Holiday return fraud to cost retailers USD 2.2 bln in 2015

Such returns are expected to cost retailers USD 2.2 billion, up from roughly USD 1.9 billion in 2014. Retailers surveyed estimate that total annual returns will reach USD 260.5 billion, or 8% of total retail sales, with USD 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: nine in 10 retailers surveyed (91.9%) said they have experienced the return of stolen merchandise, similar to last year’s 92.7%. Wardrobing, or the return of used, non-defective merchandise, also presents a unique challenge year after year for retailers: three-quarters (72.6%) of those polled said they have experienced wardrobing, on par with 72.7% in 2014.

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% in 2014;
• 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 percent in 2014.
• retailers surveyed said they estimate 10% of returns made without a receipt are fraudulent, up from an estimated 5% who said so in 2014. Just 1% of purchases made online and returned to stores are suspected to be fraudulent.

The NRF Return Fraud Survey was conducted by the National Retail Federation during October–November 2015 by polling senior loss prevention executives at 62 retail companies. Executives from all segments of retail including discount stores, department stores, drug stores, supermarkets, and specialty stores completed the survey.