Online Shopping Fuels Easy Return Abuse, Costing Retailers Billions

  • Rising return processing costs due to fraud and increased expenses.
  • Saks CEO notes a doubling of false "merchandise not received" complaints, highlighting return fraud challenges.
  • Practices like "wardrobing" and "bracketing" add complexity, with intentional post-use returns posing significant risks.

Retailers relaxed their online return conditions more than ever in an attempt to attract customers and increase sales in recent years. But there is a price for such adjustments.

Retailers have taken action to combat fraud as more customers buy online and return more orders. Customers may return merchandise that differs from what they originally purchased, return stolen goods, or assert that a transaction was delivered even when it did not.

Online Shopping Fuels Easy Return Abuse, Costing Retailers Billions

(Photo : by Spencer Platt/Getty Images)
Retailers relaxed their online return conditions more than ever in an attempt to attract customers and increase sales in recent years.

However, after the meeting last month, unexpectedly positive results for the fourth quarter of 2023's gross domestic product growth and December's non-farm payrolls in the United States have been reported.

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In a poll conducted by Appriss Retail and the National Retail Federation, retailers estimated that 13.7% of returns, or $101 billion, were fraudulent in the previous year. According to the report, the percentage of predicted fraudulent returns during the busiest Christmas season was significantly higher at 16.5%, or $24.5 billion.

Since many stores are extending their return windows for purchases made in November and December until the end of January, those products are still coming back in. According to industry analysts, merchants' primary concern as they handle these returns is fraud.

According to a Pitney Bowes survey of 168 merchants, processing an online return costs an average of 21% of the order's value. More than 21% of the responding firms paid.

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Rising Costs and Strategies in Return Processing

According to industry analysts, the cost of processing a return is rising as a result of growing fraud as well as greater shipping and processing expenses. As word of those strategies spread, numerous businesses began to increase the difficulty of returning goods.

While the business has historically received valid complaints from consumers over missing products, Saks CEO Marc Metrick stated during the NRF Big Show in mid-January that false "merchandise not received" complaints to the firm had more than doubled over the previous several years. That is only one method of false returns.

Return fraud is most commonly caused by shipping back an empty box or an item that was not what was received, such a box of bricks instead of a television, according to Pitney Bowes' Ramachandran. Fraudsters may restore stolen things in different situations. As an additional scenario, they may search through the garbage for a receipt, enter the store, locate the item, and bring it to the return counter.

Less severe actions are also sometimes seen as return abuse rather than fraud. It consists of "wardrobing" and "bracketing."

Purchasing many sizes or colors with the intention of returning the ones that don't fit is known as "bracketing." Even if it's not fraud, the store still has to pay for the returns. A more serious problem is "wardrobing," which occurs when customers purchase an item, use it, and then return it.

Five hundred and sixty-six percent of customers admit to "wardrobing," according to a poll conducted by the fraud protection company Forter. Four out of five customers stated they purchased an item during the Christmas season of 2023 with the intention of returning it after using it.

Doriel Abrahams, the Forter Head of Risk, stated that deliberate, premeditated returns following usage are particularly hazardous.

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