Retailers Can’t Afford to Keep Every Delivery Promise This Holiday Season

Faster delivery is becoming an expensive promise to keep. It became a default expectation, but rising delivery costs, high return volumes, and tariff uncertainty are reshaping inventory plans. The National Retail Federation's latest estimate puts holiday returns at about 17 percent of sales, on top of nearly $850 billion in merchandise returned industry-wide annually. Growing fulfillment complexity, transportation costs, and margin pressure are forcing retailers to rethink how they make and keep customer promises during peak season.

Customers are largely indifferent to where an order originates. They care whether the item is available, arrives when promised, and can be returned easily. The question for retailers is no longer whether an item is in stock, but whether they can make and keep a promise that makes financial sense.

Three areas deserve attention:

1. Know what inventory can actually support.

Inventory availability alone doesn't show whether an order can be fulfilled profitably. A unit may be in stock but too far from the customer, reserved as safety stock, or better fulfilled from a store with excess inventory. A retailer shipping a jacket from a distribution center three states away may be absorbing shipping costs that a nearby store could have avoided.

Before peak, retailers should establish a single view of inventory across all fulfillment locations within their order management system. Maintaining inventory accuracy through frequent reconciliation is essential to avoid stock discrepancies and fulfillment failures. Carrier service data, labor capacity, transportation costs, inventory turns and cost-to-serve metrics should be incorporated into fulfillment decisions and checkout promises.

This makes available-to-promise data more useful. Instead of showing a delivery date based only on an item's location, retailers can base it on their ability to pick, pack and deliver the order as promised. Retailers must test these rules against holiday volume scenarios now. When demand rises, accurate promise dates can reduce costly exceptions and protect customer trust.

2. Make the service level fit the order.

While faster delivery still has a place, retailers need to understand which options customers prioritize and which make financial sense.

Order patterns can show when expedited fulfillment improves conversion or loyalty and when it adds expense. Those findings can inform service policies by product category, customer segment and geography. Same-day delivery, for example, may make sense for high-value purchases within a defined radius, while pickup or standard delivery may be the better option elsewhere — a retailer that offers same-day delivery on a $40 order within a five-mile radius may find the shipping cost erases the margin entirely.

Artificial intelligence-driven order orchestration can apply these policies in real time as conditions change. Rather than relying on static rules, it can continuously weigh inventory location, store labor, carrier capacity, delivery cost and expected margin, adjusting fulfillment options as capacity tightens closer to the holidays — identifying the path that meets the customer promise without weakening the economics of the sale.

3. Not every store should do everything.

Stores can serve as pickup locations, fulfill orders and accept returns, helping lower last-mile and reverse logistics costs. However, challenges arise when store teams lack the inventory, labor or space to support while serving in-store shoppers, particularly in the weeks after Christmas, when return volume spikes.

The key? Use each store strategically. Retailers should set rules for when stores should fulfill orders, support pickup or process returns. Those rules should consider product value, local inventory, staff capacity, transportation costs and the item's resale path. Agentic AI can help keep these decisions current as conditions change, flagging pickup orders at risk of delay and directing returns to locations where they can be resold or processed at the lowest cost. This approach turns what's typically a fixed rulebook into one that adjusts dynamically.

Holiday 2026 will test whether retailers can keep their checkout promises. The months before peak provide an opportunity to identify weak points early, preventing customer disappointment and unnecessary costs.

Anup Prasad is senior vice president and business unit head for the Consumer Business in Americas at Cognizant, an AI builder and technology services provider.