UK retailers face GBP £1.05bn hit from gift returns

UK retailers face an estimated GBP £1.05 billion hit from post-Christmas returns, as shoppers prepare to send back around 52 million unwanted gifts, according to new research from supply chain software firm Manhattan Associates.

The study suggests that while the proportion of consumers who return gifts has fallen over the past year, from 43% to 33%, the financial impact remains large. The average value of a returned item stands at GBP £57.

"The sheer scale of gifts being returned this year underscores the immense logistical and financial pressure on retailers after the festive season," said Martin Lockwood, Senior Director, Manhattan Associates. "The returns cycle remains a critical factor in building long-term trust and loyalty between UK businesses and their customers. This demands systems and processes that can recover value, while maintaining consistent, positive shopping experiences."

Mixed shopping habits

The findings indicate that hybrid shopping remains the dominant pattern for UK consumers. Almost one in three respondents, 31%, said they planned to split Christmas purchases evenly between in-store and online channels. A further 26% intended to shop mostly in store but partly online.

Only 5% of consumers said they would make all their festive purchases online. This signals a shift away from the peak eCommerce levels seen immediately after the pandemic. In-store retail continues to hold a central role in the Christmas period.

The research highlights marked differences between age groups. Among those aged 65 and over, 23% planned to shop entirely in person. This compares with 10% of 18 to 24-year-olds. Retailers must manage inventory and returns across channels that serve both digital-first and store-focused shoppers.

Returns concentrated in fashion

Fashion items continue to dominate the returns landscape. Clothing was the most commonly returned category, cited by 39% of consumers. Shoes and other footwear followed closely at 37%.

Clothing also topped the list in the previous year, at 42%. Footwear returns have risen sharply, from 21% last year to 37% this year. The data suggests ongoing challenges with sizing, style and fit in online and hybrid fashion purchases.

Jewellery and watches accounted for 12% of returns. Cosmetics also represented 12%. These categories often involve subjective preferences, which can raise the likelihood of items being sent back.

Preference for people

The study points to a continued preference for human interaction during the returns process, despite investment in automation and digital tools across retail.

Four in five respondents, 81%, said they would rather deal with a store associate than a digital assistant when handling a return. Trust emerged as the main reason, with 70% of those polled identifying it as the key factor behind their choice.

Retailers are experimenting with chatbots and AI-driven systems for customer service and order management. Many shoppers still seek in-person reassurance when resolving issues around refunds, exchanges and return conditions.

The research indicates support for a blended approach that combines technology with human staff in stores and contact centres. Digital tools handle basic queries and processing tasks. Staff manage more complex or sensitive interactions.

Generational contrasts

Attitudes towards returns vary sharply by age. Overall, 58% of people said they had returned a Christmas gift at some point. The picture changes significantly when broken down by demographic group.

Almost nine in ten shoppers aged 65 and over, 87%, said they did not return any gifts last Christmas. This suggests an older cohort that appears more inclined to keep items or resolve issues informally.

By contrast, younger adults are more likely to engage with formal returns channels. More than half of 18 to 24-year-olds, 53%, admitted to returning at least one gift last Christmas. The generational gap highlights differing expectations around consumer rights, convenience and the role of digital channels.

These patterns add complexity for retailers that operate across multiple age segments. Policies on time limits, receipts, digital returns labels and in-store exchanges must accommodate both heavy and light returners.

Post-Christmas pressures

Retailers enter the new year managing the cost and operational strain of reverse logistics. Returned items must be transported, inspected and reprocessed for resale, discount or disposal. The volume of goods moving back through networks after Christmas can stretch warehouse capacity and staff resources.

"Retailers are stuck with competing pressures in the wake of the Christmas period," said Lockwood. "This year, we're seeing a real clash between consumer expectations which often lean towards seamless, free, and convenient returns, and the operational realities for businesses, including the cost of processing returns and reintroducing and reselling (previously unwanted) inventory."

Retailers now assess how changing hybrid shopping habits, age-related differences and a preference for human interaction will influence returns strategies for the next peak trading season.