Whether a sweater’s the wrong size or people would rather rack up store credit, ’tis the season for post-holiday gift exchanges. In 2024, product returns were expected to account for 17% of all merchandise sales, according to the National Retail Federation (NRF).¹ That amounts to $890 billion in items being returned to sender.² It’s a big jump from 2023, when NRF calculated that year’s returns at $743 billion.³

Holiday spending rush

American shoppers were forecast to spend $980 billion in November and December 2024.⁴ Nearly 2 in 5 people (37%) said they were more likely to shop during Black Friday and Cyber Monday sales, according to Empower research.

Post-Thanksgiving spenders spared no expense. Setting records across both big shopping days, people spent $10.8 billion online on Black Friday alone, a 10% year-over-year bump — and doubling the take from 2017.⁵ Cyber Monday saw another surge: Consumers opened their wallets to the tune of $13.3 billion, 7% more than in 2023 and amounting to the biggest U.S. online shopping day ever.⁶

The give-back cycle

Dressing up was at the top of the list for gift buyers this season, with 75% of people saying they’d buy clothes to give loved ones.⁷ The cost of clothes has been on the rise, with men’s and boys’ apparel up 2.2% in November compared with the same time last year and women’s and girls’ up 0.4%, according to the latest Consumer Price Index data.⁸

In addition to the upfront cost, apparel can be an especially tricky present to unwrap because personal preferences and sizing differences across brands can add a layer to the gifting process.

Many shoppers have been proactive about getting the right fit, and they’re changing buying habits accordingly. In 2022, 63% of people who shop online said they used “bracketing,” where they purchase more than one size or color of the same item.⁹

Products being returned can cut into retailers’ margins, considering the charges associated with packaging, return postage, freight, assessing the item upon return, and labor costs all along the way.¹⁰ For example, an item priced at $100 could then cost the retailer around $32 to receive back and resell, according to one industry estimate.¹¹ 

Navigating the exchange

To offset extra expenses, consumers are now faced with a more complex returns landscape. Belt-tightening isn’t just for apparel sellers, either: 81% of retailers rolled out stricter return policies in 2023, in which shoppers saw additional shipping charges and narrower return windows, among other considerations.¹² During the 2023 holiday season, around 40% of retailers charged a fee to process an online return.

Meanwhile, other sellers have been using the returns process to drive foot traffic and possibly additional sales. More than half (60%) of people are willing to make an exchange or get store credit instead of a full refund if the process is quick and convenient.13

Kohl’s accepts eligible Amazon items for return in its stores through a partnership started in July 2019, which helped the department store chain get 2 million new customers in 2020. By bringing items into the physical store, people avoid return fees, don’t need to print off a shipping label, and aren’t required to pack the products into a box — with the trade-off being walking through aisles of merchandise to reach the drop-off spot.¹⁴

Amazon emphasized the appeal of its Kohl’s returns arrangement (and similar setups in Whole Foods and Amazon Fresh grocery stores) in 2023 when it started charging customers an additional $1 fee to make a return at a UPS store when those alternate outlets were closer to their delivery address.¹⁵

Later in 2023, UPS made a strategic deal by paying $465 million to acquire Happy Returns, a reverse-logistics and software company that expands access to no-label and no-box product returns.¹⁶ The company consolidates many customers’ returns into larger shipments to save on costs. In addition to more than 5,200 UPS store locations, Petco and Staples count themselves among the chains that offer Happy Returns drop-offs.¹⁷

Making a swap

Hunting for a gift receipt, filling out forms, or shuffling down to a store can still be too much of a hassle for gift recipients looking to make a change.

Perhaps the easiest way to avoid returns is to first give the perfect gift: Empower research found that 77% of Americans say receiving money saves them time from returning items they don’t like.