Return Fraud to Hit $3.7 Billion This Holiday Season

November 28, 2007

This article is included in these additional categories:

Retail & E-Commerce

Loss-prevention executives anticipate that nearly 9% (8.93%) of holiday returns will be fraudulent, up slightly from 8.67% last year, according to the National Retail Federation’s second annual Return Fraud Survey, released earlier this month.

If those projections are accurate, return fraud will cost retailers an estimated $3.7 billion this holiday season, up from $3.5 billion last year, and retailers will lose $10.8 billion to return fraud in 2007, NRF said.

Despite the prevalence of fraud, more than one-third of retailers (35.0%) have stated they made their return policies more lenient during the holidays to accommodate holiday shoppers. Common practices include retailers’ extending the amount of time for returns to be made and also being more flexible to customers without a receipt.

According to the survey completed by 60 retail loss-prevention executives in Oct.:

  • Nine out of ten retailers (92.0%) have had stolen merchandise returned to stores within the past year.
  • Retailers also report being victimized by returns of merchandise originally purchased with fraudulent or stolen tender (83.1%) and returns using counterfeit receipts (51.0%).
  • The unethical practice of “wardrobing,” the return of non-defective, used merchandise, is also escalating in the industry: Nearly two-thirds of retailers (66.1%) have been victims of wardrobers in the past year – up from 56.0% of retailers last year.

Also according to the survey, consumers will not see a drastic shift in holiday return policies this year: four in five retailers (81.4%) implementing the same holiday return policy as last year, while 15.3% will tighten their policies (vs. 25.0% in 2006) and 3.4% will loosen policies (vs. 4.8% last year).

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