Roughly 17 percent of holiday purchases come back, and the National Retail Federation pegs that flow at billions of dollars in merchandise — a volume that now lands in a secondary market worth more than 3 percent of U.S. GDP.

That figure, cited by Dale S. Rogers, ON Semiconductor Professor of Business at Arizona State University's W. P. Carey School of Business, anchored a returns-focused session at Sourcing Journal's annual fall Sourcing Summit in New York City on Tuesday. Rogers, who has tracked the secondary market since 2008, said it has grown from about 2 percent of U.S. GDP that year to over 3 percent in 2025.

"There are a lot of industries that aren't as big as 3 percent of GDP," Rogers said. "For quite a few years, the fastest-growing segment of retail has been on the secondary market side. You can buy stuff really cheap and sell it for not as cheap, so the margins can be very attractive."

Tariffs are raising the stakes, Rogers said. Forward logistics is routinized and highly structured; reverse logistics gives retailers a wider and more complicated set of options for where returned goods go. Tariff costs can shift the economics of moving those goods offshore — a calculation reverse-logistics teams must now run on every disposition decision. Companies typically staff reverse logistics thinly because it represents a smaller share of the business, and Rogers called that a potentially costly error.

Selective fraud controls, not blanket friction

Customer expectations for returns have never been higher. Laura Perdomo, vice president of location operations and partnerships at Happy Returns, the UPS-owned box-free, label-free drop-off provider, pointed to the company's latest "Returns Happen" report: 86 percent of shoppers said they were more likely to buy from a brand offering free returns and immediate refunds.

Perromo flagged two common failures. Retailers often are not upfront about return policies, and blanket anti-fraud rules imposed during peak season — when bad actors blend into higher volumes — punish legitimate customers.

"There's a little bit of a sense of betrayal when someone goes to create a return and finds out there's a fee or that they're going to have to wait," Perdomo said. "The goal is not to punish everybody with more punitive actions or more friction in order to prevent what a small population is doing."

Her recommendation: identify high-risk returns and apply additional verification selectively.

Target runs disposition on algorithms

Target processes more than 90 percent of its returns at guest services desks in stores, said Lindy O'Brien, the retailer's vice president of recommerce and returns. "Operationally, peak season is our big time for returns," she said. "The rest of the 364 days are about testing, learning and listening to our guests and team members."

Target has moved beyond treating secondary markets as a clearance channel. Algorithmic tools guide disposition decisions based on price, item condition, quantity, location and expected demand, determining whether it makes economic sense to hold inventory for the next season or move it into alternative channels such as eBay and TikTok Shop.

Apparel returns carry an operational advantage here. O'Brien said clothing is more likely than goods in other categories to come back with tags attached and without damage, which strengthens its resale economics.

"I think it's an 'and' strategy," O'Brien said. "It's really about whether we have the capabilities to put an item back into inventory and fulfill it again. When that isn't an option, that's where sustainable decisions and circularity come into play through donation or recycling the fibers and materials."

AI-driven routing expands

Goodwill Industries is using AI to assess donated goods, identify the highest-value items and route them to the most appropriate resale, donation or recycling channel. "You wouldn't have expected Goodwill to do that, and we're seeing that they're getting a lot more value," Rogers said. Retailers, 3PLs and other organizations are applying the technology similarly to returned, excess and donated inventory. Rogers cited Liquid Data as one newer player in AI disposition analysis and estimated "there's probably 20 just like them."

Warehouse basics unlock margin

Drew Taranto, vice president of strategy and product development for ecommerce and returns at DHL Supply Chain, argued retailers should treat returns as a value-recovery engine rather than a cost center. Basic warehouse capabilities can deliver high-margin recovery, he said, particularly restoration to saleable condition.

"Even Grade A products can be sold as new. It's things like hang tags — empowering your warehouse to put a hang tag back on a product when one has been removed, or adding fabric care tags. A lot of brands and manufacturers aren't doing that today," Taranto said.

Capturing that value requires capacity built for volatility. DHL has opened two facilities and upgraded others to expand throughput in its multi-client returns network, alongside a visibility platform that gives customers the data needed to streamline disposition decisions.

"Returns are very unpredictable," Taranto said. "We don't know what's coming in until we open that dock door and see what's in that truck. It is not pretty. It is not sexy. There's nothing cool about it. But you have to deal with it."

With tariff economics now in every offshore disposition calculation and AI-driven routing tools proliferating, retailers that under-resource reverse logistics heading into January risk leaving recoverable margin on the dock.