April may be the cruellest month in the minds of poets, but January is the cruellest month for retailers.
January, also known as Returnuary in retail circles, can be a month when retailers see their margins melt away due to product returns.
According to the holiday edition of ReturnPro’s Returns Report, more than half of retailers (52%) expect sales to grow during the 2025 holiday season. However, much of this growth is driven by price rather than volume, leaving margins exposed to return costs.
A lack of inventory and later promotions mean more holiday shopping is concentrated between October and December, leading to an increase in sales in January, the report explained.
Because of this, she warned, “Returns will be less staggered and more disruptive, which will test reverse logistics and recovery systems.”
“After Black Friday, you get a little bit of a pick-up in returns, but most of those gifts get to people over Christmas, so right now you’re starting to see the volume pick up,” explained Wes Berry, executive vice president of client partnerships and success at Miami-based ReturnPro, a life-cycle return management and reverse logistics company.
Fast Not always smart
Online shopping is also contributing to growing revenue, Berry added. “Each year, more and more shoppers shop online,” he told the E-Commerce Times. “Online return percentages exceed in-store percentages.”
“2025 has proven 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 were made online, shoppers were nearly five times more likely to regret compared to in-store purchases,” he told the E-Commerce Times.
“At a time when budgets are tight and consumers are counting on every dollar, impulse buying is no longer a luxury they can afford,” he said. “In 2026, brands that focus only on speed and convenience will struggle, while those that prioritize trust, transparency and shopper trust will lead the next wave of e-commerce growth.”
A dramatic shift in perception
Despite rising revenues, the report says there are signs that retailers are addressing the issue.
Four years of surveys reveal a dramatic shift in the perception of revenue as a business problem. In 2023, almost half (49%) of executives said that returns were a serious issue, the biggest pressure on the industry, but by 2024 this share had fallen to 28% and by 2025 it had fallen even further to just 6%. Meanwhile, it continued, the number of dealers calling in a minor problem has tripled in two years, from 11% in 2023 to 37% in 2025.
Chart source: ReturnPro
“These developments (in executive sentiment) indicate that investments in revenue management, policy enforcement and technology are paying off,” he reasoned. “Returns have not gone away as a challenge, but they are increasingly seen as manageable.”
Manageable or not, returns are getting more complicated. “We’re seeing increased volume, more sophisticated fraud, tighter labor availability and rising shipping costs all collide,” noted Gaurav Saran, CEO of ReverseLogix, a returns management company in Burlingame, California.
“This combination turns back-office revenue into a front-line profitability issue,” he told the E-Commerce Times. “Retailers who win are those who see yield 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 states that returns are affected by pricing strategies. By 2024, 60% of retailers will accept price increases to offset inflation and rising return costs, she explained. In 2025, even more executives say margin growth depends less on volume and more on price adjustments, with fulfillment costs and tariff exposure continuing to erode profitability.
Payment for returns
As part of their efforts to manage returns, retailers are tightening their return policies. According to the report, 65% of retailers are implementing measures to monitor or prohibit excessive returns this holiday season.
“Stronger return requirements after the holiday season are no surprise given how much is returned per person: 80% of retailers said the average person returned $51 or more worth of merchandise,” the report said. “Nearly half (44%) of retailers reported $101 or more.
“We’re starting to see even the big retailers quietly changing their return policies,” said ReturnPro’s Berry. “They’re really using the data to improve their policies as they move forward as the cost of revenue continues to rise.”
One blip in the return policy is not so quiet. “We’re seeing a big trend right now of retailers charging for returns,” said Amrita Bhasin, co-founder and CEO of Sotira, a reverse logistics company in San Francisco.
“These are retailers that have never charged for refunds before,” she told the E-Commerce Times. “Even items that are unopened, essentially brand new, in perfect condition, and even in-store returns are still subject to a fee. For some categories, like electronics, it can be quite expensive.”
“Retailers aren’t eliminating free returns, they’re making them conditional,” says Amber Brooner, chief revenue officer at Xtel, a global technology solutions provider.
While store returns remain free, others bundle free returns with loyalty programs, she explained.
“This shift is intentional and strategic,” she told the E-Commerce Times. “By linking free returns to loyalty membership or in-store activity, retailers gain higher customer retention and lifetime value, better data collection through loyalty ecosystems, lower reverse logistics costs through consolidation of in-store returns, and incremental in-store purchases through return visits.”
Reprocessing returns
Many retailers are overhauling returns, added Jordan Shamir, vice president of business development and customer experience at NoFraud, a fraud prevention technology company in New York.
“Retailers are changing when and how refunds are issued by delaying refunds until items are received, requiring verified returns or routing high-risk returns through more stringent flows instead of immediate approval,” he told the E-Commerce Times.
“The era of ‘one return policy for all’ is ending,” he continued. “Good customers get faster refunds and fewer hoops, while high-risk customers face friction like restocking fees, shorter windows or in-store returns.”
Retailers are also actively weeding out unprofitable customers. “Retailers are increasingly blocking, banning or ‘firing’ customers whose behavior consistently results in losses, even if those customers are generating revenue on paper,” explained Shamir.
“Customer support teams are also being retrained to move away from unconditional approvals,” he added. “Agents are learning to identify manipulation, escalate suspicious claims, and follow risk-based guidelines instead of not paying ‘yes.’
In addition, retailers are using data and automation to support tough decisions, he noted. Risk scoring, behavioral tracking, and historical return analysis give teams the confidence to enforce policies without relying on agent instinct or judgment.
“Year-end returns are still strong and retailers are balancing customer-friendly policies with stronger controls,” Shamir said. “Businesses no longer accept return fraud as a cost of doing business. The trend is towards smarter, risk-based returns that facilitate good customers while reducing exposure to repeat abusers.”