Retailers Battle Holiday Returns, Holiday Hangover Kicks In

Retailers are battling holiday returns as customers returned over $700 billion in merchandise in 2023, with more than 13% involving abuse or fraud, according to a report by the NRF (National Retail Federation.)

The fraudulent merchandise contributed to more than $100 billion in losses from retailers. The fraudulent returns increased this holiday season. As of today, retailers expect an astonishing $25 billion in fraudulent returns, with approximately 16% stemming from the holidays.

Most retailers have discussed this being a real problem for the industry during the holiday season. According to more than 500 retailers, this is a nearly 3,000% increase from the prior year.

According to the NRF, the most common type of return fraud comes from “wardrobing,” in which customers return the clothing after wearing it. Other types of fraud include stolen money or returns from using counterfeit receipts.

Fraudsters are capitalizing on policies such as free online returns that were rolled out over the last four years by retailers. The policy aimed to attract customers post-pandemic; however, these policies continue to increase returned merchandise.

“During the holiday season, many retailers use seasonal workers, which makes it easier for customers to commit criminal activity,” said Alan Amling, a supply chain professor at the University of Tennessee.

According to experts, customers are trying to dodge the system, hoping they’ll receive a refund when mailing back returns as soon as their shipping label is scanned before the retailer confirms the item.

According to analyst Tom Enright, “Some people are sending back a box of bricks instead of a television set, while others are returning a lower-priced item with a higher-priced product’s tag stuck to it.”

Chief executive of returns-service provider Optoro, Amena Ali, said, “Some people ship counterfeit goods back to luxury retailers hoping they will be refunded before the item is identified as fake. The fraud is becoming more and more of a concern to retailers.”

Retailers say they are coping, but major corporations such as Target, Home Depot, and Macy’s are taking the brink of returns. Additionally, over the past year, they’ve also experienced an increase in shoplifting bulk items.

Even though large corporations are one of the highest targets, fraud still occurs on a smaller scale.