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Returns Fraud Remains a Serious Threat to Retail

National Retail Federation

National Retail FederationReturns fraud continues to pose a serious threat to the retail industry, according to the National Retail Federation (NRF). According to a recent study, 11% of retailers’ annual sales will be returned this year, and 8% of those returns are likely to be fraudulent.

And while the NRF surveyed loss prevention professionals at department stores, big-box stores, and other retailers, it seems likely that returns fraud would be at least as high if not higher for online sellers.

According to NRF’s study, 38% reported in an increase in online purchases being returned to a bricks-and-mortar location, and 29% cited an increase of those returns being fraudulent.

During the holiday season, retailers expect 11 percent of sales to be returned, on average, down from 13 percent last year, and that 10 percent of the returns will be fraudulent, down from 11 percent last year.

Despite the very real problem of fraudulent returns, online marketplaces continue to force sellers to offer generous return policies and may even penalize them for having too many returns.

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The NRF noted that organized retail crime losses (ORC) is a growing problem, with 92% of companies surveyed reporting they had been a victim of ORC in the past year, with 71% reporting that ORC incidents were increasing. Losses averaged $777,877 per $1 billion in sales, up 7 percent from last year’s previous record of $726,351.

Retailers said online selling contributed to the problem, with criminals targeting items that could be easily stolen and quickly resold.

“ORC typically targets items that can be easily stolen, and quickly resold, and top items range from low-cost products like laundry detergent, razors, deodorant, infant formula and blue jeans to high-end goods like designer clothing and handbags, expensive liquor and cellphones. Stolen goods are recovered anywhere from flea markets and pawnshops to online, with gift cards often ending up on online gift card exchanges. While online fencing has increased over the years, retailers say 60 percent of recovered merchandise, on average, is found at physical locations.”

The NRF said the country’s largest cities are the most frequent targets of ORC. The top locations are 1) New York City; 2) Los Angeles; 3) Miami; 4) Chicago and Houston, tied; 5) San Francisco/Oakland; 6) Atlanta; 7) Baltimore; 8) Orlando; 9) northern New Jersey, Washington, D.C., Philadelphia, and Arlington/Dallas/Fort Worth, tied; and 10) Fort Lauderdale and Seattle, tied. See the full release here.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

2 thoughts on “Returns Fraud Remains a Serious Threat to Retail”

  1. Return fraud according to Greedbay doesn’t exist on their site. Every return is honest and upright. Buyers all trustworthy and great therefore their isn’t any return fraud that Greedbay can find.

  2. Amazon cares even less. Why should they? They make everyone else pay for it! Returns go back to the seller or manufacturer, no matter if it’s your item or some broken 10 year old doorstop. Even better for them, they charge us for the return, as well as to send it back to us. When you have no skin in the game, but instead profit from it, why should you change?

    Ultimately the liberal return policies exist for one reason – they allow Amazon\Fleabay to raise the bar for customer expectations and differentiate their brands. When they offer these returns, they look like Santa; most other sites can’t (they do have to foot the bill for these) and they in turn look like the Grinch.

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