Returns are a big and costly ordeal. While a majority of retail focus on getting items to store shelves or doorsteps, what happens afterwards is increasingly becoming a top of mind issue for supply chain executives.
To put things in context, consumers were expected to return $849.9 billion in merchandise in 2025, according to the National Retail Federation. The projection, from NRF and Happy Returns’ 2025 Retail Returns Landscape, equals 15.8% of retail sales, down from $890 billion, or 16.9%, in 2024.
ITF Group, a third-party logistics provider based in Hazelwood, Missouri, argues retailers book part of that cost in the wrong department. Its Retail Reality Check Report, released Sept. 30, traces many returns to how a retailer vets and manages its carriers.
The report lands as retailers pay more to move holiday freight. Contract truckload rates reached a 52-week high of $2.72 a mile plus fuel on Oct. 9, up 18% year over year, according to FreightWaves SONAR data. ITF’s report contends a marginal discount from a lower-cost carrier is often a risk transfer. The cost moves into missed appointment windows that trigger chargebacks, cargo damaged in handling, and returns no one ties back to the freight decision.
“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 handling turns into returns
Agyemang worked on the shipper side of retail before joining ITF. In an interview with FreightWaves, he said returns often get blamed on something that went wrong along the logistics route.
“If you kind of scratch right beneath the surface, supply chain is where everything becomes visible,” he said. “It’s not necessarily where the problems originated from.”
He described a hypothetical hit holiday toy: loaded at its manufacturing origin, palletized for domestic or international shipment, opened and put on a shelf, then boxed again for delivery.
“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.”
Many shoppers expect the trip back to cost them nothing. In a Kenco survey of more than 350 North American consumers, 47% said they expect free returns.
Agyemang said the retailer then covers the reverse logistics and the work of getting the item back into inventory.
“What procurement is seeing as a good rate for their P&L,” he said, “could now be a customer service issue when they realize that this product was mishandled in the transportation of it.”
Freight costs split across departments
Retailers handle returns, freight cost, and margin timing as three conversations in three departments, the report argues. A product mishandled in a warehouse, it says, surfaces weeks later as a percentage in another department’s report.
“We’re organized, especially in the West, for very segmented structures and departments. They’re not necessarily always talking about their P&L amongst each other,” Agyemang said.
But the public data does not show how many returns start in freight. NRF found 9% of 2025 returns were fraudulent, and its release does not break out how many of the rest involved goods damaged in transit. ITF’s report gives no figure for the share of returns tied to freight handling.
Scoring carriers on more than on-time delivery
The standard carrier scorecard stops when the freight is delivered, according to the report.
“A question every shipper should ask themselves is how many companies measure transportation success only by on-time delivery, and never measure how transportation affects return rates,” ITF CEO Sam Burkhan said in the report.
The report closes with five questions for retailers: whether they track freight’s effect on return rates, score carrier bids on total risk, know where liability sits, vet carriers after onboarding, and build freight relationships before peak.
The liability question has sharpened this year. In May, the U.S. Supreme Court ruled 9-0 in Montgomery v. Caribe Transport II that freight brokers can face state negligent-hiring suits over the carriers they select. The ruling covered brokers. The court did not decide whether shippers carry the same exposure.
“Because of that Montgomery ruling, everyone needs to start rethinking and retraining how they vet their carriers,” Agyemang said. “And unfortunately during your peak season, that’s not when you want to start vetting carriers. You probably can’t rebuild your network in a few weeks in peak, right?”
ITF’s self-reported performance figures
ITF says its operating model is built to catch failures before they become returns, chargebacks, or stockouts. It reports a 98% on-time record across more than 100,000 loads a year. ITF says fraud-related incidents and exposure fell about 90% after it added fraud-prevention and turnaround controls, and it puts its in-transit damage rate at about 0.004%. Damage of that kind can come from causes beyond ITF’s handling, such as improper loading or driver error, the report says.
Returns arrive after peak
In NRF’s 2025 survey, retailers expected 17% of holiday sales to come back, in line with previous years.
“If you’re able to have good vetted carrier relationships from the start, I do feel that you’re going to eliminate a lot of the risk that you will see that will show up in different departments in January,” Agyemang said.
Why it matters: Retailers are paying the highest contract truckload rates in a year to stock shelves for the holidays. If ITF is right, picking the cheapest carrier to offset that cost can create damage and returns that land in January, in budgets procurement never sees.
