January Returns Surge—Where Deductions Hide
- The HRG Team
- Jan 5
- 3 min read
If you sell into retail, January is when the “customer experience” turns into a finance problem.
Returns are the obvious headline. But the sneakier issue is what rides along with returns: disputes, claims, and deductions that show up weeks later on the remittance—often coded in ways that make them hard to validate quickly.
And the volume is no joke. Retailers estimate 15.8% of annual sales will be returned in 2025—about $849.9 billion, with 19.3% of online sales expected to come back.
That kind of churn is exactly why January can feel like you’re shipping with one hand and backtracking with the other.
Why January returns turn into deduction risk
Returns increase deduction pressure for three simple reasons:
More touches = more variance. Every time product moves—store to DC (distribution center), DC to returns processor, returns processor to liquidation—there’s more room for something to be misclassified, damaged, or “lost in the narrative.”
Fraud and “rule-bending” creates stricter controls. The same returns report found 9% of returns are fraudulent, and 45% of shoppers say it’s acceptable to “bend the rules.” Retailers respond with more scrutiny, and that scrutiny often shows up as supplier-facing chargebacks and claims.
Finance gets hit after the operational moment has passed. By the time a deduction appears, the people who remember the shipment, the packaging, the promotion, or the condition of goods have moved on to the next fire.
That delay is where margin disappears.
The most common “return-adjacent” deductions suppliers see
You’ll recognize these buckets (names vary by retailer, but the themes repeat):
Damage/defectives (and the never-ending debate: actual product defects vs. shipping damage)
Unsaleables / RTV (return to vendor) penalties
Shortages linked to reverse logistics moves
Pricing disputes triggered by credit/rebill confusion
Duplicate deductions (yes, it still happens—especially during peak volume clean-up)
The risk isn’t just the deduction itself. It’s the time cost. If your team spends January chasing low-quality claims, you’ll miss the high-win recoveries that actually move cash.
A fictional example (to make it real)
Fictional scenario: A mid-sized food brand notices a spike in “defective” claims in the first week of January. The quality team panics—until they pull photos from the warehouse and realize the outer cases are crushed, while inner units are fine. That’s not a defect trend. That’s a handling and packaging conversation.
But here’s the catch: those claims were taken as deductions two statements later—after the warehouse photos were harder to find, and after the carrier documentation was archived.
That’s how good money becomes “too hard to fight.”
A practical January playbook: reduce noise, win the right disputes
You don’t need to chase every claim. You need a triage system.
Step 1: Separate returns volume from returns risk
Create a simple weekly view by retailer:
Total return dollars (or units)
Total deductions tied to returns/claims
Top 5 reason codes
Top 20 SKUs affected
If returns are up 5% but return-related deductions are up 25%, you’ve got a coding or process issue—not just a “bad January.”
Step 2: Build a “fast proof” package before the memory fades
For the top deduction buckets, standardize what “proof” looks like:
Proof of delivery (POD) and freight documentation
Invoice and item-level mapping (what shipped vs. what’s claimed)
Photos (pack-out, pallet, case condition—where available)
Return authorization/claim documentation
Retailer correspondence and disposition notes
The key is speed. A dispute package assembled 5 days after the event is a different animal from one assembled 45 days later.
Step 3: Watch the fraud-and-abuse pressure indirectly
Even if fraud is “a retailer problem,” supplier policy tightening can follow.
If your retail partner is dealing with rising fraudulent returns (again, 9% is the cited benchmark in the NRF/Happy Returns work), this may show up as tougher disposition standards, stricter timelines, and less tolerance for missing backup.
So don’t wait for the retailer to announce a change. Track your own patterns.
Step 4: Pick your battles (and win the ones you pick)
In January, the best wins often come from:
Duplicates and obvious errors
Repeatable claim types with consistent documentation
High-dollar exceptions (not the death-by-$43 cuts)
Misclassified damage vs. defectives (when evidence supports it)
Where HRG fits (without the hype)
At HRG, we focus on helping suppliers validate what’s valid, challenge what isn’t, and document the why, so deductions don’t become a quiet margin tax.
If January is already noisy for your team, a smart next step is to identify which return-related deduction buckets are most “recoverable” for you—and build the process around those.
