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Return Fraud to Cost Retailers $3.7 Billion This Holiday Season

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For Immediate Release
Ellen Davis (202) 783-7971 or davise@nrf.com

Return Fraud to Cost Retailers $3.7 Billion This Holiday Season, According to NRF

Washington, November 9, 2010 – Fine-tuning return policies has become both a science and an art as retailers continue to grapple with roller-coaster return fraud rates. According to NRF’s annual Return Fraud Survey, completed by loss prevention executives at 111 retail companies, the retail industry will lose an estimated $3.68 billion to return fraud this holiday season, up from $2.74 billion last year. Return fraud will cost retailers an estimated $13.95 billion during the 2010 calendar year, up from $9.59 billion in 2009. When asked if their company has ever changed its return policy to specifically address return fraud, nearly two-thirds (65%) said it had.

“Retailers are still struggling to find the appropriate balance between providing stellar customer service for their shoppers while prohibiting criminals from taking advantage of lenient return policies,” said Joe LaRocca, Senior Asset Protection Advisor for NRF. “Combating this very costly problem helps retailers keep prices low but can unfortunately involve establishing policies that inconvenience honest shoppers.”

The most common type of return fraud is return of stolen merchandise, which 93.5 percent of retailers say they have experienced in the last year. Wardrobing – the return of used, non-defective merchandise like special occasion apparel and certain electronics – also poses a huge problem, as more than six in 10 retailers (61.7%) say they been victims of this activity within the last year, up from 46.2 percent in 2009. Additionally, 88.8 percent say they have had a problem with employee return fraud, 68.2 percent have  Return Fraud Chartexperienced the return of merchandise purchased on fraudulent or stolen tender, and 35.5 percent have found criminals using counterfeit receipts to return merchandise.

As a result of rampant fraud, many retailers have begun to adopt policies which require customers returning merchandise to show identification. Retailers estimate that 3.89 percent of returns with a receipt are fraudulent, but that number skyrockets to 12.61 percent for returns without a receipt. As a result, seven in ten retailers (67%) now require customers returning items without a receipt to show identification, which reduces fraud. One in five retailers (21.1%) requires shoppers with a receipt to show ID.

While the majority of retailers’ policies will remain unchanged this year (83.6%), 5.5 percent of retailers said they will loosen their holiday return policies while 10.9 percent will tighten. According to the survey, one-third (33%) of retailers say their return policies are more flexible during the holiday season in order to accommodate shoppers who may be purchasing gifts.

According to an NRF survey conducted last December, 87.9 percent of Americans feel retailers’ return policies are fair.

PRESS AND ANALYSTS: NRF will host a special media briefing to address crowd control and other holiday loss prevention topics on Thursday, November 11 at 1:00 p.m. EST. If you would like to join the call, please click here to register. The call is reserved for members of the press and analysts only.

About the survey
NRF’s fifth annual Return Fraud Survey polled senior loss prevention executives at 111 retail companies in October 2010. Executives from discount stores, department stores, drug stores, supermarkets and specialty stores completed the survey.

As the world's largest retail trade association and the voice of retail worldwide, the National Retail Federation's global membership includes retailers of all sizes, formats and channels of distribution as well as chain restaurants and industry partners from the U.S. and more than 45 countries abroad. In the U.S., NRF represents the breadth and diversity of an industry with more than 1.6 million American companies that employ nearly 25 million workers and generated 2009 sales of $2.3 trillion. www.nrf.com

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