Fraudulent Holiday Returns Could Cost Retailers $2.2 Billion
Now that the holiday shopping season is over, retailers must face a new battle–return fraud. The National Retail Federation estimates that 3.5% of retail returns after this year’s holidays will be fraudulent, up from 3% last year. This could cost retailers as much as $2.2 billion, $300 million more than the year before.
The NRF predicts total annual returns to reach $260.5 billion this year, which is 8% of the total retail sales.
The biggest issue retailers face with fraudulent returns is the return of stolen products. 91.9% of retailers said they have experienced such a problem thus far. 72.6% of retailers have experienced wardrobing fraud, where consumers will return used merchandise that is not defective. Both of these figures are in line with those from 2014.
The increase in online holiday sales this year may also pose a problem for retailers. One-third of retailers reported that they experienced return fraud through the use of e-receipts, a huge increase from 18.2% of retailers a year ago.
Many consumers who ordered products online will choose to return those products at their local stores, which could lead to inventory surpluses at some locations. Retailers must adjust their inventory management systems to accommodate for the boost in returns for products originally purchased over the Internet. A recent MasterCard study revealed a 20% increase in online sales over the holiday season and a 7.9% increase in total sales.