URGENT UPDATE: Retailers across the United States are grappling with a startling rise in return fraud, costing businesses an estimated $103 billion in 2024 alone. This alarming trend highlights a growing issue as consumers exploit generous return policies, leading to significant financial losses for both small and large retailers alike.
Bill Stewart, owner of LI Toy and Game in Long Island, New York, reports being “screwed over” by return scams twice a month. Recently, a customer returned a Scooby Doo Mystery Machine model kit in unusable condition, resulting in a net loss of $55 after considering shipping and fees. “Went right into the trash,” Stewart lamented. “The kid played with it, was probably too young for it.” For small businesses, these losses can be devastating.
The return fraud epidemic is fueled by consumers abusing return policies, with reports indicating that 15% of returns—equating to $103 billion—were fraudulent in 2024, according to a recent report from Appriss Retail and Deloitte. The ability to return items easily has become an entrenched aspect of the shopping experience; however, this has led many to take advantage of the system.
Experts in retail logistics, such as David Morin of Narvar, emphasize that both organized criminals and average consumers are engaging in fraudulent activities. “Consumers who would never steal from a store are being socially trained to take advantage of retailers in these small ways,” Morin stated.
The issue is widespread, with recent surveys revealing that more than half of U.S. consumers admitted to committing fraudulent returns at least once. Surprisingly, nearly 40% of online shoppers acknowledge abusing return policies. This culture of entitlement is prompting retailers to take a stand.
In response, many retailers are tightening return policies, including measures like banning repeat offenders. Companies such as REI and ASOS have actively begun to restrict returns from customers known for abuse. “Retailers are using aggregated data to identify bad actors, ensuring they can act before the purchase is made,” said Jessica Meher, senior vice president of marketing at Loop.
As e-commerce continues to expand, the ease of returning items online complicates matters further. Retailers often process refunds before assessing returned products thoroughly, leaving them vulnerable to deceitful returns. Morin outlined cases where consumers returned empty boxes or swapped items, exploiting return systems to their advantage.
The impact on small businesses is palpable. Megan Wyatt, owner of Wit & Whimsy Toys in California, noted that customers expect the same leniency from small retailers that they experience at larger chains. “We have to train customers that you can’t return things at a small business the way you would at Target or Amazon,” she explained.
Amid the surge in return fraud, retailers are increasingly implementing stricter measures. Some are now offering personalized return policies to reward good customers while penalizing those who frequently take advantage of the system. This shift reflects a larger sentiment of mistrust between consumers and businesses, leading to a pervasive “us-versus-them” mentality.
As the holiday shopping season approaches, the urgency for retailers to address return fraud grows. Many are now prioritizing customer satisfaction while also safeguarding their bottom line. The question remains: how will retailers strike a balance between accommodating genuine customers and deterring fraudulent behavior?
With the financial stakes so high, both retailers and consumers must navigate this evolving landscape carefully. As more people become aware of the consequences of return fraud, the hope is that a shift in consumer behavior can occur—before small businesses pay the price for widespread abuse.
Stay tuned for more updates on this developing crisis in retail.
