Return Fraud to Cost Retailers $3.5 Billion This Holiday Season
The retail industry will lose an estimated $3.48 billion to return fraud this holiday season, down from $3.73 billion last year. Annual return fraud will cost retailers an estimated $14.37 billion in 2011, up slightly from $13.66 billion in 2010, says NRF's annual Return Fraud Survey. Yet, fewer retailers are expecting return fraud rates to grow this holiday season, thanks in part to enhanced return policies and requiring identification when receipts are not present during the return process, the report says.
According to the survey, nearly nine in ten (89.1%) retailers say they have experienced the return of stolen merchandise in the last year, and just as many (89.1%) report that employee return fraud or collusion with external sources has been a problem in the past year. Wardrobing – the return of used, non-defective merchandise like special occasion apparel and certain electronics – also poses a huge issue, as more than six in ten retailers (61.4%) say they been victims of this activity within the last year. Additionally, eight in ten (81.2%) say they have experienced the return of merchandise purchased on fraudulent or stolen tender, and 38.6 percent have found criminals using counterfeit receipts to return merchandise.
When asked if their company has ever changed its return policy to specifically address return fraud, nearly two-thirds (64%) said it had.
The growing problem of return fraud has forced many retailers to adopt policies which require customers returning merchandise to show identification. Retailers have made significant progress in reducing fraudulent returns when a receipt is present, as the survey found 2.89 percent of returns with a receipt are fraudulent, down from 3.89 percent in 2010. Of those without a receipt, retailers estimate 14.02 percent of those returns are fraudulent. As a result, six in ten (62.1%) now require customers returning items without a receipt to show identification. Slightly more than ten percent of retailers require customers making returns with a receipt to show ID.
Most respondents (82.5%) state their return policies will remain unchanged this holiday season, on par with last year, but slightly more (12.6% vs. 10.9% in 2010) will tighten their policies to combat the typical excess return fraud they see each year during the holiday season.
According to an NRF survey conducted last December, 88.4 percent of Americans feel retailers’ return policies are fair.