Retailers estimate holiday return fraud will cost $2.2 billion

by Stephen Garner

GiftsAccording to NRF’s latest Return Fraud Survey, retailers estimate that 3.5 percent of their holiday returns this year will be fraudulent, up slightly from the estimated 3 percent reported last year. Holiday return fraud is expected to cost retailers $2.2 billion, up from approximately $1.9 billion last year.
Retailers surveyed estimate that total annual returns will reach $260.5 billion, or 8 percent of total retail sales, with $9.1 billion of retailers’ annual returns expected to be fraudulent, or 3.5 percent of the industry’s total returns.

“Return fraud remains a critical issue for retailers with the impact spanning far and wide, in-store and online,” said NRF vice president of loss prevention Bob Moraca. “While technology has played a significant role in deterring many in-person fraudulent transactions that would have otherwise gone unseen, there is little that can be done to prevent a determined criminal who will find a loophole one way or another. When it comes to retail fraud, retailers can build taller walls, but criminals continue to find taller ladders.”

When it comes to specific instances of return fraud, one problem stands out as the biggest offender: nine in 10 retailers surveyed (91.9 percent) said they have experienced the return of stolen merchandise, similar to last year’s 92.7 percent. Wardrobing, or the return of used, non-defective merchandise, also presents a unique challenge year after year for retailers: three-quarters (72.6 percent) of those polled said they have experienced wardrobing in past year, on par with last year’s 72.7 percent.

“Retailers have the difficult task of providing superior customer service by always giving the benefit of the doubt to their shoppers when it comes to returns, while simultaneously working to make sure they protect their business assets,” continued Moraca. “We expect retailers to continue their tried and true ways of combating fraud through increased usage of identification verification, as well as seeking new and innovative approaches on the back end.”