It is the start of the new year, and the 2025 Christmas holidays have come and gone with the blink of an eye it seems. I was at a Christmas party when a friend asked me a question I could not immediately answer. He asked: “How much of the Christmas presents given actually get returned by the recipients?”
When I got home, I dug into my work archives because I remember having visited a company that processed product returns for major retail chains. The DC (distribution center) that this 3PL (third party logistics) provider operates is in Eastern Pennsylvania, strategically located to process the massive flow of returns from the metropolitan New York City region. This company offers what is known as “reverse logistics,” which includes all the steps in the process of obtaining the returned item from a consumer through reselling the item.
Simply put, I was not prepared for the massive scale of this center.
Here’s what I learned about the center’s scale of operations.
- On the day of my visit, there were 1.7 million articles of clothing and accessories on hand, in storage pending fulfillment.
- The overall goal of the DC is to receive, process, and store women’s clothing and accessories only (no men’s clothing processed) and have the received items posted to their online store (second-hand retail opportunity), within 24 hours. The DC is a 24/7 operation.
- Every returned item is dry-cleaned. This DC was, at the time of my visit, the largest dry-cleaning facility in North America.
- There are about 65,000 unique “brands” the DC handles, all uniquely identified in the DC’s database, and each garment has a cloth label with its unique barcode sewn into it by the DC’s team of about 50 seamstresses who also repair damaged garments if required.
- About 8,400 “processed” items are sold and shipped to consumers each day.
Given the size and scales of this operation, I wanted to know what the overall annual volume of returns in the United States for all categories of products (returns are a worldwide phenomenon).
Across the U.S. retail industry, consumers return roughly 15–17% of the goods they purchase overall, with online purchases seeing return rates roughly two to three times higher than in-store purchases. Online and in-store activity are considered separate “channels.”
The exact percentage varies by channel and by year, but here are the most widely cited figures from recent industry research conducted by the National Retail Federation:
For 2025 retailers estimated 15.8% of annual retail sales would be returned—roughly $850 billion in merchandise.
- E-commerce returns are much higher than in-store:
- Online purchases (e-commerce) see return rates typically in the 18–25% range of sales value.
- In-store returns are significantly lower, often around 8–10% of sales.
- Return rates increased sharply in the past decade, largely driven by e-commerce growth and more flexible return policies.
- Holiday and seasonal purchases tend to have even higher return percentages, sometimes approaching 17% or more during peak periods.
My next thought was how many companies like the one I visited are there in the U.S.?
Just for garments and clothing accessories (e.g., handbags), there are ten other companies providing reverse logistics services.
While this DC was focused on garments, I have been in similar operations for the return of automotive parts (~19.4% return rate ≈ ~$44 billion returned annually) and cellular phones (~20% return rate ≈ ~$13 billion). The scale and complexity in each of these channels is comparative to that which I saw being done for garments, although the processes vary based on the type of products being handled.
As mentioned above, returning an item has been made more “user friendly” for the consumer. Amazon, for example, let’s you request the return online, providing a printable label, which you take with the item to a UPS retail store. The store processes the shipment (at no cost to the consumer) and once it “ships” the return, Amazon processes the consumer’s credit. Other retailers have their processes, but minimizing the “friction” the consumer encounters is the overall objective.
Who pays for all this enormous “back end” cost? What do you think?
And for the returned items that cannot be resold? According to Planet Aid, approximately 11.3 million tons of used clothing and other textiles are disposed of in landfills each year in the U.S.
Returns are a massive—and growing—tidal wave washing over the retail goods industry.
About the Author
Tim Lindner develops multimodal technology solutions (voice / augmented reality / RF scanning) that focus on meeting or exceeding logistics and supply chain customers’ productivity improvement objectives. He can be reached at linkedin.com/in/timlindner.
