As is well-known, product returns are an operational and financial disaster for traditional retailers and ecommerce companies.
According to the industry trade group the National Retail
Federation (NRF), retailers on average expect consumers to return about 15% of merchandise purchased during the 2023 holiday season, valued at $148 billion.
But to that long running challenge, comes a growing problem: fraudulent returns.
NRF says that more than $100 billion in merchandise was returned fraudulently in the US in 2023, representing 13.7% of the overall returned goods retailers received last year. That was more than twice the level of fraudulent returns seen in 2020 (though there was some change in the NRF’s measurement methodology in the 2023 study.)
Fraudulent returns involve a variety of scams, including replacing the merchandise contained in a carton or other packaging with other material, returns using counterfeit goods, the return of goods that were stolen, or returns brought in using fake receipts.
Fraudsters returning stolen items without receipts are often receiving store gift cards for the value of the goods. So steal it, return it, get a store credit.
The long-used scam of returning a lower-priced item with a higher-priced product’s tag attached to it is also still prevalent.
Accord to a recent article in the Wall Street Journal, the thieves are in part taking advantage of retailer policies such as free on-line returns that retailers rolled out over the past four years or so. Those policies have led to an increase in rate of returned merchandise, as some consumers buying apparel order in several sizes and colors on-line, only to return all but the item they want.
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 Another issue: with a huge backlog of returns to process, especially after the holidays, fraudsters increasingly get their returns cash well before the retailer finds a problem with a return, which can take weeks.
The Wall Street Journal report, for example, includes the tale of one third-party returns processor that sometimes get a surprise when dealing with returns for retailers - opening television boxes that are filled with bricks rather than newly purchased TVs.
Add this returns challenge to the growing level of shoplifting, increasingly thought to be the result of organized crime, being profitable in retail is tough goal to meet.
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