Freight Drives Part of Retail’s $850 Billion Returns, ITF Report Finds
ITF report ties part of retail’s $850 billion in returns to freight execution
Retailers expected consumers to return $849.9 billion in merchandise in 2025, equal to 15.8% of total retail sales, according to the National Retail Federation and Happy Returns’ 2025 Retail Returns Landscape report. The projection was down from $890 billion, or 16.9% of sales, in 2024.
A new report from third-party logistics provider ITF Group argues that at least some of the cost associated with those returns may be connected to transportation and freight-handling decisions. The company’s Retail Reality Check Report, released Sept. 30, says retailers often treat returns, freight costs and peak-season readiness as separate issues handled by different departments.
ITF contends that the problems can share the same origin: how freight partners are selected, managed and measured.
“We’ve accepted a false premise in this industry. We talk about returns as if they’re a customer service issue, something e-commerce has to deal with,” Sam Agyemang, ITF’s vice president of business development and sales, said in the report. “In reality, many of those returns are symptoms of an execution failure. And it’s always upstream.”
How freight problems can surface as returns
Agyemang, who previously worked on the shipper side of retail, said products can pass through numerous handling points before reaching a customer. A holiday toy, for example, may be loaded at a manufacturing site, palletized for domestic or international transport, opened and stocked at a retail location, and later repackaged for delivery to a consumer.
Each transfer creates another opportunity for damage, packaging problems or signs of use. Those issues may not be identified as transportation failures when a customer sends the product back.
“There are lots of hands that touch these goods along the way,” Agyemang said. “If you aren’t necessarily privy to the process or the relationships that you have throughout the supply chain … you could be sending out product that’s maybe slightly damaged, looks used, etc. And that can be part of your return as well.”
Retailers can also absorb the cost of reverse logistics when customers expect returns to be free. A Kenco survey of more than 350 North American consumers found that 47% expected free returns, according to the information provided. The retailer may then pay to move the product back, inspect it and determine whether it can be returned to inventory.
That means a freight decision initially viewed as a procurement savings may produce costs that appear later in customer service, inventory or returns operations.
Carrier scorecards may stop too soon
ITF says traditional carrier scorecards often focus on whether a shipment arrived on time and stop measuring performance once delivery is complete. The company argues that retailers should also examine whether transportation affects product damage, customer returns, chargebacks and inventory availability.
The report questions whether a lower linehaul rate always represents a true savings. ITF describes a marginal discount from a lower-cost carrier as a potential transfer of risk into missed appointment windows, damaged freight or other costs that may be recorded outside the transportation department.
For professional drivers and carriers, the issue highlights the importance of more than simply meeting a delivery appointment. Loading quality, securement, handling practices, communication and documentation can affect the condition of freight long after a truck leaves a shipper or receiver.
ITF recommends that retailers ask whether they track freight’s effect on return rates, account for total risk when comparing carrier bids, understand where liability rests, continue vetting carriers after onboarding and establish freight relationships before the peak season begins.
Data does not establish how many returns are freight-related
The available retail data does not quantify the share of returns caused by freight handling. NRF reported that 9% of 2025 returns were fraudulent, but its release did not identify how many of the remaining returns involved transit damage, warehouse handling or other supply chain issues.
ITF’s report also does not provide a percentage or dollar figure for returns tied specifically to freight. Its conclusion is that retailers may be recording some transportation-related costs in other departments, not that all nonfraudulent returns result from freight problems.
The report also points to increased attention on carrier and broker due diligence. It references a May U.S. Supreme Court ruling in Montgomery v. Caribe Transport II involving potential state negligent-hiring claims against freight brokers and the carriers they select. The ruling addressed brokers, while the court did not decide whether shippers face the same exposure.
Agyemang said retailers should not wait until peak season to rebuild or reevaluate their carrier networks. He argued that vetting and relationship-building are more difficult when capacity is tight and shipping volumes are elevated.
Returns often arrive after the holiday peak
Retailers surveyed by NRF expected 17% of holiday sales to be returned, a figure consistent with previous years. Those returns generally occur after the busiest shipping period, when the original freight decisions may be several weeks or months behind the costs appearing in January reports.
ITF said its own operating model produced a 98% on-time record across more than 100,000 loads annually. The company also reported a roughly 90% reduction in fraud-related incidents and exposure after adding fraud-prevention and turnaround controls, along with an in-transit damage rate of approximately 0.004%. Those are self-reported company figures.
The broader issue for retailers and carriers is how transportation performance is defined. On-time delivery remains important, but ITF argues that a complete evaluation should also consider freight condition, handling, claims, returns and the costs that appear after delivery.
