Holiday Return Fraud Will Cost Retailers $3.4 Billion

Return fraud will cost U.S. retailers billions of dollars this holiday season, according to new data released by the National Retail Federation. The organization surveyed 62 retailers and found that the industry will lose an estimated $3.4 billion due to return fraud during the busy year-end shopping period.

This year's figure represents the 5.8 percent of phony returns retailers can expect during the holidays, up slightly from 4.6 percent in 2012. Return fraud happens in various forms, including the return of stolen merchandise, items that have been used but that are not defective, and clothing that has been worn, the most recurrent type of fraud experienced. Special-occasion apparel is most likely to be returned after a customer wears the item, but retailers are cracking down on this "wardrobing" trend with more prominent labels attached to the outside of the garments. The efforts seem to be working, as 62.1 percent or retailers report having been victims of wardrobing, down from 64.9 percent last year.

According to the report, nearly all (94.8 percent) of the retailers who responded say they have processed returns on stolen merchandise, while the vast majority (69 percent) say they have processed returns that were originally purchased using counterfeit or stolen forms of payment, including fake store credits or gift cards. Additionally, 29.3 percent have found customers using counterfeit receipts to return merchandise.

"Recent efforts to combat fraudulent activity are slowly starting to work, but criminals are becoming more savvy and technologically advanced in their methods, making it even more difficult for retailers and law enforcement to keep up with the growing problem," NRF vice president for loss prevention Rich Mellor said in a statement.

In order to reduce return fraud, many retailers now require customers to show identification when attempting to return an item. 

For more: 
-See this Global Post article
-See this Retailing Today article

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