Return fraud helped fuel $101B in retail losses in 2023: report

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By Dan Sears

Return fraud is the latest retail crime plaguing the industry, contributing to some $101 billion in losses for sellers in 2023, according to the National Retail Federation.

Last year, $743 billion worth of merchandise was returned, according to a 2023 Retail Report from NRF and Appriss Retail, marking a 14.5% return rate.

Of those, the NRF expects 13.7% of those returns to be fraudulent, NRF executive director of research Mark Matthews told Fox Business.

“Moreover, for every $100 in returned merchandise, retailers will lose $13.70 to return fraud,” the NRF reported.

“There are different motivations,” Mathews told Fox of the burgeoning threat to the retail industry.

Sometimes, the scam involves abusing a merchant’s return policy, including returning stolen merchandise or counterfeit items, or sending a product back after it’s been used — a concept called “wardrobing” that’s one of the most common types of return fraud, according to Matthews.

Return fraud accounted for $101 billion in retail industry losses in 2023, according to the National Retail Federation. The con involves abusing stores’ customer-friendly return policies to get items for free or send them back after use. Odua Images – stock.adobe.com

Customers have also been known to abuse stores’ customer-friendly return policies by making false claims about an item’s inadequacy in order to receive a refund without having to send back the item in question. 

In other explicit versions of the con, shoppers claim they never received an online order so the retailer will send them another one — free of charge.

To make matters worse, there isn’t any indication that the problem is going to go away despite retailers’ efforts to thwart returns with initiatives like paid returns and more detailed product descriptions, Matthews told Fox. 

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“This has been an extremely lucrative business for them,” Mathews said. “They’re not just going to walk away from this.”

Logistics firm Happy Returns recently reported that as the holiday gift-giving season gives way to the gift-returning season, four in five merchants have started charging customers a fee to ship back or return an item they don’t want.

Amazon has started charging customers $1 to return items to a UPS store instead of using a Whole Foods, Amazon Fresh grocery store or Kohl’s — since it owns or has partnership deals with those companies.

Popular shopping destinations like Zara, Macy’s, Abercrombie & Fitch, J. Crew and H&M, among others, have also added shipping fees for mail-in returns.

To combat return fraud, Amazon started charging customers $1 to return items to a UPS Store, while other popular shopping destinations are now charging as much as $8 for mail-in returns. Sundry Photography – stock.adobe.com

Abercrombie is charging customers as much as $7 to return items, while American Eagle Outfitters deducts a $5 fee from mail-in returns that do not qualify for free send-backs.

J.C. Penney’s fee on mail-in returns is a whopping $8 while, and J.Crew charges $7.50.

However, returns remains a costly part of retailers’ operations, which involves sending returned items to a center for inspection before they’re repacked and shipped back to the store if they’re not deemed defective.

“In many cases, it actually has to be thrown away because it wasn’t handled properly,” Mathews said, per Fox.

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All the while, retailers have also been struggling with multibillion-dollar losses over an epidemic of organized shoplifting rings.

Store owners recently revealed that they collectively lost $4.4 billion in 2022 as a result of retail theft — which they say adds to the urgency for Gov. Kathy Hochul to crack down.

However, Hochul vetoed a bipartisan bill last week — to the displeasure of store owners — that would have created a task force to combat organized theft.

The Retail Council of New York State, the Albany-based lobbying group which represents retailers statewide, said it was “extremely disappointed” by Hochul’s veto.

Retailers have sought to take action themselves, locking items up behind theft-proof barriers, though the move has triggered a new problem as customers now have to wait for employee assistance to access their goods.

Reporters from the investigative outlet Inside Edition visited five Targets, five Walmarts and five CVS stores across New York and New Jersey in October to see how long it took to receive items set behind lock and key after pressing the stores respective help buttons.

The crew was forced to wait as long as 40 minutes to retrieve everyday items at an NJ Walmart store.

Retailers have also been dealing with a shoplifting epidemic, which they’ve sought to thwart by locking items up behind barriers. Helayne Seidman

In response to the long wait times, a TikToker who goes by @real_ogjr devised a “life hack” that circumvents the lock-block for certain items — by ripping the whole rack off the shelf.

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In the clip, taken at an undisclosed store, the influencer can be seen approaching a shelf with a rack of items that are protected by a red button security lock.

“If these things are here, and you also need a worker, well you don’t need a worker,” he declared. He then grabs the metal hanger and detaches it from the wall, before sliding the desired item off the other end, which is not under lock and key.

He explained in the comments of the TikTok clip — which has racked up nearly 700,000 views since it was posted last month — that he busted out the anti-anti-theft technique after his sister struggled to find an employee.

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