Holiday return fraud to cost retailers $4B

Return fraud will cost the retail industry an estimated $10.8 billion this year. And in the holiday season alone, retailers will lose about $3.8 billion due to return fraud, according to the National Retail Federation's 2014 Return Fraud Survey.

The loss is slightly up from last year's holiday season, when $3.4 billion was lost. Overall, retailers polled believe that 5.5 percent of holiday returns are fraudulent.

"Today's sophisticated technology does well keeping criminals at arm's length but often isn't enough to completely stop the unethical practices of organized and individual retail fraud occurrences," said NRF VP of loss prevention Bob Moraca. "Return fraud has become an unfortunate trend in retail thanks to thieves taking advantage of retailers' return policies to benefit from the cash or store credit they don't deserve. Additionally, many of these return fraud instances are a direct result of larger, more experienced crime rings that continue to pose serious threats to retailers' operations and their bottom lines."

Retailers are noticing an increase in return fraud instances with regard to e-receipts, up to 18.2 percent versus 15.5 percent last year.

In addition, there has been a significant jump in the number of retailers who have had stolen or fraudulently bought items returned, 81.8 percent up from 69.0 percent last year.

Another big issue for retailers is wardrobing, or the return of used merchandise. Though companies often curb this practice as best as possible, 82.7 percent of retailers still reported experiencing it in the past year, up from 62.1 percent last year.

Which payment methods were most often used for return fraud? Of those polled, 72.7 percent saw an increase in gift card/store merchandise credit fraud in the past year and 38.2 percent witnessed an increase in return fraud with credit cards. In addition, 30.9 percent have witnessed an increase in debit card fraud.

Fraud could definitely be a big issue this year, as 68 percent of consumers believe the country is still in a recession, and are therefore wary of spending too much money. In fact, as of Dec. 10, U.S. consumers had finished 52.9 percent of their holiday shopping, up just slightly from 49.9 percent last year, and some of the holdup included financial priorities, 21.7 percent; and waiting for the best possible deals, 23.4 percent.

For more:
-See this NRF press release

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