Survey: Holiday return fraud may cost retailers $3.8B

Washington--The retail industry as a whole will lose an estimated $10.9 billion to return fraud this year, with more than a third of that occurring during the holiday season, according to the National Retail Federation’s 2014 Return Fraud Survey.

Approximately $3.8 billion of that $10.9 billion total, or nearly 35 percent, will be lost during this holiday season. If that figure holds up, it will represent an increase of 12 percent over last year’s figure of $3.4 billion.

The NRF’s return fraud survey was fielded in October and November of 2014, and made up of responses from loss prevention executives at 60 retail companies representing grocery, department, discount, specialty, and small retailers. 

More than three-quarters of those polled (78 percent) said they have experienced return fraud through returns by organized retail crime groups, up from 60 percent last year.

One of the biggest issues for retailers, according to the survey, is the practice of “wardrobing,” or the return of used, non-defective merchandise such as special occasion apparel and certain electronics.

Though many companies have employed specific tactics to curb this practice, 73 percent of retailers polled said that they still experienced wardrobing in the past year, a 17 percent climb from last year’s 62 percent.

Retailers estimate that 14 percent of returns made throughout the year without a receipt are fraudulent. Consequently, 71 percent now require customers returning items without a receipt to show identification. Even when a receipt is present, more retailers polled this year said they ask for identification--26 percent in 2014, which is more than double last year’s reported 12 percent.

“Today’s sophisticated technology does well keeping criminals at arm’s length but often isn’t enough to completely stop the unethical practices of organized and individual retail fraud occurrences,” said NRF Vice President of Loss Prevention Bob Moraca.

“Return fraud has become an unfortunate trend in retail thanks to thieves taking advantage of retailers’ return policies to benefit from the cash or store credit they don’t deserve. Additionally, many of these return fraud instances are a direct result of larger, more experienced crime rings that continue to pose serious threats to retailers’ operations and their bottom lines.”