Retailers 2024 Appriss Retail Report: Fraudulent Returns and Claims Cost $103 Billion
Understanding Returns Fraud in Retail: A 2024 Analysis by Appriss Retail
Appriss Retail, a leader in data analytics aimed at reducing retail losses and combating return and claim fraud, has released its 2024 Consumer Returns in the Retail Industry Report in collaboration with Deloitte. This report sheds light on the growing challenges faced by when it comes to managing returns, with a particular focus on fraudulent behaviors and the ineffectiveness of stricter return policies.
According to the findings, total merchandise returns in 2024 reached an eye-watering $685 billion, accounting for 13.21% of total retail sales, which amounted to $5.19 trillion in the U.S. This highlights the magnitude of returns within the retail industry. Of this, an alarming $103 billion was attributed to fraudulent returns and claims, with 15.14% of all returns deemed fraudulent. Fraudulent returns occur when a customer attempts to return an item for a refund, fully aware that the item does not meet the retailer’s return policy criteria.
While have been taking stronger steps to limit fraudulent returns through the enforcement of more rigid return policies, Appriss Retail’s research indicates that these measures are not producing the desired results. Despite these efforts, the incidence of returns fraud continues to be pervasive, undermining the efficacy of stricter rules.
A closer look at the report’s findings reveals the most common types of returns fraud and abuse encountered by retailers. Among the key issues reported were:
- Wardrobing: 60% of retailers surveyed reported incidents where consumers buy an item, use it, and then return it. This behavior is commonly seen in fashion and electronics retail, where items such as clothing or gadgets are used briefly before being returned for a refund.
- Fraudulent Tender Returns: 55% of experienced returns made using fraudulent or stolen payment methods, such as stolen credit cards, counterfeit bills, or gift cards obtained through fraudulent means.
- Stolen Merchandise Returns: 48% of retailers faced the return of stolen items, where criminals would return products that were originally stolen from the store for a refund or store credit.
These fraudulent behaviors are not only costly but also disrupt the retailer’s ability to manage returns efficiently, leading to higher operational costs and lost revenue.
Michael Osborne, CEO of Appriss Retail, emphasized the dilemma faced by : “It’s clear why retailers want to limit bad actors who exhibit fraudulent and abusive returns behavior, but the reality is that they are finding stricter returns policies are not reducing the returns fraud they face. Our annual research highlights the serious problem of returns fraud and why an AI-powered, data-driven approach to loss prevention can reduce fraud and keep consumers loyal.”
Despite the growing recognition of the issue, retailers continue to struggle with returns fraud, even as they implement new policies. The inability of these measures to curb fraud underscores the need for more sophisticated and comprehensive solutions. Appriss Retail advocates for an artificial intelligence (AI) and data-driven approach to tackling these problems. Such technologies can help retailers identify fraudulent behaviors more accurately and in real time, significantly reducing the impact of returns fraud on their bottom line.
This research is based on extensive data, including input from more than 60 leading U.S. retailers, the U.S. Census Bureau, and surveys involving 1,000 consumers and 150 retail executives. The collaboration with Deloitte provides a valuable insight into the larger context of the issue, recognizing that the rapid growth of online shopping is contributing to an increase in return rates, particularly for products bought online and returned in-store.
Kevin Mahoney, Managing Director of Retail at Deloitte Consulting LLP, commented on the broader implications of the findings: “Returns are a significant cost for retailers, and the rise of online shopping could increase this trend. As retailers implement policies to address this issue, they should avoid negatively affecting customer loyalty and retention. Effective policies should reduce losses for the retailer while minimally impacting the customer experience. This approach can be crucial for long-term success.”
For retailers, the challenge lies not only in preventing fraud but also in balancing the need for strict return policies with the imperative to maintain positive customer relationships. Overly restrictive policies could alienate customers, leading to lost sales and diminished brand loyalty. Therefore, retailers must strike a delicate balance, focusing on reducing fraud while still offering a customer-friendly returns experience.
The 2024 Consumer Returns in the Retail Industry Report offers a comprehensive analysis of the return behaviors, claims, fraud, and abuse trends that are shaping the future of retail. For retailers looking to combat fraud and improve their returns process, the insights provided by Appriss Retail are invaluable in helping them take a more strategic approach.
Appriss Retail has been at the forefront of providing data-driven solutions to mitigate retail losses for over 20 years. Trusted by more than 60 of the top 100 U.S. retailers, Appriss Retail operates across 150,000 locations and serves clients in 45 countries around the world. The company’s expertise in omnichannel intelligence enables retailers to take a proactive approach to loss prevention, ultimately helping them boost profitability and customer satisfaction.
As retail continues to evolve, especially with the ongoing expansion of e-commerce, the need for effective fraud prevention tools will become even more critical. With the insights from Appriss Retail’s report, retailers can better understand the scope of the returns fraud problem and explore innovative ways to address it.
For more detailed information, retailers and industry professionals can download the full report from Appriss Retail’s website.
About Appriss Retail Appriss Retail provides retailers with robust solutions to prevent fraud and abuse in every transaction, no matter where it occurs. With more than two decades of expertise in retail data science, the company’s omnichannel intelligence platform is trusted by leading retailers worldwide. By leveraging AI and data analytics, Appriss Retail helps retailers optimize their operations, reduce losses, and improve the customer experience. For more information, visit Appriss Retail.
