The retail industry will lose an estimated $8.76 billion to return fraud this year, and $3.39 billion during the holiday season alone, according to the National Retail Federation’s 2013 Return Fraud Survey. Overall, 5.8% of holiday returns are fraudulent, up slightly from 4.6% last year.
“Recent efforts to combat fraudulent activity are slowly starting to work, but criminals are becoming savvier and more technologically advanced in their methods, making it even more difficult for retailers and law enforcement to keep up with the growing problem,” said NRF VP of loss prevention Rich Mellor.
In survey results, nearly all (94.8%) retailers polled say they have experienced the return of stolen merchandise in the last year, and 69% report that they have experienced the return of merchandise purchased on fraudulent or stolen tender. Additionally, 29.3% have found criminals using counterfeit receipts to return merchandise.
Employee return fraud or collusion with external sources is also a big problem for retailers: nine-in-10 (93.1%) report they’ve dealt with this issue in the past year.
For the first time, NRF asked retailers about their experiences with return fraud and a connection to organized retail crime groups: 60.3% have experienced this in the past year.
One of the biggest issues for retailers is the practice of ‘wardrobing,’ or the return of used, non-defective merchandise like special occasion apparel and certain electronics. Many companies have employed specific tactics to help curb this unethical practice, and are beginning to see the fruits of their labor: 62.1% report having been victims of wardrobing, down from 64.9% last year.
The survey found 15.5% say they have dealt with e-receipt return fraud. And, as online sales continue to grow, 82.5% say they allow customers to return merchandise purchased online in their stores.
The problem of return fraud has forced many retailers to adopt policies which require customers returning merchandise to show identification. Retailers estimate that 13.97% of the returns made throughout the year without a receipt are fraudulent and, as a result, nearly three-quarters (73.7%) now require customers returning items without a receipt to show identification.
When asked about return fraud and the various types of tender, almost half (49.1%) say they have witnessed an increase in gift cards/store merchandise credit fraud in the past year. One-in-five (19.6%) say they have seen a decrease in the fraudulent use of cash, but more than a quarter (26.8%) have seen an increase; half report no change (48.2%).
Additionally, three-in-10 (29.1%) say they’ve witnessed an increase in credit card fraud, 18.2% say those incidents have decreased and more than half (52.7%) say there’s no change from last year.