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Return Fraud Will Cost Retailers $3B this Holiday Season

Despite the high potential for loss, sellers say they'll keep their policies.

Merchants will lose nearly $3 billion on bogus returns this holiday season.

The National Retail Federation reports sellers will miss out on $2.9 billion because of return fraud, estimating that 4.6 percent of holiday returns will be fraudulent. Overall, merchants are expected to lose $8.9 billion this year when shoppers return non-defective items after wearing or using them, when buyers return products with counterfeit receipts and when consumers return stolen merchandise.

“Return fraud comes in a variety of forms and continues to present challenges for retailers trying to grapple with the sophisticated methods criminals are using to rip off retailers,” says Rich Mellor, vice president of Loss Prevention for NRF. “Even more troubling is the fact that innocent consumers often suffer because companies have to look for ways to prevent, and detect, all types of crime and fraud in their stores, oftentimes resorting to shorter return windows and limitations on the types of products that can be returned.”

Retailers say “wardrobing,” or returning clothing after it’s been worn, is a major problem. More than 64 percent of merchants have experienced this

Retailers say “wardrobing,” or returning clothing after it’s been worn, is a major problem. More than 64 percent of merchants have experienced this, according to NRF.

The Online Seller readers have also reported experiencing this problem. A costume jewelry seller tells us she had trouble with shoppers “renting” her merchandise when policies regarding eBay returns changed.

Receipt fraud is also common among sellers, NRF finds, with about 45.6 percent of retailers saying customers have tried to return items to them using a counterfeit receipt. It’s even happened with electronic receipts. Almost 20 percent of merchants say they have dealt with ereceipt fraud.

With the growth of online sales, 86 percent of brick-and-mortar shops that have an online presence say they allow shoppers to returns items they bought online in their stores. NRF finds that about 3.9 percent of those returns are fraudulent.

“Return fraud in any form is a serious threat, and we know that retailers have made significant strides in their fight against retail crime, and are continuing their efforts working with law enforcement to address this multibillion-dollar problem,” Mellor adds.

But despite the projected losses, more than 80 percent of respondents say they will keep the return policies they used last holiday season. About 10.2 percent say they will make their policies less strict to attract more shoppers.


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About the author

Olga Munoz
Olga Munoz is editor of TheOnlineSeller.com. In addition to writing news and feature articles about e-commerce, selling trends, online marketing and other topics of interest to online sellers, Olga manages the site's social media efforts. A journalism graduate of Chico State, Olga says her favorite part of being a journalist is learning interesting facts that help put stories into perspective, attending industry events and meeting interesting people "that leave you smiling, even in tough situations." Opinions expressed here may not be shared by The Online Seller and/or its principals.

  • This is a topic that is close to my heart. My business has definitely suffered from customers who have learnt how to steal products by paying through PayPal. We have easily lost about $5000 from this kind of fraud. I think more needs to be done to protect sellers!

  • I have a strictly no returns policy on my eBay listings. I trade on a good reputation and have decided that a no returns policy filters out your average idiot and/or thief. Sure, it’s still possible to scam me I guess by another route, but why bother with me when there are low hanging fruit with 2-week return policies one listing down?



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