Merchandise returns in 2013 cost U.S. retailers more than $267 billion in lost sales, and retail fraud and abuse accounted for $9.1 billion to $16.3 billion in the United States, an increase of 2.6 percent from 2012, according to The Retail Equation’s 2013 Consumer Returns in the Retail Industry report.

The extreme loss of profit has the potential to cause retailers to offset the negative business impact by raising prices and reducing costs, which could mean a loss of jobs. Last year, retail fraud cost retailers and workers between 331,000 and 595,000 jobs, which costs states a total of $549 million to $989 billion in lost sales taxes, the report states.

The report estimates that annual merchandise return fraud and abuse accounted for $1.1 billion to $1.6 billion in the Canadian retail industry, and cost between 29,000 and 42,000 jobs.

The report also found:

  • A 15-percent increase in employee collusion versus last year (from 80.7 percent to 93.1 percent) implies that exception reporting systems are not sufficiently preventing this type of fraud.
  • Retailers are putting more importance on the issue of return fraud during the past four years, and there is growing evidence that return fraud and shrink are highly correlated.
  • Four out of five main tender types (cash, gift card/merchandise credit, credit card, debit card and check) showed increased fraud. Fraud increases outpaced decreases by 42 percent.