Many retailers look forward to a flood of revenue during the year’s busiest shopping season, overlooking the fact that this cash flow is followed by a corresponding increase in returns. While online stores and small businesses are often disproportionately affected, this issue transcends merchant and product types.
For years, many have been lenient with Christmas and Boxing Day returns. However, the cost of doing business in the United Kingdom is rising — a free, frictionless returns process is becoming increasingly difficult to sustain. How can companies tackle holiday returns logistics without adversely impacting customer retention or their bottom line?
The True Cost of Holiday Returns Logistics
Research shows January is the peak season for reverse logistics in places like the U.K. and the United States. If past seasons are any indicator, much of the merchandise bought in November and December will soon return to store shelves.
ParcelHero research suggests U.K. consumers returned an estimated £1.51 billion in goods during the peak returns period of 2024. David Jinks — the parcel delivery service’s head of consumer research — said retailers could see this figure climb to £1.55 billion because sales values increased by 3% this season.
Online retailers that ship overseas may be disproportionately affected. According to the National Retail Federation’s 2025 Retail Returns Landscape report, the cost of returns reached an estimated £627.6 billion in 2025. According to the retail trade association’s projections, online returns accounted for nearly 20% of that total.
Items returned in-store cost less to process and are back on the shelves by the end of the day. Online returns must be shipped to a distribution centre, taking days before becoming available for resale. Unfortunately, they are often returned more frequently since consumers can’t assess sizing or material quality before purchasing. Also, there is a chance goods may arrive damaged.
Rethinking the Post-Holiday Returns Process
The reverse supply chain may function similarly to its conventional counterpart, but its purpose and rules differ significantly. Fast resolution is crucial for meeting consumer expectations and maintaining high retention rates, but restocking can be time-consuming and expensive.
Many U.K. businesses face the pressures of evolving regulatory requirements and shifting consumer behaviour. Every solution they devise must consider the rapidly changing geopolitical landscape. Trade wars, tariffs and foreign conflicts are making free, frictionless returns increasingly challenging to sustain.
The way forward is to rethink holiday returns logistics entirely, from how goods move through the reverse supply chain to how frustrated consumers are placated. Adopting forward-thinking strategies can help businesses become resilient by design.
Top Reverse Logistics Strategies to Adopt
To tackle holiday returns logistics, retail professionals must optimise returns management. While investing in cutting-edge technologies is an excellent strategy, not all can afford to do so. Luckily, several alternatives exist.
Reevaluate Returns Dispositioning
There are only so many ways companies can handle returns, so strategic dispositioning is crucial. Their decision to restock, liquidate, donate or discard should be information-based. A machine learning model can identify subtle patterns, enabling them to determine when bulk liquidation or a tax-deductible donation is more cost-effective.
Form New Strategic Partnerships
Allowing third-party logistics companies to handle the wave of January returns saves on in-house labour without sacrificing efficiency. They can restock items more quickly and even analyse consumer behavioural data to identify trends.
Decision-makers should also consider forming partnerships with new carriers and distributors by establishing microfulfillment centres. Placing returns processing closer to customers enables them to replace, repair, recycle or resell faster.
Less-than-truckload shipping is the most cost-effective method because retailers only pay for the space their shipment occupies. Since the trucks typically stop at multiple fulfilment centres, it may take longer for goods to reach their destination. Shortening the distance drivers must travel accelerates trips and decreases fuel usage, saving time and money.
Improve Supply Chain Visibility
Visibility is equally important to consumers and professionals. However, one survey found just 6% of retailers have complete visibility into their supply chains. Automation can close this gap. Organisations should automate real-time tracking and inspections. Quickly determining goods’ destinations is imperative for superior visibility, speed and predictability.
Offer Store Credit as an Alternative
While there are exceptions to the rule, retailers must offer full refunds if online shoppers notify them of their intent to return the goods within 14 days. For items purchased on Boxing Day, they have until January 9 to request a refund. To disincentivise them from doing so, retailers can also offer store credit and allow them to keep the item.
Offering credit instead of a refund may appeal to people. Rather than dealing with the hassle of the returns process, they get to keep the item and get more merchandise for free. This strategy may not initially positively impact the bottom line, but it supports customer retention while minimising reverse logistics costs.
Future-Proof Supply Chains Before Next Year
Around 95% of consumers agree a poor returns experience makes them less likely to do business with a brand again. Consequently, 75% of retailers report prioritising providing a good returns experience over decreasing return rates. A robust business strategy should prioritise both outcomes.
Investing in solutions that eliminate the possibility of holiday returns logistics leads to long-term success. For instance, using augmented reality to let individuals try on clothes or view furniture in their homes can mitigate returns.
Before companies can invest in such technologies, they must analyse their return process to uncover trends. By adopting novel reverse logistics strategies, they can future-proof themselves against fickle buying behaviours.
Although January is the peak season for reverse logistics, the reverse supply chain is busy year-round. Acting sooner rather than later enables decision-makers to capture valuable post-holiday data. However, they can gather insights throughout the year.
Turning a Cash Drain Into a Revenue Engine
Returned merchandise does not have to drain a retailer’s cash flow. By adopting cutting-edge holiday returns logistics strategies, they can turn it into a revenue engine that drives customer retention and offers competitive advantages.
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