Why Peak Retail No Longer Ends on Christmas Day

The day after Christmas used to mark the end of peak season.

For many retailers in 2025, it marks the start of a second peak, one that moves in reverse.

Packages that flowed out in November and December come back in January, often at peak shipping rates and with less margin to absorb the cost. That puts pressure on workflows, fraud controls and profitability at the same time.

Returns Remain Enormous, Even as Rates Ease

Returns remain a massive operational burden. The National Retail Federation, in conjunction with Happy Returns, projected that retail returns in the United States will reach $849.9 billion in 2025, representing about 15.8% of total retail sales. Online purchases drive a disproportionate share of that volume, with the NRF estimating that 19.3% of eCommerce sales will be returned.

While the overall return rate is slightly below 2024 levels, the absolute dollar figure remains close to a trillion-dollar problem, one that increasingly lands on retailers’ balance sheets rather than being absorbed as a cost of growth.

Holiday sales intensify the pressure. The NRF said it expects U.S. holiday retail sales to exceed $1 trillion for the first time. Retailers surveyed by NRF and Happy Returns anticipated that roughly 17% of holiday purchases will be returned, implying about $170 billion in merchandise flowing back through reverse logistics channels just weeks after peak promotions end.

UPS, for its part, has marked the peak of returns as the Monday after New Year’s, which falls on Jan. 5.

Why 2025 Raised the Stakes

ECommerce continues to elevate baseline return costs. Adobe forecasted $253.4 billion in U.S. online holiday sales between Nov. 1 and Dec. 31, up 5.3% year over year. Even modest growth matters because every return adds cost twice, once outbound and once inbound.

Tariffs are also reshaping return economics. The NRF said retailers are managing returns amid external pressures, such as tariffs and broader cost uncertainty. In the NRF and Happy Returns survey, merchants cited higher return processing costs and higher carrier shipping costs as the top reasons for charging for returns, with economic uncertainty and tariff risk close behind. When landed costs rise, free returns become increasingly difficult to justify, particularly in low-margin categories.

Return abuse compounds the challenge. The NRF estimated that 9% of all returns are fraudulent and reported that most surveyed retailers now use artificial intelligence tools to detect or prevent return fraud.

Reverse Peak Pricing Turns January Into a Profit Test

The cost of moving returned goods rises just as volume spikes. The U.S. Postal Service implemented temporary holiday pricing beginning in early October that extends into mid-January. UPS peak season demand surcharges also run into January.

For bulky items that trigger oversize or additional handling fees, these surcharges can quickly turn a free return into a margin-negative event. January has effectively become a reverse peak, with higher costs and lower recovery value.

Amazon’s Returns Model Signals the Direction of Travel

Amazon’s approach to returns underscores how consumer expectations and operational realities are converging. The company offers free returns with no box, tape or label required at thousands of locations, including Amazon stores, Whole Foods Market, Kohl’s and Staples.

The model reduces parcel shipping, accelerates item verification and improves recovery economics through consolidation. While few retailers can replicate Amazon’s scale, the strategy highlights that returns must move away from individual doorstep shipments and into controlled, lower-cost nodes.

An Operating Playbook for Returnageddon

For the merchants, steering returns to the lowest-cost channels, such as buy online, return in store, staffed drop-offs and label-free returns, can help with margins, as can return flows to prioritize exchanges or store credit, meeting consumer expectations for instant resolution while protecting cash flow.

Returnageddon is not a one-month inconvenience. It is a structural operating reality with a January stress test. In 2026, the retailers that succeed will be those that treat returns as a cross-functional discipline spanning logistics, payments, fraud and merchandising rather than a customer service afterthought.