Fraudulent Returns Inflict $103 Billion Loss on Retailers in 2024

Fraudulent Returns Inflict $103 Billion Loss on Retailers in 2024

In 2024, retailers faced staggering losses of $103 billion due to fraudulent and abusive returns, as efforts to tighten return policies often backfired by alienating loyal customers. A recent report by Appriss Retail, in collaboration with Deloitte, sheds light on this growing issue, revealing the significant financial impact of these activities on the retail sector. Fraudulent and abusive returns accounted for 15.14% of all returns, contributing to total merchandise returns of $685 billion, which equates to 13.21% of overall retail sales, valued at $5.19 trillion.

Insights into Consumer Return Behaviors

The “2024 Consumer Returns in the Retail Industry” report draws from a comprehensive data analysis, including surveys of 150 retail executives and 1,000 consumers and insights from the U.S. Census Bureau. The findings illustrate the complexities of return practices across physical and online retail channels.

Key Fraudulent Return Practices

The study identifies several prevalent types of fraudulent and abusive return behaviors:

• Wardrobing (returning used merchandise): 60%
• Gift card fraud: 55%
• Returning shoplifted goods: 48%
• Using counterfeit receipts or e-receipts: 48%
• Bracketing (buying multiple items and returning some): 47%
• Employee fraud or collusion: 39%

The influence of online shopping on return trends is evident, with in-store purchases showing a return rate of 8.72%, compared to a significantly higher rate of 24.52% for online transactions. Together, Buy Online Return In-Store (BORIS) and Buy Online Return Online (BORO) transactions account for over half of all return dollars.

Retailers Struggle with Return Fraud

To combat return fraud, 84% of retail executives have adopted stricter policies, such as requiring proof of purchase (67%) and shortening return windows to 30 days or less (59%). Unfortunately, these measures often come at a cost:

• 55% of consumers avoid retailers with restrictive return policies.
• 31% of consumers have stopped shopping at retailers due to unsatisfactory return experiences.

Michael Osborne, CEO of Appriss Retail, emphasized the need for a more sophisticated approach, stating, “Stricter return policies are not solving the issue of return fraud. Retailers must adopt AI-driven, data-powered solutions to reduce losses while retaining customer loyalty.”

Technology as a Solution

To address return fraud effectively, many retailers are turning to innovative technologies:

• Real-time return approval systems (35%) to evaluate claims instantly.
• Manual data monitoring (54%) is used to identify patterns of abuse.
• This data underscores the importance of balancing fraud prevention with customer satisfaction to navigate the evolving challenges of consumer returns in the retail industry.

Authored by: Thorvardur de Shong and edited by Cliff Locks, Reverse Logistics Solutions

Other Blog Post that you may be interested in: Optimizing Returns Management: Embracing Technology for Future Success