\u201d or wardrobing behavior.<\/p>\n
\u201cFriendly fraud\u201d (including false damage claims, \u201citem not received\u201d disputes and serial refunds) now represents roughly 15% of all return-related losses, costing retailers over $100 billion annually. Each fraudulent claim chips away at already-tight margins and forces retailers to choose between protecting profits and preserving goodwill.<\/p>\n
The average cost of processing a return now exceeds $27 for a $100 order, once restocking, shipping and inspection labor are factored in. For low-margin products, that can wipe out profits, even when the merchandise is resold.<\/p>\n
The convenience of buying online and returning in-store has blurred oversight. Without unified systems, fraud teams may not see cross-channel return patterns, like the same customer returning items purchased under different accounts or payment methods.<\/p>\n
Retailers know they can\u2019t simply tighten the screws without risking loyalty. The very policies that create trust \u2014 fast refunds, no-questions-asked exchanges, extended return windows \u2014 have become a balancing act between generosity and control.<\/p>\n
Instead of tightening policies across the board, leading retailers layered automation, data and behavioral insight to make every return decision dynamic.<\/p>\n
AI-powered verification tools can cross-check orders, payments and tracking data before a refund is issued. By flagging inconsistencies, such as repeated \u201citem not received\u201d claims or mismatched return weights, they help reduce the burden on overwhelmed support teams while preventing false refunds.<\/p>\n
One brand using NoFraud managed to block nearly $50,000 in monthly losses from fake tracking IDs and shipping manipulation alone. And across multiple retailers, automated verification now identifies and declines roughly 5% of claims driven by fraud or abuse while speeding up resolution times for legitimate customers.<\/p>\n
Some retailers are consolidating fraud, logistics and customer service into unified risk engines. This allows for pattern recognition across millions of transactions \u2014 spotting, for example, a customer who returns the same SKU across multiple accounts or who consistently disputes high-value orders.<\/p>\n
Some sellers are applying fraud scoring to return requests in real time. Shoppers with a strong purchase history receive instant approvals or pre-paid labels; meanwhile, high-risk profiles trigger a brief manual review. This results in legitimate customers enjoying frictionless service while abusers encounter invisible guardrails.<\/p>\n
Retailers are beginning to customize the return rules themselves by tailoring window lengths, restocking fees and refund timing based on a shopper\u2019s behavior and product category. A loyal customer might receive instant store credit or a 60-day window, while repeat abusers might see shorter timelines or credit-only options. By replacing one-size-fits-all policies with data-driven flexibility, merchants can reward good behavior without exposing themselves to risk.<\/p>\n
Returns are often the most emotional moment in the customer journey. The most effective AI systems can route each case to the right resolution channel. Low-value items may be marked as \u201ckeep it\u201d to avoid shipping costs, while high-value returns get handled by live agents who can recover trust in real time.<\/p>\n
Leading brands are feeding return data into product and content teams. If an item has a 35% return rate for \u201cfit,\u201d marketing might adjust its imagery or descriptions; if a category drives high abuse, it might prompt a re-evaluation of pricing or packaging.<\/p>\n
Returns will always be part of retail, but in 2026, they\u2019re also becoming a mirror for how each brand manages trust. Instead of trying to eliminate returns, shift your mindset to see them as a recurring investment in customer lifetime value. The sellers that succeed won\u2019t be the ones with the strictest policies, but the ones that turn these signals into smarter operational decisions.<\/p>\n
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Scott Gifis is the CEO of <\/em>NoFraud<\/em>. With more than 20 years of leadership experience, he previously served as President and COO of Frame.io, acquired by Adobe for $1.3 billion, and as President of AdRoll. Gifis also has held executive roles at OpinionLab (acquired by Verint Systems), Criteo, CareerBuilder and TeraSolar (which was sold in 2005).<\/em><\/p>\n<\/p><\/div>\n