Survey: Holiday-related return fraud to cost retailers $2.7 billion

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Washington, D.C. According to NRF’s annual Return Fraud Survey, completed by loss-prevention executives at 134 retail companies, the retail industry will lose an estimated $2.7 billion in return fraud this holiday season and an estimated $9.6 billion this year.

The survey provided evidence that changing return policies are beginning to reduce the amount of return fraud in retail. According to the survey, 6.4% of holiday returns are expected to be fraudulent this year, down from 7.5% last year. Department stores and specialty stores, including children’s apparel stores, experience higher return rates; as expected, rates at grocery stores, drug stores and restaurants are lower.

“Retailers are constantly trying to fine-tune return policies to create guidelines that honest customers can live with and dishonest people can’t get around,” said Joe LaRocca, senior asset protection advisor for NRF. “Many shoppers are doing their part to help stores combat return fraud by being more conscious about saving receipts and attaching gift receipts to presents this holiday season.”

According to the survey, 93.1% of retailers said stolen merchandise has been returned to their stores in the past year, up from 88.9% in 2008. In addition, three-quarters of retailers (75.4%) say they have experienced returns of merchandise purchased with fraudulent or stolen tender, while 43.1% say they have experienced returns using counterfeit receipts. Nearly half (46.2%) also report that wardrobing -- the return of used, non-defective merchandise such as special-occasion apparel and certain electronics -- has been an issue for their company within the past year.

Most retailers’ holiday policies will stay consistent with last year (80.4%), while 16.9% of companies said their return policy will tighten and 3.8% said the policy will loosen. About one-third (28%) of retailers say their return policy is more flexible during the holidays than it is during the course of the year.

According to an NRF survey conducted last December, 87.2% of Americans feel retailers’ return policies are fair.

“Criminals have been fond of using a ‘woe is me’ mantra because of the economy, but the truth remains that most return fraud is more “greed” than “need”,” said LaRocca. “In many cases, return fraud is committed by people who use technology to produce counterfeit receipts or take advantage of lenient return policies by stealing large quantities of merchandise and returning it to dozens of stores without a receipt.”