There’s a shocking rise in fraudulent return practices

The data: Return fraud is accelerating. Seventy-six percent of shoppers admit to embellishing return reasons to avoid fees— a 39% increase from 2023, according to research from Optoro.

Nearly 69% of shoppers said they participate in “wardrobing,” or buying items for temporary use with the intent to return them.

Why it matters: With return volume expected to reach $160 billion between Thanksgiving and January's end, per CBRE forecasts, consumer return behavior is becoming problematic for retailers.

• Traditional return policies and manual inspection processes are proving inadequate for detecting misuse.
• Retailers face mounting pressure to balance fraud prevention with maintaining positive customer experiences.

Shifting market dynamics: The rise in ecommerce has made it easier for consumers to exploit return policies.

Extended return windows, while customer-friendly, may inadvertently enable fraudulent behavior.

“I might take a very different policy and personalization approach to [a shopper who exploits a return policy] versus the first-time shopper versus somebody in between who shops some and returns some,” Optoro CEO Amena Ali told EMARKETER. “I'm not sure there's a one-size-fits-all solution.”

Protecting the bottom line: Fraud has become so prevalent that retailers must now use sophisticated software to determine if returned items are actually new.

• Retailers are implementing automated inspection systems to verify item condition.
• Software solutions can help identify patterns of return abuse while protecting customer privacy.
• Third-party logistics providers are adopting technology to streamline return verification.
• And smart disposition engines can help optimize handling potentially fraudulent returns.

Our take: As return fraud rises, retailers must evolve beyond traditional prevention methods. While technology offers promising solutions for detecting and preventing abuse, the underlying challenge remains balancing fraud prevention with the customer experience.

• Ali emphasized that retailers need to consider the complete customer relationship rather than just the cost of returns—looking at factors like loyalty program status, purchase history, and return patterns to determine a customer's true lifetime value before making blanket policy decisions.
• Success will likely come from combining sophisticated detection systems with adaptive policies that reward honest customers while identifying and addressing problematic behavior.

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