Retailers took back $743B in returns last year, with $101B lost to fraud: NRF

Dive Brief:

Last year, total merchandise returns amounted to $743 billion, a rate of 14.5%, according to research using retail survey data from the National Retail Federation and customer data from analytics firm Appriss Retail. Survey respondents included “more than 60 of the top 100” U.S. retailers, per the report.
According to those respondents, fraudulent returns, which include the use of counterfeit receipts, shoplifting, organized retail crime activity and other fraud and abuse, equaled 13.7% of returns. That extrapolates to $101 billion, the groups found.
In December 2022, NRF and Appriss estimated that more than $816 billion worth of merchandise was returned that year, and that for every $100 in accepted returns, $10.40 was lost to fraud. However, those results are not comparable to this year’s, due to a change in methodology, per a NRF press release.

Dive Insight:

Returns, including fraudulent returns, have escalated as e-commerce has grown. When it acquired the Reverse Logistics Association last year, the NRF itself has expanded its own membership to accommodate the burgeoning industry affiliated with returns.

“Digital growth has an increased impact on in-store returns rates and leads to a significant increase in online claims and appeasements for missed, late, or damaged deliveries,” the NRF and Appriss said in their report. “Fraud and abuse are growing at a significant pace in this category.”

With holiday e-commerce expected to be especially strong this year, many retailers are bracing for an elevated level of returns, with CBRE and Optoro estimating that as much as $82.1 billion worth of merchandise might go back.

As NRF and Appriss also note in the report, retailers are increasingly exploring ways to mitigate or discourage returns, which they must do carefully considering consumer demand for “frictionless retail.” Retailers are shortening return windows, implementing return fees, requiring identification or limiting refunds to store credit, among other tactics.

The report includes “bracketing,” where shoppers order more than one size or color of an item with the intention of returning at least some, as part of “fraud and abuse.” Bracketing would be “abuse,” rather than “fraud” on the part of a customer, but could also indicate product unreliability, or poor product descriptions or reviews, according to Appriss Retail Chief Revenue Officer Pedro Ramos.

“It would be to the retailer's benefit to determine what is driving it and how to minimize that from happening,” Ramos said by email.

It’s not clear how fraudulent returns fits into the NRF’s annual shrink report, and the group declined to elaborate on how those overlap, citing lack of time.

Inventory losses caused by theft, operational or process mistakes and systemic errors — rose to 1.6% in 2022 from 1.4% in 2021, according to the group’s annual retail security survey. That calculation was based on survey answers from 177 retail brands, with some $1.6 trillion of annual retail sales and more than 97,000 retail locations in the U.S. The NRF has about 16,000 retailer members.