A recent National Retail Federation survey reported that retailers estimate that holiday return retail fraud will cost them $3.8 billion.
In the survey, nearly all retailers said they’ve experienced the return of stolen merchandise in the past year (92.7 percent), which suggests that organized retail crime still is prevalent in retailers despite attempts to increase security technology usage. Of those polled, 78.2 percent said they’ve had organized retail crime groups hit their stores, which is nearly an 18 percent jump from 2013.
“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,” NRF Vice President of Loss Prevention Bob Moraca said in the survey. “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.”
So what’s causing the increase in fraudulent returns? Retailers cited e-receipts as one reason for the increased return fraud cases. Retailers also saw a significant increase (69 percent to 81.8 percent) of returned merchandise that was purchased with fraudulent or stolen payment methods. Counterfeit receipts also continue to be an issue, but those figures have slowly dropped (29.4 percent in 2013 to 25.5 percent in 2014).
The increase in fraudulent return practices have caused retailers to increase security measures. There’s also been an increased gift cards/store merchandise credit fraud in the past year. And roughly 38 percent of those polled said they’ve seen an increase in credit card fraud returns. That is slightly higher than the roughly 30 percent that reported seeing an increase in debit card fraud.
“The problem of return fraud has forced many retailers to adopt policies that require customers who are returning merchandise to show identification,” the report said. “Retailers estimate that 14.1 percent of the returns made throughout the year without a receipt are fraudulent and as a result, 70.9 percent now require customers returning items without a receipt to show identification. Even when a receipt is present, more retailers polled this year say they ask for identification.”