Retail Returns in 2026: The Supplier Cost Trap
- Jon Allen
- 5 days ago
- 3 min read
Let’s say the quiet part out loud:
Returns aren’t just a retailer's problem anymore. They’re a supplier profit problem.
And January is when you feel it.
The scale is staggering
The National Retail Federation (NRF) and partners estimate that consumers will return 15.8% of retail sales in 2025—about $849.9 billion worth of merchandise.
The NRF report also estimates 19.3% of online sales will be returned in 2025.
And then there’s fraud:
NRF found 9% of all returns are fraudulent.
NRF also reported that 82% of consumers say free returns are important, while 45% say it’s acceptable to “bend the rules” on returns.
Retailers that track it reported increases in tactics like “empty box/box of rocks” and decoy returns, and 85% said they’re using artificial intelligence (AI) to detect or prevent return fraud.
So yes, returns are expected. Free returns are demanded. And fraud is rising.
Welcome to 2026.
Why suppliers end up paying for returns
Depending on the retailer, category, and terms, returns often translate into supplier impact through:
unsaleables and damages
return-to-vendor (RTV) processes
markdown or disposal allowances
fees tied to handling and processing
“mystery” deductions that show up after the return event
Even when the retailer “owns” the return, suppliers often share the financial consequence—directly or indirectly.
The result is a quiet erosion of margin that doesn’t show up in the same place as the promotion that created the demand in the first place.
A fictional scenario (clearly fictional)
Fictional example: A household item supplier has a strong holiday season on a retailer’s website. January returns spike.
Most returns aren’t fraud. They’re “didn’t meet expectations” and “arrived damaged.”
A few weeks later, the supplier sees a wave of unsaleables-related claims. The team argues about whether it’s packaging, carrier handling, or incorrect product content that set expectations wrong.
The truth is usually messy: it’s a little of all three.
But the dollars still come out the same way.
The hidden cost per return
Beyond lost sales, returns cost money to process. A 2026 returns-fraud report summarized by logistics and supply chain outlets cites average return costs of $25–$30 per item and retailer estimates that about 15% of returns involve fraud (note: this is a vendor-sponsored report, but the directional pressure aligns with broader industry findings).
Even if you debate the exact number, the reality is clear: returns are expensive.
A supplier playbook for Q1: reduce returns and reduce penalties
You can’t eliminate returns. But you can eliminate the avoidable ones.
1) Treat product content as “returns prevention.”
Returns often start withan expectation mismatch.
Fix:
unclear sizing/volume cues
missing “what’s included” statements for bundles
vague use-case instructions
images that hide scale
claims that customers interpret differently than you intended
Good content doesn’t just sell. It reduces boomerang costs.
2) Harden packaging for real-world handling
If you have “damaged” return patterns, your packaging may be underbuilt for how it moves through the network.
Simple improvements can pay back fast:
stronger corrugate
better internal bracing
seals that survive handling
label placement that stays scannable
3) Use returns data like a quality program
Returns tell you what your customer experience is really like.
Track:
return reason trends by SKU
damage-related returns by carrier/warehouse node
customer complaint themes tied to product clarity
seasonal spikes (January vs. summer vs. Q4)
Then fix one thing at a time.
4) Clarify disposition and claims processes
If you’re seeing questionable unsaleables or inconsistent claims, tighten the paper trail:
what qualifies as unsaleable
required proof
time windows
who approves and how disputes are handled
This is where a lot of “shrug and move on” money lives.
5) Build a returns scoreboard
Make it visible:
returns rate by SKU
cost impact estimate
top 3 drivers
owner and corrective action
What gets measured gets managed.
Where Woodridge Retail Group fits (without the pitch)
Woodridge Retail Group works with suppliers who want to protect margin without living in dispute portals.
Returns are now part of the commercial strategy—because they affect net revenue, deductions, and how retailers view your operational reliability.
If you want to pressure-test your Q1 return-risk hotspots, we can help you identify the patterns and prioritize the fixes that matter most.
