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 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 Foundation
(NRF). NRF’s 2013 Return Fraud Survey, completed by loss prevention
executives at 62 retail companies, also showed that 5.8% of holiday returns are
fraudulent, up slightly from 4.6% last year.
“While
coverage of this issue paints return fraud as one of the ‘less severe’ retail
crimes, the fact of the matter is that returning used or stolen items, or even
using false tender to purchase items is fraud, period,” said NRF Vice President
of Loss Prevention Rich Mellor. “Recent efforts to combat fraudulent activity
are slowly starting to work, but criminals are becoming more savvy and
technologically advanced in their methods, making it even more difficult for
retailers and law enforcement to keep up with the growing problem.” According to
the survey, nearly all (94.8%) retailers polled said 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 that 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.
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