Rampant Return Fraud: A Growing Retail Challenge

Bill Stewart, the proprietor of LI Toy and Game located in Long Island, New York, finds himself financially hamstrung twice each month due to deceptive return practices. Customers misrepresent product quality or falsely claim it fails to function, or they return merchandise in far worse condition than when sold. A recent incident involved a Scooby Doo Mystery Machine model kit that was returned with an opened box, partially assembled, and missing parts. Reselling was impossible, leaving Stewart with no choice but to discard it. 'It ended up straight in the bin,' lamented Stewart. 'The child who played with it must have been too young.'

Factoring in the item cost, round-trip shipping fees, and charges from Walmart Marketplace—the selling platform—Stewart's financial loss was approximately $55. Larger companies might shrug it off, but for small enterprises like his, it's substantial and there's no solution in sight. 'With Walmart, the shopper always wins,' Stewart notes.

Returns have become integral to purchasing, encouraging buyers to acquire more knowing they won't face penalties for returns. This return culture, however, is being exploited. Some consumers indulge in fraudulent returns by sending empty packages, swapping different items, or feigning non-delivery. Others take advantage of lenient policies by returning used items weeks or months later. It's easy to point fingers at crime syndicates, but many instances involve regular consumers. People feel financially pressured, have become accustomed to lax return rules, and often show no remorse at tricking an impersonal corporation.

'Retailers are inadvertently socializing consumers into thinking these minor scams are acceptable,' comments David Morin, Narvar's VP of Client Strategy. 'It's all about sticking it to the man.'

Widespread Casual Return Deception

A 2024 report by Appriss Retail and Deloitte highlighted that returned merchandise in the US was valued at $685 billion, with 15%—worth $103 billion—deemed fraudulent, indicating refunds were issued inappropriately.

Morin acknowledges the ambiguity in identifying whether organized crime or common consumers are more culpable; nonetheless, the spectrum of fraudsters is broader than expected. A Narvar 2024 survey revealed over 50% of American shoppers have engaged in return fraud. A separate 2023 survey from Loop Returns reported around 40% of online patrons confessed to return policy exploitation or knowing someone who committed such.

Jessica Meher, Loop's Senior VP of Marketing, observes, 'A sense of entitlement pervades consumers towards fraudulent returns.'

Return misconduct ranges widely, from mild 'bracketing,' where buyers purchase various sizes or colors to return what's unsuitable, to the less acceptable 'wardrobing,' which treats return periods as no-cost rentals—as familiarity with this returns practice grows among consumers. Events like using new attire for an occasion and then returning it occur often enough to frustrate retailers.

Retailers’ Dilemma: Processed Refunds with No Scrutiny

"E-commerce exacerbates return abuse," explains Thomas Borders from Inmar Supply Chain. Warehouse employees rarely inspect each returned item, which means stains and wear might not be evident until it's too late, if noticed at all.

More severe acts involve lying about undelivered packages, substituting returned items, or sending bogus products. Morin recounts a pandemic case where a client noticed a trend of returns involving empty CD cases. Similar item weight tricks carriers, leading to false refunds post-return authorization.

Hilary Koziol of Cellar Sellers encounters such duplicitous tactics from her customers on eBay. For instance, after selling valuable trading cards, the buyer falsely claimed to have received clothing instead, demanding a refund. Koziol had to involve the USPS to resolve the issue.

Online Tricks and Social Media Influence

Tips for scamming returns abound on social media, like TikTok’s advice on claiming Amazon refunds. Discussions on platforms like Reddit include how long customers can stretch return policies before crossing the line. This mirrors couponing trends—consumers seek hacks for return policies.

Personal anecdotes reveal casual return fraud's spread. A colleague reported a friend returned rocks in place of a TV. Another friend avoids small business targets, preferring to deceive large corporations. Low-level fraud seems victimless when targeting mega-corporations, despite significant economic implications.

Shifting Retail Tactics Against Return Fraud

Retailers are revising return policies due to rising fraud. According to Megan Wyatt of Wit & Whimsy Toys, lenient policies by big names become burdens for smaller businesses, forcing store-specific return guidelines. As a result, many companies have curtailed complimentary returns and stricter customer identification measures.

Some, like REI and ASOS, have outright banned habitual return abusers. Whereas organizations now leverage collective data insights to preemptively identify and dissuade prospective fraudulent returners. These personalized policies resonate with retailers seeking to protect genuine clientele without alienating them.

In an era marked by corporate skepticism and consumer tact, these protective measures highlight a growing divide as companies strive to balance leniency with control and sustainability.