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Holiday Returns Fraud Could Cost Retailers $3.4 Billion Featured

  • Written by  Mike Santos

Research_piece

As many retailers celebrate spikes in 2013 holiday sales, the overall industry must guard against a related spike in return fraud: An estimated $3.39 billion will be lost due to fraudulent returns of merchandise purchased during the 2013 holiday season, according to the Return Fraud Survey from the NRF.

Return fraud is on the rise: 5.8% of 2013 holiday returns will be fraudulent, up from 4.6% last year, according to the NRF report. Results are based on a poll of senior loss prevention executives at 62 retail companies during October and November 2013. Executives from discount stores, department stores, drug stores, supermarkets and specialty stores completed the survey.

Though retailers work hard year-round at loss prevention, only 27.9% of those surveyed change their returns policies during the holiday shopping season, according to the report.

On a scale of 1 to 5, with 1 being not at all effective, retailers ranked their current policies at 3.55 in terms of being effective in deterring return fraud.

One of the biggest issues for retailers is the practice of “wardrobing:” customers who return used, non-defective merchandise such as holiday and other special occasion apparel, and certain electronics. Many companies are tackling this practice and beginning to see positive results: 62.1% of respondents reported being victims of wardrobing, down from 64.9% last year.

“Recent efforts to combat fraudulent activity are slowly starting to work,” said Rich Mellor, VP of Loss Prevention, NRF, “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.”

Other key findings of the 2013 Return Fraud Survey include:

  • 94.8% of retailers experienced the return of stolen merchandise;

  • 93.1% reported problems with employee return fraud or collusion with external sources;

  • 69% experienced the return of merchandise purchased on fraudulent or stolen tender;

  • 60.3% experienced return fraud with a connection to organized retail crime groups:

  • 49.1% witnessed an increase in gift cards/store merchandise credit fraud;

  • 29.1% reported an increase in credit card fraud; and

  • 15.5% reported e-receipt returns fraud.


For a complete copy of the 2013 Return Fraud Survey, click here.
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