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Wed Dec 5, 2012, 05:54 AM

Return Fraud to Cost Retailers $2.9B This Holiday Season

The National Retail Federation’s (NRF) 2012 Return Fraud Survey, completed by loss prevention executives at 60 retail companies in October, has found that retailers are poised to lose an estimated $8.9 billion to return fraud this year -- $2.9 billion just during the holiday season. Retailers estimate that 4.6 percent of total holiday returns are fraudulent.

“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,” said Rich Mellor, VP of loss prevention at Washington, D.C.-based 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.”

Almost all (96.5 percent) retailers polled said they’ve had stolen merchandise returned in the past year, and 84.2 percent noted that they’ve experienced the return of merchandise bought with fraudulent or stolen tender. Nearly two-thirds (64.9 percent) of respondents said they’ve been victims of wardrobing, or the return of used, nondefective merchandise such as special-occasion apparel and certain electronics, within the past year. Further, 45.6 percent have discovered criminals using counterfeit receipts to return merchandise. And eight in 10 (80.7 percent) respondents reported dealing with return fraud or collusion with external sources in the past year.

For the first time in this survey, NRF asked about return fraud with the use of e-receipts, and nearly two in 10 (19.3 percent) loss prevention execs responded that they’ve dealt with the issue. As online sales continue to grow, 86 percent said they let customers return merchandise bought online in their stores, estimating that 3.9 percent of those returns are fraudulent.


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