How much of the $850 billion in retail returns is actually caused by freight decisions?

ITF Group's report does not provide a specific percentage of returns tied to freight handling. However, the analysis traces many returns to poor carrier vetting and handling rather than customer choice, arguing that returns are often misclassified as customer service issues when they originate from procurement and transportation decisions. The National Retail Federation found 9% of 2025 returns were fraudulent, but public data does not break out transit damage.

Why do retailers use low-cost carriers if they drive higher return rates?

ITF argues that procurement teams optimize for rate discounts, which appear favorable on their departmental P&L. However, the downstream costs (chargebacks, damage claims, reverse logistics) are charged to customer service or operations departments, masking the true total cost of ownership. This siloed accounting structure creates a false incentive to choose carriers based on price alone rather than total risk.

What does the Montgomery Supreme Court ruling mean for carrier selection liability?

In May 2025, the Supreme Court ruled 9-0 in Montgomery v. Caribe Transport II that freight brokers face state negligent-hiring liability for carrier selection. The ruling covered brokers specifically, and the court did not decide whether shippers carry the same exposure. ITF advises companies to rethink carrier vetting practices immediately, particularly before peak season, to manage emerging legal and operational risks.

What performance standards should retailers use to score carrier bids?

Traditional carrier scorecards measure only on-time delivery and stop when freight arrives. ITF recommends scoring carriers on total risk, including their effect on return rates, damage rates, and chargeback frequency. The report identifies five key questions retailers should ask: whether they track freight's effect on returns, score bids on total risk, know where liability sits, vet carriers after onboarding, and build relationships before peak season. ITF reports a 98% on-time rate, 0.004% in-transit damage rate, and a 90% reduction in fraud-related incidents after adding controls.

How do product handling issues across the supply chain become returns?

Products encounter multiple handoff points: manufacturing, palletization, warehousing, store shelving, reboxing for delivery, and reverse logistics. At each step, goods can be slightly damaged or appear used without being defective. When consumers receive items in this condition, they return them. Retailers then absorb reverse logistics costs and inventory rework. Agyemang notes that supply chain visibility is good, but organizations lack inter-departmental alignment to trace the root cause upstream to the carrier or warehouse that caused the damage.

Procurement

Moderate

Retailers Misallocate $850B Returns Cost, Study Shows

Nov 12, 2026

Get tomorrow's supply chain signal

Daily supply-chain brief. Free, unsubscribe anytime.

The signal

An ITF Group analysis challenges how retailers account for the $849.9 billion in merchandise returns expected in 2025, arguing that many return costs actually originate from poor carrier vetting and freight handling rather than customer behavior. The report contends that retailers misclassify freight-related failures, chargebacks, and damage as customer service issues when they should be traced to procurement decisions.

With contract truckload rates reaching 52-week highs of $2.72 per mile in October, selecting low-cost carriers without evaluating total risk exposure creates hidden costs downstream. The analysis highlights a structural problem: procurement celebrates rate discounts while customer service departments absorb the resulting returns, damage claims, and chargebacks, preventing cost visibility across the organization.

Supply chain leaders must align freight selection criteria with return rate performance metrics and strengthen carrier vetting before peak season, especially after the Supreme Court's Montgomery ruling exposed liability gaps in carrier selection practices.

How this affects:

Total Wine & More

Open the full daily intelligence brief · Pulse 78

#freight-cost-allocation

#procurement-strategy

#damage-prevention

#peak-season-planning

Frequently Asked Questions

What This Means for Your Supply Chain

Simulation Suggestion

strategic

What if retailers measure carrier impact on return rates instead of just on-time delivery?

Model a scenario where carriers are scored on return rate contribution rather than delivery timeliness alone. Compare procurement cost savings from low-cost carriers against downstream customer service and reverse logistics costs when return rates correlate with carrier selection. Show the total cost difference over peak season.

Run this scenario

Simulation Suggestion

this month

What if a retailer reallocates 2% of returns to freight cost accounting?

Assume 2% of the $849.9 billion in 2025 returns (approximately $17 billion) are actually freight-related costs misclassified as customer returns. Model the impact on procurement budgets, carrier spending decisions, and departmental P&L alignment if these costs are reclassified to supply chain instead of customer service.

Run this scenario

Simulation Suggestion

this week

What if truckload rates continue climbing and force retailer carrier consolidation?

Model the operational impact if contract truckload rates continue rising from the current 52-week high of $2.72 per mile. Simulate procurement pressure to consolidate carriers on fewer, lower-cost options, and calculate the downstream return rate and damage cost increases if quality vetting is sacrificed to reduce rate spend.

Run this scenario

Go deeper:

Supply Chain Modeling Software: A Buyer's Guide

Supply chain and logistics modeling, how to evaluate modeling software, and how to choose the right model for questions like where to put a new warehouse.

Shipping & FreightHigh Impact

Retail's $850B Returns Crisis Stems from Freight, Not Customer Service

Oct 2, 2026

Shipping & FreightHigh Impact

Retail Returns Crisis Reaches $849.9B as Freight Costs Soar

Oct 21, 2026

Shipping & FreightHigh Impact

Q3 Freight Surge Squeezes Automakers, Boosts Rail Efficiency

Nov 10, 2026

Get the daily supply chain briefing

Top stories, Pulse score, and disruption alerts. No spam. Unsubscribe anytime.