Christmas return fraud to cost US retailers over 3.8 billion dollars

An increasing number of US consumers are willing to return unwanted gifts, with an estimated 64.67 billion dollars of presents expected to be returned this holiday season. According to a recent survey from the National Retail Federation (NRF), over one fifth of all returns occur during the festive season.

However, unwanted gift returns are not the main issue for US retailers, the increasing trend revolving around return fraud, the return of stolen goods, is becoming a larger problem, costing them 10.9 billion dollars this year alone. US retailers estimate that 3.8 billion dollars will be lost to return fraud this holiday season, up from last Christmas's 3.4 billion dollars.

From the 60 retail companies surveyed by the NRF, retailers estimated that 5.5 percent of all holiday returns are fraudulent, driven by a surge of organized crime groups which come together to take full advantage of stores' return policies. “Today’s sophisticated technology does well keeping criminals at arm’s length but often isn't enough to completely stop the unethical practices of organized and individual retail fraud occurrences,” commented NRF Vice President of Loss Prevention, Bob Moraca.

“Return fraud has become an unfortunate trend"

“Return fraud has become an unfortunate trend in retail thanks to thieves taking advantage of retailers’ return policies to benefit from the cash or store credit they don’t deserve. Additionally, many of these return fraud instances are a direct result of larger, more experienced crime rings that continue to pose serious threats to retailers’ operations and their bottom lines.”

According to the NRF survey, 92.7 percent of the retailers questioned have experienced the return of fraudulent merchandise over the past year, with more than three-quarters, 78.2 percent, reporting return fraud via organized retail crime groups, up from 60.3 percent last year.

Although return fraud may be on the rise, not many Americans seem eager to step forward and admit to returning unwanted Christmas gifts. Only 32 percent of US shoppers claim they would return unwanted presents this holiday season, down from 45 percent in 2013, according to a survey from RetailMeNot.

However, those who do return their gifts tend to prefer to swap the gift for cash, with 40 percent exchanging the present for money, followed by 16 percent exchanging the unwanted present for gift cards or vouchers, 13 percent for another item from the same store and 11 percent settling for store credit.

Another issues US retailers struggle with is the practice of 'wardrobing,' known as the return of used merchandise, such as special occasion wear or electronics. Although a number of retailers do use a number of tactics to discourage such practice, 72.7 percent of retailers polled by the NRF say they have experienced some form of wardrobing over the past year, up from the 62.1 percent in 2013.

The increasing problem of return fraud has led to a number of US retailers introducing additional policies which require customers who wish to return an item to show a form of identification. Retailers surveyed believe that 14.1 percent of returns carried out throughout the year without a receipt are fraudulent; 70.9 percent of retailers ask customers returning goods without a receipt to show identification.

In spite of the increasing trend towards fraudulent returns, 70 percent of the US retailers polled do not plan to change their return policy this holiday season.