Retailers Facing $101B In Fraudulent Holiday Returns

The few weeks after the holiday season certainly aren’t the most wonderful time of the year for retailers in the U.S., especially as stores are facing billions of dollars in fraudulent holiday returns.

According to a survey conducted by the National Retail Federation, there was in excess of $101 billion in merchandise returned fraudulently last year. That represents roughly 14% of all of the goods that were returned to retailers for 2023, and more than two times as much as was returned in 2020.

The NRF report estimates that retailers lose $13.70 in fraud for every $100 in merchandise that gets returned to them.

“Retailers continue to test and implement new ways to minimize losses from returns, particularly those that are fraudulent, while at the same time optimizing the shopping experience for their customers,” Mark Matthews, the executive director of research for the NRF, said.

Some of these efforts, according to Matthews, include providing more detailed descriptions about the fit and sizing for products that are purchased online, as well as requiring all people to have a receipt if they want to return an item.

In addition, the industry as a whole is doing its best to reduce how much merchandise gets returned — whether that be online or in stores.

Tom Enright, a retail industry expert, added that the sheer returns volume has been compromising companies’ profit margins, labeling it “a trillion-dollar problem.”

Enright added that people are trying to scam retailers. They hope that when a return shipping label gets scanned, the refund will be secured before that particular retailer even receives the item back, let alone confirm that the item sent back to them is real, correct and in good shape.

In addition to “wardrobing” — when someone returns a clothing item that’s already been worn — one of the most common types of retail fraud is transferring a more expensive price tag to an item that doesn’t cost as much.

Today, more and more people are returning fraudulent items to luxury retail companies, in hopes of making a good amount of money in a short period of time, Amena Ali, the CEO of Optoro, told The Washington Examiner recently.

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