Survey: Retailers to See a Drop in Return Fraud Losses 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, according to NRF’s annual Return Fraud Survey. The drop is a result of enhanced return policies that require identification when receipts are not present during the return process.

“Those who think they will be able to get away with manipulating a company’s return policy will be sorely disappointed this holiday season,” said Joe LaRocca, senior asset protection advisor for NRF, in a statement. “Retailers have been putting checks and balances in place to prevent people from taking advantage of stores’ return policies, which raises prices for honest shoppers.”

The survey found that 64 percent of retailers had changed their return policies to specifically address return fraud. More than 60 percent of retailers are now requiring customers to show identification when returning something without a receipt. The survey also found that more than 12 percent of retailers plan to tighten their policies, as opposed to just under 11 percent in 2010.

“Point of sale software and other measures, such as requiring receipts and/or identification, have reduced return fraud, and made it more difficult without an inside accomplice,” says John Kennedy, president of Jewelers’ Security Alliance.

He also tells JCK that return fraud is far more common with apparel than with jewelry. Casual and inexperienced criminals seek to sell stolen jewelry to pawnshops, and it is uncommon that criminals attempt to return jewelry to the same chain from which it has been stolen. “While return fraud occurs, and it can be painful, in the big picture it isn’t a significant problem for the jewelry industry,” he says.

Other findings from the survey:

  • 89.1 percent of retailers said they have experienced the return of stolen merchandise in the past year.
  • 89.1 percent said that employee return fraud or collusion with external sources has been a problem in the past year.
  • 61.4 said they were victims of wardrobing—the return of used, non-defective merchandise like special occasion apparel and certain electronics.
  • 81.2 percent said they have experienced the return of merchandise purchased on fraudulent or stolen tender
  • 38.6 percent have found criminals using counterfeit receipts to return merchandise.

Loss prevention executives at 103 retail companies participated in the survey.