The January returns wave: turning holiday returns into exchanges, store credit and second orders

Every January, a slice of your best quarter comes back in the post. Gifts in the wrong size, the colour that looked different on screen, the jacket that was bought in two sizes on purpose. Brands tend to book this as a cost and move on. A customer who sends something back is still a customer, though, and the return is where you find out whether they stay one.

US retailers expect 17% of holiday sales to be returned, and 82% of shoppers say they return unwanted holiday gifts within a month of getting them, according to the National Retail Federation and Happy Returns. If you make most of your year in November and December, a big share of that revenue is in play for a few weeks in January.

Below: the legal floor in each major market, exchange-first returns, store credit, the product page fixes that prevent avoidable returns, and what to measure.

How big is the January returns wave?

The best public numbers come from the US. The 2025 Retail Returns Landscape report from NRF and Happy Returns, a UPS company, puts total US returns at US$849.9 billion, or 15.8% of annual retail sales. Online is higher at an estimated 19.3% of sales. Holiday sales sit around 17%, a rate the report describes as steady year on year.

Timing matters as much as volume. The same survey of 2,006 US consumers found 82% return unwanted holiday gifts within one month of receipt, which pushes the bulk of the work into early and mid January. Big retailers stretch this further: Amazon let most items bought between 1 November and 31 December 2025 be returned until 31 January 2026, and shoppers expect the same elsewhere.

One caveat: the merchant side of the NRF study surveyed 358 ecommerce professionals at US retailers with more than US$500 million in revenue. Treat it as a big-retail benchmark. Your own Shopify data, by category, beats any industry average.

The experience also decides what happens next. In the NRF data, 71% of shoppers say a poor returns experience makes them less likely to shop with a retailer again, up from 67% a year earlier, and 52% say they will not buy at all if they expect a difficult return.

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The best public numbers come from the US.

What does the law require for returns in the US, UK, Canada, Australia and Asia?

Before you design a flow, separate what you must do from what you choose to do. In most markets the legal floor covers faulty goods and goods that do not match their description. Change-of-mind returns, which make up most of the January wave, are largely a policy choice. The UK is the major exception for online sales.

This is a general overview for planning, not legal advice. Rules change and vary by state and province, so check the official guidance for each market you ship to.

Why should you offer an exchange before a refund?

A refund ends the sale and costs you shipping both ways. An exchange keeps the sale, often keeps the margin, and gets the customer the thing they wanted in the first place. In the NRF survey, 76% of shoppers prefer a return option that gives an instant refund or exchange, so speed matters more than the label you put on it.

An exchange-first flow puts the exchange options at the top of the returns portal. The customer picks the item and the reason, then sees the same product in another size or colour, then other products, and only then a refund to the original payment method. The refund stays visible, which matters most in the UK.

Loop's 2026 Global Ecommerce Retention Report, based on its own data from 23.4 million returns across 4,000 plus Shopify merchants between November 2024 and October 2025, shows how common this is now: 73.6% of Loop merchants offer exchanges and 49.2% offer Shop Now, which lets a customer put the return value toward any item in the store. Shopify's native returns tools also support exchanges and self-serve return requests from the order status page, so smaller brands can start without an app.

• Show same-product variant swaps first, with live stock, so customers are not offered a size you do not have.
• Ship the replacement once the carrier scans the return. Waiting for it to reach your warehouse adds a week.
• Make exchanges free even if refunds carry a fee. The price gap does the steering for you.
• Give exchanges a slightly longer window than refunds. Loop's merchants average 41 days for exchanges and 39 for refunds.

Does bonus store credit change what customers choose?

For about half of them, yes. Narvar's 2025 State of Post-Purchase survey of 3,461 US online shoppers, run in August 2025, found 54% would choose store credit over a cash refund if they received a bonus, such as US$105 of credit for a US$100 return. In Loop's data, 51.7% of merchants using Shop Now pair it with bonus credit, at an average incentive of US$11.28.

Store credit works best when it is easy to spend and hard to forget. Shopify lets you refund a return to store credit, or split a refund between the original payment method and credit, and set an expiry date if you want one. Check local rules before adding expiry, since gift card and credit expiry is regulated in several markets.

Be careful in the UK. A customer cancelling within the 14-day period is entitled to a refund to their original payment method. You can offer bonus credit as an alternative, but it has to be a genuine choice.

Which product page fixes prevent avoidable returns?

The cheapest return is one that never happens. Many January returns trace back to a promise the product page made: a fit that ran small, or a colour that photographed warmer than it is. Fix the page and you cut returns for next season too.

Bracketing is a clear signal. Merchants in the NRF study say 23% of purchases in the past year included a bracketed item, rising to 26% in apparel and footwear. Customers buy two sizes when the page does not give them the confidence to buy one, and most of the tactics retailers use against bracketing are product page changes.

• Read your return reasons by SKU. A product with a high "too small" rate needs a fit note on the page, or a size chart that matches reality.
• Add the model's height and size worn to every apparel image set, plus a flat measurement chart in centimetres and inches.
• Shoot colour in daylight and add one unedited photo. Call out when a shade looks different on screen.
• Surface review text that mentions fit, sizing and quality near the size selector, where the decision happens.
• Put the returns and exchange policy on the product page in one plain line, so expectations are set before purchase.

How do you win back customers who returned a holiday order?

Customers who took a refund are the group most likely to drift, and the easiest to identify. They are already in Shopify with a return reason attached. Build a short win-back sequence in your email or SMS platform that starts after the refund is processed, and segment it by reason.

• Wrong size: send a fit guide for the exact product, plus the size most customers with the same complaint ended up keeping.
• Not as expected: show the product in real customer photos or video, or suggest a closer alternative.
• Gift return: these customers may never have bought from you. Welcome them as a new customer and introduce the range.
• Unspent store credit: remind at 14 and 30 days, then before any expiry date, with products that match the original order.
• Repeat or serial returners: leave them out of discount-led win-back offers, so you do not pay to fund the next bracketed order.

How do you get returned stock back on sale before it loses value?

Every day a returned item sits in a tote, it loses value. Winter stock returned in mid January has a few weeks of full-price selling left in the northern hemisphere, and Australian summer lines run out of season by March. Speed of processing decides whether a return goes back on the shelf at full price or ends up in a clearance bin.

Plan January capacity in December. Most brands staff up for outbound orders before Christmas and then run the returns peak with a skeleton crew. Book warehouse or 3PL time for inbound processing in the first three weeks of January, and agree a target, such as two working days from receipt to restock, so returned items show as available stock while customers still want them.

Grade every item on arrival. Unworn items with tags go straight back to sellable stock. Items with minor marks can go to an outlet collection, a seconds sale or a resale programme. Faulty items go back to the supplier with the defect recorded against the SKU, which also gives you evidence for the product page fixes above.

• Restock exchanges first, since the same SKU may be what another customer is waiting for.
• Match the grading rules to your returns policy, so staff do not reject returns your policy accepts.
• Track days from receipt to restock weekly through January and fix the bottleneck while the wave is still running.

What should you measure after the January wave?

Return rate on its own tells you little about January. A brand that turns half its returns into exchanges can post the same return rate as last year and a much better January.

1. 1.NRF: Consumers expected to return nearly $850 billion in merchandise in 2025 (15 October 2025)
2. 2.NRF and Happy Returns: 2025 Retail Returns Landscape (full report)
3. 3.About Amazon: Amazon holiday return policy 2025
4. 4.Loop: 2026 Global Ecommerce Retention Report benchmarks
5. 5.eMarketer: A small bonus is all it takes to keep refund dollars in your store (Narvar 2025 State of Post-Purchase data)
6. 6.Narvar: 2025 State of Post-Purchase
7. 7.Shopify Help Center: Returns and exchanges
8. 8.Shopify Changelog: Refund to store credit when processing a return
9. 9.GOV.UK: Accepting returns and giving refunds
10. 10.Office of Consumer Affairs (ISED Canada): Refund and exchange
11. 11.ACCC: Refunds and returns poster
12. 12.CASE Singapore: CPFTA and Lemon Law
13. 13.Japanese Law Translation: Act on Specified Commercial Transactions
14. 14.Department of Consumer Affairs India: Consumer Protection Act 2019 and online transactions
15. 15.New York Department of State: holiday refund and return policy consumer alert (24 December 2025)