In this article, learn about:
How to prepare for peak season reverse logistics by confirming retailer return-to-vendor (RTV) terms and authorization requirements.
How to forecast post-holiday return volumes and plan warehouse capacity, staffing, and inventory disposition.
How to reduce returns-related deductions, processing delays, and operational disruptions with a supplier readiness checklist.
Retailers expect roughly 17% of holiday sales to be returned, according to a recent National Retail Federation (NRF) report. This represents approximately $170 billion in merchandise.
A lot of the guidance surrounding this seasonal surge focuses on retailers and third-party logistics providers (3PLs), particularly those managing distribution and returns centers. For suppliers, however, preparation comes with its own set of priorities.
Why Is Reverse Logistics Peak Season a Supplier Problem?
Merchandise sold in November and December comes back through retailers in January, and the share that moves upstream lands on the supplier’s dock. Loop Returns' 2024 holiday-season data shows $224.2 million in returns processed from December 26 to January 12. By then, seasonal headcount is typically winding down, and attention has moved to first-quarter planning.
Suppliers face two kinds of inbound returns. Standard customer returns generally follow sales volume, while unsold inventory may be returned when a supplier has agreed to accept stock exceeding a negotiated threshold.
Retailers are preparing for the post-holiday returns surge well before it arrives. According to an NRF and Happy Returns survey, 49% of retailers reported relying on third-party logistics providers, 43% planned to hire seasonal returns staff, and 37% were extending return windows. For suppliers, these decisions have implications of their own, particularly when it comes to coordinating returns, managing inventory, and meeting retailer deadlines.
What Does Holiday Returns Readiness for Suppliers Look Like?
Preparing for higher return volumes starts with three priorities:
Confirming return terms
Assessing receiving capacity
Establishing a clear disposition process
Each requires coordination across teams, particularly with buyers and sales teams who can help anticipate which products are likely to be returned and in what quantities. As industry commentary dating back to 2013 emphasizes, these conversations are an important part of planning for returns before they arrive.
Settle the RTV Process for Each Retailer Before Peak Season
Each retailer establishes its return-to-vendor (RTV) and authorization requirements through its vendor agreement. These terms vary by retail partner.
At Lowe’s, suppliers select their return, authorization, and collection methods during onboarding. These selections determine how customer returns are handled, including whether a supplier provides blanket authorization or approves individual returns. At Walmart, a defective allowance is an upfront discount. A 5% allowance takes 5% off each invoice, so the supplier avoids deductions on every return. Walmart’s return handling charge is typically set at 10%, and a supplier with a 2% allowance at another retailer can use that figure as a starting point.
Many return requests are communicated through electronic data interchange (EDI), including the EDI 180 Return Merchandise Authorization and Notification transaction. A retailer sends it to ask permission to return merchandise, with a reason such as a defect or an incorrect shipment. It also notifies the supplier that merchandise is on its way and carries return instructions and the authorization record.
Size Receiving and Inspection Capacity for Returns
Staffing plans built around outbound holiday shipments may not account for the additional work that comes with returns. Every returned item must be received, inspected, and evaluated before the next steps can be determined.
Industry commentary has noted that some big-box retailers expand warehouse operations from five single-shift days to six or seven days with three shifts during the months following the holidays. To support that workload, retailers may reassign employees from outbound operations as shipping volumes decline and bring in temporary workers to manage the additional demand.
Smaller suppliers can take a similar approach without significantly expanding their workforce. For example, a supplier with a three-person receiving team might dedicate one employee to returns inspection and grading during the first three weeks of January, adjusting responsibilities as volumes change.
Technology also plays a role in managing that workload. Suppliers using a warehouse management system (WMS) should review their existing receiving workflows to confirm they can accommodate returned inventory, including inspection, disposition, and putaway, without disrupting regular operations.
Decide Disposition Before the Pallets Arrive
Returned goods lose value the longer they wait, so each type of return needs a destination before it arrives. Planning ahead also avoids needless overtime and processing costs, according to the 2013 commentary.
A 40-unit pallet of mixed returns, for example, can be sorted without escalation when a written rule says:
Unopened units go back to stock.
Damaged units follow the retailer’s RTV terms.
Anything beyond repair goes to salvage.
Under that rule, 28 units might return to stock, nine might follow the retailer’s terms, and three might go to salvage, all without a single question to a manager.
Related Reading: Core Return Program for Auto Parts Suppliers Who Want Their Deposits Back
How Much Return Volume Should Suppliers Plan For?
Return volumes can rise considerably after the holidays, making historical averages an important starting point for capacity planning. Industry commentary suggests that monthly returns can reach three to four times their usual volume during the post-holiday period, with as much as 45% of annual returns arriving between mid-December and early March.
For a supplier that typically processes 200 returns per month, that could mean receiving 600 to 800 units in January alone, or 400 to 600 more than usual. If the supplier averages 2,400 returns annually, a concentrated post-holiday period could account for as many as 1,080 units.
While these figures are historical benchmarks rather than current forecasts, they illustrate why suppliers should evaluate receiving capacity, staffing, and processing timelines well before returns begin arriving.
The commentary also names three capacity areas, which become questions an operations lead can answer now:
Inbound holding: How many pallets of unprocessed returns can the dock and staging area hold before new orders slow down?
Processing space: Where will returns be inspected and graded, and how many units per hour can that area handle?
Outbound storage: Where do graded returns wait for restocking, pickup, or salvage, and for how long?
Some operations lease outside space to cover the gap, while others rent only storage trailers, depending on the labor plan and the actual flow of volume. Answering these questions before December keeps returns from competing with outbound orders for dock space.
How Do Return Terms Connect to Deduction Exposure?
When return terms are unsettled, backlogs build and returns-related chargebacks start in those backlogs.
Without an allowance like the 5% example above, each return lands as a deduction on a remittance. The Walmart guide adds that excessive defectives can signal post-audit risk, so suppliers that track returns against their allowance can spot a problem early. The deduction codes for each retailer are covered in a companion piece on peak season deductions.
What Should Suppliers Lock Down Before the Returns Rush?
Preparing for holiday returns in the supply chain works best on a calendar counted back from the early-January crest.
On smaller teams, one person can cover several of the owner roles.
When | What to settle | Suggested owner |
Six to eight weeks out (early to mid-November) | Return method, authorization process, and fees for each retailer, plus a disposition rule for each type of return | Customer operations or the account lead |
Two to four weeks out (early to mid-December) | Staffing and space for receiving and inspection, plus answers to the three capacity questions | Warehouse or fulfillment lead |
Ongoing | Include EDI 180 return authorization procedures and advance ship notice (ASN) handling in temporary worker onboarding, as applicable. | Operations manager |
Finishing these rows before the first pallet arrives keeps returns from turning into a February backlog.
Related Reading: Are You Ready for the Reverse ASN?
Frequently Asked Questions
When do holiday returns peak?
Returns usually crest in early January, and the broader window runs from mid-December to early March. One benchmark puts the heaviest stretch at Dec. 26 to Jan. 12.
What is an RTV in retail?
Return to vendor (RTV) is the process of sending returned or defective goods back to the supplier under the terms of the vendor agreement. At Lowe’s, for example, a supplier chooses between return to vendor and disposal.
What does an EDI 180 do?
The EDI 180 carries a return request, the authorization, and a notification that merchandise is being returned, along with return instructions. Retailers and buyers typically send it, and suppliers respond with the authorization.
Keep Return Authorizations Moving Before the Rush
As post-holiday return volumes increase, keeping documentation accurate and communication consistent becomes especially important. Delays in return authorizations can create additional work for suppliers and retail partners, slowing down the returns process when receiving teams are already managing higher volumes.
SPS Fulfillment helps suppliers automate EDI with their retail partners. By reducing manual document handling and follow-up, suppliers can maintain clearer communication around authorized returns and help ensure agreed-upon terms are reflected in the exchange.
With the right processes in place before peak returns season, suppliers can spend less time managing paperwork and more time processing returned inventory efficiently.