How apparel companies handle the post-holiday return surge

The opinions expressed here by Trellis expert contributors are their own, not those of Trellis.​

Holiday returns look clean from the customer side: Click a button, scan a code, drop off a box. The refund lands like magic, usually within a week or so.

But behind that drop-off counter is a second supply chain that’s uglier, faster and far less forgiving than the simple consumer return process. Apparel isn’t a toaster; it doesn’t sit on a shelf politely while you decide what to do with it. The minute the calendar turns, the value starts leaking out.

The National Retail Federation projects U.S. consumers returned about $850 billion in merchandise in 2025, about 15.8 percent of total retail sales. Online shopping is worse, with returns estimated at 19.3 percent of all online sales. And then the holidays hit the gas: retailers expect roughly 17 percent of all holiday sales to come back.

So where do all those returns go? Not straight to the landfill, but not straight back to the rack, either. It goes through a triage system designed around one brutal reality: Every extra touch costs money and every extra day kills resale value. Here’s a breakdown of how those returns play out. 

Backroom triage

Store returns start with one question: Can we sell it again today? The key here isn’t “should we,” but can we?

If it’s clean, tagged, the current season and still moving, it gets scanned and put right back out. That’s the golden path of returns: no shipping, no processing center, no extra handling, no delay. One touch, and it’s back to revenues.

Most apparel doesn’t get that easy outcome. A little deodorant smell, makeup on the neckline, a missing hangtag or a stretched waistband can make a return take another route. A “looks worn” vibe you can’t prove but you can’t ignore. Once it fails that quick test, it drops out of the full-price stream.

Then it’s a routing decision. Companies can ship it to a returns center, transfer it to another store or mark it down. None of these choices are made with feelings. They’re made with a spreadsheet and a clock.

The returns center

Online returns usually skip the store and go straight to a processing site. Many brands and retailers try to reduce chaos by consolidating shipments, reducing packages and minimizing touches. Happy Returns, for example, sells the “box-free” drop-off model that aggregates returns and sends them together to regional hubs.

Once the garment hits a processing table, it gets graded: sellable as new, sellable with light cleanup, sellable only through discount channels or not sellable.

“Cleanup” sounds minor until you watch the labor stack up: rebagging, relabeling, steaming, lint removal and tag replacement. Rebuilding sets that came back incomplete or repacking accessories. It’s a lot of hands-on work for a low-margin item.

This is why “free returns” quietly rewires product strategy. An $18 top can become a loser for apparel companies after two shipping legs and a few minutes of paid handling. At that point, the retailer isn’t asking whether it’s a nice top. They’re asking whether it’s worth touching one more time.

Fraud and return abuse

Returns now also come with a policing job for companies. NRF’s research estimates 9 percent of all returns are fraudulent, which are defined as anything from customers claiming items didn’t arrive to returning a defective item you already owned. What’s more, nearly half of shoppers say it’s acceptable to bend the rules when returning items.

Apparel has its own brand of abuse. “Wardrobing” is the most rampant: wear it once, return it and leave just enough ambiguity as to whether you did or didn’t use the product that nobody wants to fight. The result is predictable: The garment becomes markdown merchandise (or outlet) or a write-off. 

While companies are trying new ways to combat wardrobing, the reality is that the system is spending more money just to decide whether it’s being cheated. During the 2025 holiday season, for example, Happy Returns tested tools aimed at spotting fakes and suspicious patterns by using sophisticated barcode and database recognition software. 

Where the clothes actually go

Once things are sorted, returned apparel usually ends up in one of five places: 

• Back on the shelf: Either in the same store, another store or back into the “new” online flow. That’s a clean loop and what retailers ideally want.
• Markdown: Still sold, but discounted to reflect the clock, handling efforts and weaker demand.
• Off-price and liquidation: Bulk movement where the brand recovers pennies on the dollar. Sure, it’s better than zero, but not a win.
• Re-commerce or donation: Heavily dependent on condition, category and what the brand is willing to operationalize.
• Disposal: The dead end.

To be fair, disposal doesn’t always mean “tossed immediately,” but it’s far more common than customers assume, especially for low-value goods, intimate categories and damaged items where the labor cost of sorting exceeds the resale value. Reverse logistics company Optoro estimates returned inventory generates 5.8 billion pounds of waste annually and some goods end up in the landfill just because reprocessing costs exceed resale value. That’s the ugly truth: sometimes the cheapest move is to stop moving it.

Even when a returned garment isn’t tossed in the trash, recycling isn’t a reliable safety net. The National Institute of Standards and Technology notes that only about 15 percent of used clothing and textiles in the U.S. are reused or recycled, with the rest going to landfills or incineration. That’s because many parts of clothing, such as trims or blended materials (a shirt made of cotton and spandex), make it difficult and costly to separate materials for actual recycling. 

So the post-holiday return surge doesn’t just stress customer service and warehouse labor. It exposes how thin the whole “after” system really is.

What can change the outcome

While all this can seem overwhelming, consumers and companies do have options to make the system better. First, speed matters. The faster a return is inspected, graded and routed, the better the resale odds. That’s why retailers extend return windows for shoppers, then sprint internally to process the wave with seasonal labor, third-party logistics providers and overflow capacity. 

But reducing returns matters even more. Better sizing, better specs, clearer product information, fewer mystery fits — especially online and during gifting season — cuts the problem off at the source. Returns prevention is still the highest-ROI “sustainability” program in most closets.

Consolidation matters, too, because it reduces wasteful motion. If you can reduce redundant shipping and handling, more garments stay economically sellable instead of sliding into the loss pile.

Holiday returns aren’t a character flaw. They’re baked into modern retail. But once a garment crosses the return desk, it stops being a product and becomes a routing problem. If the system finds a second buyer fast, it lives. If it doesn’t, that refund gets attached to a quiet pile of waste.