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The dark — and costly — side of holiday returns


Return fraud during the holidays is a growing problem for retailers—and also an extremely expensive one.

Holiday return fraud is expected to cost retailers $2.2 billion, up from about $1.9 billion last year, according to NRF’s Return Fraud Survey. Retailers estimate that 3.5% of their holiday returns this year will be fraudulent, up slightly from the estimated 3% reported last year.

Retailers surveyed estimate that total annual returns will reach $260.5 billion, or 8% of total retail sales, with $9.1 billion of retailers’ annual returns expected to be fraudulent, or 3.5% of the industry’s total returns.

When it comes to specific instances of return fraud, one problem stands out as the biggest offender: 91.9% of retailers said they have experienced the return of stolen merchandise.

Wardrobing, or the return of used, non-defective merchandise, also presents a unique challenge year after year for retailers: 72.6% of those polled said they have experienced wardrobing in past year, on par with last year.

The survey also found that one-third (33.9%) of those polled said they have experienced return fraud with use of e-receipts, up from 18.2% last year.

The report does offer a glimmer of optimism though. According to the survey, fewer retailers in 2015 have experienced specific instances of return fraud, including:

  • 75.8% have experienced the return of merchandise purchased on fraudulent tender, down from 81.8% in 2014;

  • 71% have experienced return fraud made by known organized retail crime groups, down from 78.2% last year;

  • 77.4% of retailers surveyed have experienced employee return fraud or collusion with external forces, down from 81.8% in 2014.

Additional findings:

  • Three in 10 (30%) surveyed said they have seen an increase in fraudulent purchases made with cash, while six in 10 (60.7%) have seen an increase in the use of gift card/merchandise credit return fraud.

  • Eight in 10 retailers surveyed (85.2%) said they require identification when making a return without a receipt, up from 70.9% last year.

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