Internal analysis by top U.S. retailers reveals claims and appeasements fraud is costing billions in online sales, with a 1.5% increase year over year.
Appriss Retail, a leading provider of data and analytics solutions aimed at reducing retail losses, decreasing returns, and enhancing the consumer experience, has released the Appriss Retail 2024 Claims and Appeasements Report. This report features internal research highlighting the troubling rise of claims and appeasements fraud.
Claims and appeasements fraud is a sophisticated tactic where consumers claim an online order never arrived, arrived damaged, or didn’t meet expectations, prompting retailers to offer refunds or appeasements. Although seemingly honest, and often categorized as “friendly fraud” by the National Retail Federation (NRF), organized retail crime (ORC) groups and savvy fraudsters exploit this tactic.
The Appriss Retail 2024 Claims and Appeasements Report features exclusive analysis from top U.S. retailers, highlighting the impact of claims and appeasements fraud on their businesses in 2023. In collaboration with NRF and drawing from the 2023 Consumer Returns in the Retail Industry Report, key findings include:
- A 1.5% year-over-year increase in claims and appeasements fraud cases.
- 10.5% of these cases are fraudulent.
- Depending on the retailer type, the cost of claims and appeasements fraud on online retail sales ranges from $21 billion to $35 billion.
The report also notes that fraudsters are becoming more sophisticated in their tactics, such as:
- Joining online forums where professional returners share tips on bypassing returns systems.
- Running professional returns fraud services advertised online.
- Sharing resources like complaint letter templates and scripts for customer service interactions.
ORC groups and professional fraudsters increasingly outsmart loss prevention teams, making it difficult to distinguish between honest and fraudulent claims. While loyal shoppers genuinely experience delivery issues, fraudsters exploit these scenarios to collect, resell items, and file fraudulent claims for refunds.
“The rise of ecommerce and omnichannel shopping has fueled fraudsters to deceive retailers with fraudulent claims for refunds and appeasements,” said Michael Osborne, CEO of Appriss Retail. “This issue costs retailers billions, but advancements in AI can help combat professional returners.”
Retailers can use predictive analytics and AI to identify suspicious behaviors, such as making claims across multiple locations. These tools track patterns and alert retail associates to potential fraud, potentially reducing claims and appeasements cases by 6.5%.
For more insights on how AI can mitigate loss from claims and appeasements fraud, download the Appriss Retail 2024 Claims and Appeasements Report.
