Returns of fraudulent goods cost US retailers $101 billion last year, with roughly one in seven returns involving fraud in some way, new industry data shows.
The figures from the National Federation of Retailers underline the growing problem for retailers in the age of free and easy online returns, with scammers coming up with exotic new ways to cheat the system.
The NFR report shows that consumers returned $743 billion worth of goods in 2023, with returns representing 14.5 percent of total sales.
The proportion of returned items deemed fraudulent or abusive rose to 13.7 percent, more than double the previous year, as dishonest customers adopted inventive new schemes such as bracketing and wardrobe.
Bracketing refers to buying several similar items in the same order, then keeping one and returning the rest, while wardrobeing involves buying an expensive item, wearing it extensively, and then returning it.
Returns of fraudulent goods cost US retailers $101 billion last year, with about one in seven returns involving fraud (file photo)
The NFR report shows that consumers returned $743 billion worth of goods in 2023, with returns representing 14.5 percent of total sales
Returns fraud “is certainly becoming more and more of a problem for retailers,” said Amena Ali, CEO of returns service provider Optoro. Wall Street Journal.
Some of the simplest scams rely on the hope that a refund will be issued once a return shipping label has been scanned, before a retailer has had a chance to inspect the merchandise.
Some people “send back a box of bricks instead of a television set,” Tom Enright, an analyst at research firm Gartner, told the Journal.
Other reported schemes include returning stolen goods, buying luxury goods and returning counterfeits, or returning a cheaper item with the wrong price tag.
In an infamous UK case, British influencer Angelica Zabrodina was accused in 2020 of racking up $1,576 in false refunds for luxury clothing by returning cheap clothes with designer labels sewn into them.
Prosecutors said Zabrodina, with her chihuahua in her handbag, targeted TK Maxx stores in London with the intention of returning genuine items she had purchased at other locations or online, including an expensive Dolce & Gabanna dress.
Zabrodina was found guilty by the jury of seven counts of fraud by false representation.
Industry experts say bogus returns often spike during the busy post-holiday period, when scammers hope employees will be less likely to notice their tricks while processing a flood of returned items.
The NFR report shows that retailers expect the percentage of fraudulent returns to rise to 16.5 percent in the current post-Christmas period.
In an infamous UK case, British influencer Angelica Zabrodina (above) was convicted in 2020 of raking in £1,236 ($1,576) in fake refunds for branded clothing
Some of the simplest scams rely on the hope that a refund will be issued once a return shipping label has been scanned, before a retailer has a chance to inspect the goods (file photo)
Returns fraud not only harms large retailers, but also small online sellers who run specialty stores as a sideline on platforms like eBay or Amazon Marketplace
As the problem grows, some retailers are trying to fight back by encouraging customers to make returns at physical store locations, where items can be more easily inspected for problems.
Some companies use advanced algorithms and analytics to identify suspicious patterns and shut down “serial shoppers” who make large numbers of returns.
An Amazon spokesperson told DailyMail.com that the company “uses advanced machine learning models to proactively detect and prevent fraud, and also employs specialized teams dedicated to detecting, investigating and stopping fraud.” .’
“When bad actors attempt to circumvent our controls, we take action and work with law enforcement to hold them accountable,” the spokesperson added.
Some fashion brands, including Zara, J.Crew and Uniqlo, have even started charging for returns to discourage abuse of the system.
Returns fraud not only harms large retailers, but also small online sellers who run specialty stores as a sideline on platforms like eBay or Amazon Marketplace.
Forums dedicated to such online marketplaces are full of stories about dishonest customers.
‘I get people to buy my product and then return their old used version for a refund. I’ve gotten all kinds of weird stuff in the return,” one Reddit user wrote. “It’s just the cost of doing business.”
