Fraudsters target online returns

The battle against returns fraud and claims is not getting any easier for retailers. 

If anything, with fraudsters and organized retail crime syndicates targeting the returns "brothers,"  buy online return in-store (BORIS) and buy online return online (BORO), it’s only getting harder. Yes, buy online return in-store (BORIS) and  (BORO) transactions are on the rise. In fact, according to comprehensive data from Appriss Retail and Deloitte, BORIS and BORO accounted for more than half of all returns last year.

In 2024, online sales neared $1.5 trillion, up 5% from the year prior, and returns from online sales totaled $362 billion. For retailers, online sales are only going to increase, opening the door for more fraudsters to exploit BORIS and BORO activity. Loss prevention teams need to change how they manage returns fraud — engaging in a more holistic and omnichannel view of returns. 

Diving into the impacts of online returns fraud 

In total, retailers lost $103 billion last year due to fraudulent and abusive returns and claims, per the Deloitte and Appriss Retail report, which leans on actual returns processed and transaction data from 60 of the top 100 retailers.

The research finds that online shopping is a target, notably through claims and appeasements fraud and abuse, which is estimated to cost retailers $21 billion annually. The act refers to a consumer fraudulently claiming an item that was purchased online never arrived or appeared damaged; in turn, the fraudster seeks an appeasement, such as cash back or store credit.

Claims and appeasements fraud is a concern for retailers and their BORIS and BORO operations. Case in point: Visa’s annual Global E-commerce Payments & Fraud Report, in partnership with the Merchant Risk Council, cited returns fraud as the leading form of online abuse. With the high cost of labor, freight, and ultimately lower margins in the online space, retailers need to think hard about how they want to approach this trend.

For instance, the Deloitte and Appriss Retail study finds that retailers with a strict returns policy, such as a “no receipt, no return” model, can do more harm than good. More than half of surveyed consumers said they won’t buy from a retailer with a restrictive policy. Instead, retailers can keep policies more consumer-friendly, and attack online returns fraud with the help of AI and retail analytics.

Reviewing returns fraud holistically

If online returns fraud is becoming an increasing risk, a retailer’s best defense is to look at return transactions holistically. A siloed approach of looking solely at in-store theft and fraud vs. online issues can cause loss prevention teams to miss out on cases that are connected.

By integrating sales data from in-store, online, and omnichannel areas of the business, as well as consumer and loyalty data, loss prevention teams see the total returns picture. Then, leveraging AI and generative AI tools, loss prevention teams can target incidents of returns fraud and abuse to uncover similarities across cases. These insights will help prevent further incidents.

AI can help identify suspicious activity in real time, alerting digital teams and in-store customer service counters handling online returns. Additionally, generative AI can connect cases of returns fraud to larger organized retail crime (ORC) networks, streamlining case management and incident reporting.

Too often, retailers handle returns within different departments across the organization, but a holistic approach brings teams together, accessing and seeing the same data in real time. At that point, AI can recommend actions, and teams also can uncover strategies and trends that better prepare their online operations.

Reducing online returns fraud

By breaking down silos and leveraging AI to view and read transaction data and consumer histories across online and in-store behavior, retailers and their loss prevention teams can have a stronger direction to fight back against online returns fraud.

Bad actors and ORC syndicates are only going to get savvier as they target BORIS, BORO, and claims and appeasements. However, retailers can protect their profits by pulling together a strategy that studies transactions and behaviors happening in every corner of the organization.

Bryant McAnnally is strategic customer success manager at Appriss Retail.