NRF Estimates Holiday Return Fraud Could Cost $2.2 Billion

(IDEX Online News) – According to the National Retail Federation’s (NRF) latest Return Fraud Survey, US retailers estimate that 3.5 percent of their holiday returns this year will be fraudulent, up slightly from the estimated 3 percent reported in 2014.

Retailers estimate that total annual returns will reach $260.5 billion, or 8 percent of total retail sales, with $9.1 billion of their annual returns expected to be fraudulent.  Overall, holiday return fraud is expected to cost retailers $2.2 billion, up from approximately $1.9 billion last year.

“Return fraud remains a critical issue for retailers with the impact spanning far and wide, in-store and online,” said NRF vice president of Loss Prevention, Bob Moraca.

“While technology has played a significant role in deterring many in-person fraudulent transactions that would have otherwise gone unseen, there is little that can be done to prevent a determined criminal who will find a loophole one way or another. When it comes to retail fraud, retailers can build taller walls, but criminals continue to find taller ladders.”

Nine out of 10 retailers surveyed (91.9%) said they have experienced the return of stolen merchandise, similar to last year’s 92.7 percent.

Wardrobing, or the return of used, non-defective merchandise, also presents a unique challenge for retailers: three-quarters (72.6%) of those polled said they have experienced wardrobing in the past year, on par with last year’s 72.7 percent.

There is some good news, however. According to the survey, fewer retailers in 2015 have experienced specific instances of return fraud, including:

·         75.8 percent have experienced the return of merchandise purchased on fraudulent tender, down from 81.8 percent in 2014;

·         71 percent have experienced return fraud made by known organized retail crime groups, down from 78.2 percent last year;

·         77.4 percent of retailers surveyed have experienced employee return fraud or collusion with external forces, down from 81.8 percent in 2014. 

·         One third (33.9%) of those polled said they have experienced return fraud with use of e-receipts, up from 18.2 percent last year.

Three in 10 (30%) surveyed said they have seen an increase in fraudulent purchases made with cash, while six in 10 (60.7%) have seen an increase in the use of gift card/merchandise credit return fraud.

Eight in 10 retailers surveyed (85.2%) said they require identification when making a return without a receipt, up from 70.9 percent last year.

Retailers surveyed said they estimate 10 percent of returns made without a receipt are fraudulent, up from an estimated 5 percent who said so last year. Just 1 percent of purchases made online and returned to stores are suspected to be fraudulent.