Dive Brief:
- Retailers in 2024 lost $103 billion due to fraudulent returns and claims, according to a consumer returns report from Appriss Retail and Deloitte, which was compiled using data through the third quarter from the Census Bureau plus Appriss’ Q4 projections.
- Fraudulent returns were about 15% of the projected $685 billion in returns for 2024, per the report. Total returns were 13% of overall retail sales, which reached $5.19 trillion for the year just ended, per the U.S. Census Bureau.
- Almost half of surveyed retailers said they encountered instances of returned stolen merchandise, according to a report Appriss commissioned from Informa TechTarget’s content marketing arm, StudioID. Sixty percent said they found examples of “wardrobing” where consumers purchased an item, wore it and then returned it. And 55% cited items obtained through stolen credit cards, counterfeit bills and gift cards purchased through fraudulent means.
Dive Insight:
Retailers are increasingly adjusting their return policies to combat fraud, according to the report, which examined data from over 60 U.S. retailers, the U.S. Census Bureau and a survey Appriss commissioned from Informa TechTarget’s content marketing arm of 150 retail executives and 1,000 consumers.
Some 84% of retail executives said their companies changed return policies in the past year, but it was having adverse implications, per the report.
“It’s clear why retailers want to limit bad actors that exhibit fraudulent and abusive returns behavior, but the reality is that they are finding stricter returns policies are not reducing the returns fraud they face,” Michael Osborne, Appriss Retail CEO, said in a statement. “Our annual research highlights the serious problem of returns fraud, and why an AI-powered, data-driven approach to loss prevention can reduce fraud and keep consumers loyal.”
Several retailers have adjusted their return policies in recent years with an aim at combating excessive returns, including REI, Bath & Body Works and L.L. Bean.
As e-commerce continues to grow, so too has the rate of returned merchandise. While the return rate from in-store sales was 8.7%, the return rate from online sales — which include online sales returned both in-store and online — was 24.5%. Nearly 40% of consumers return at least one item per month that was purchased online, per a separate Narvar survey of over 1,900 consumers.
“Returns are a significant cost for retailers, and the rise of online shopping could increase this trend,” Kevin Mahoney, managing director of retail at Deloitte Consulting, said in a statement. “As retailers implement policies to address this issue, they should avoid negatively affecting customer loyalty and retention. Effective policies should reduce losses for the retailer while minimally impacting the customer experience. This approach can be crucial for long-term success.”
Disclosure: StudioID is a content marketing division of Informa TechTarget, the owner and publisher of Retail Dive. The division has no influence over Retail Dive’s coverage.
