Post-holidays return season in Minnesota, U.S. might not be so easy this year

After the critical holiday shopping season that retailers big and small depend on to mark a profitable year, there’s an equally important — albeit less lucrative — period: the return window.

U.S. retailers, including Minneapolis-based Target and Best Buy, have clamped down on policies in an effort to balance out costly and long-running return programs. Though many stores still extend return timeframes to accommodate the gift-giving surge, the overall trend sees companies becoming less flexible on exceptions and more likely to charge processing fees.

Neither Target nor Best Buy agreed to share their return strategy. But online fraud schemes are one major reason why retailers are cracking down on returns. Fraudulent returns totaled nearly $104 billion in 2024.

Between November and December, the average consumer budgeted $890 to spend on holiday gifts and seasonal goods this year, about 1% less than in 2024, according to the National Retail Federation (NRF). This year, approximately 15.8% of all retail sales, amounting to $849.9 billion, will end up returned, a cost increase of nearly 50% since 2020.

About 72% of merchants now charge a fee for at least one type of return, according to the NRF’s annual survey. Many reported tradeoffs, like lower return rates and more consumer complaints.

Industry analysts said retailers are on a seesaw with customers when it comes to returns. Sellers aim to provide a friendly return policy that draws shoppers in and keeps them loyal without it eating too far into margins.

A survey from analytics firm Blue Yonder this year found most people would avoid in-store and online retailers or buy from a competitor if return policies became stricter.

A return is always a negative entry on a retailer’s balance sheet, said Necati Ertekin, a University of Minnesota business professor specializing in supply chains and operations.

As more shopping has gone online in recent years, the logistics costs of shipping — which a shortage of truck drivers has partly driven up — has created a situation where offering the same return policy is pricier today than in prior years. Meanwhile, demand for hassle-free returns has surged.

“It’s kind of a two-sided story,” Ertekin said. “On the one hand, it’s definitely costly. At the same time, if you don’t have it, you won’t have the sales.”

Ertekin said many retailers have shortened allowable windows for returns overall, and holiday extensions are less common than five years ago. Some have introduced restocking fees on expensive equipment, like electronics.

Changes in consumer habits are also influencing retailers’ policies.

Heightened garment return volumes have led some of the biggest retailers to scale back their programs. Earlier this year, online retail giant Amazon ended its “Try Before You Buy” policy while encouraging customers to use alternatives like its virtual fit for sneakers and glasses.

Also influencing policy is merchants’ growing level of concern with return fraud. And that’s not all organized criminal enterprises. Sometimes, it’s just dishonest consumers who, say, return a TV bought for the sole purpose of watching the Super Bowl. Or “wardrobing,” when a person buys an outfit for a night out and then returns the garment for a full refund after wearing it.

This year, an annual NRF survey of merchants found an increasing number of customers — about 45% — now believe “bending the rules” is OK. The survey found about 9% of returns today are fraudulent.

More nefarious consumer actions, like claiming to return an item but sending back an empty box, also persist, according to retailers.

As the complexity of returns has increased, so has the infrastructure needed to support them. Happy Returns, which UPS acquired in 2023, is a bulwark against some of the most flagrant forms of fraud — like sending back a box of rocks instead of the product — but it still has trouble identifying less obvious scams.