Retail: The Cost of Return Fraud

Following Christmas, there is always the mass movement of people to retailers to return something they received and don’t really want. According to the National Retail Federation (NRF) survey, people returned an average of four gifts last year. However, the NRF also reports that there is approximately $8.76 billion lost each year because of return fraud.

The 2013 NRF survey which covered 62 retail companies, found that return fraud during the holidays was up 5.8%, which accounted for approximately $3.39 billion in loss for the retailers.

Rich Mellor, the VP of loss prevention for the NRF states that the most common forms of return fraud are returning items that have been used or stolen from the store, as well as returning items that were purchased with fraudulent tender.

Although retailers are getting better at closing the gaps in their loss prevention plans regarding returns, Mellor asserts that “criminals are becoming more savvy and technologically advanced in their methods.”

Of the 62 companies surveyed, almost all stated that had stolen items returned to the store. 75% of the companies stated they had items returned that were bought with fraudulent or stolen gift cards, credit cards or cash. 30% stated they have caught people returning items with fake receipts, and last but certainly not least, 90% of companies stated they have had to deal with employee-related return fraud issues.

Another common problem reported by these companies was the return of gently used items. This is most common with electronics and special occasion apparel. While not defective, these items can not be resold, which leads to loss.

In addition to tightening restrictions on returns, many retailers are now requiring customers to share identification when returning an item, so they can track who is making the returns and how many returns they make. For years, Target has limited the number of returns a single customer can make with or without a receipt.

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Melanie graduated in 2004 from Bowling Green State University. She has been working as a freelance writer for over five years with previous experience in both sales and marketing.