Return fraud counterfeit bags

How to Protect Yourself from Return Fraud


Did you know that return fraud is costing the retail industry billions of dollars in revenue? Many stores do not have effective ways to detect return fraud. If this issue remains unresolved it can determine whether your business will continue to stay afloat or not. 



So, what exactly is return fraud?

“Return fraud” is returning retail merchandise with the intent to get a refund (whether cash or store credit) even though you are violating the retailer’s returns policy. 

Sometimes this can happen innocently, but lately, this type of fraud has become a business or side hustle for some people.

It is not only a small percentage of shoppers taking advantage of this crime but even illegal businesses or your competition, trying to move your inventory to make a quick buck at your expense.

So, what defines the line between an innocent mistake and the illegal act of return fraud?

We believe that, in order to get a clearer picture of the intentions behind a suspicious return, we can track the data on each client’s account to recognize a pattern of their shopping behavior before jumping to assumptions. 

Having a good return policy creates a certain level of trust and satisfaction with the shoppers you do want in your business. But it is important to be aware of the main traits to look out to protect yourself from those with ill intentions. 

Return fraud is illegal. In most U.S. states it is recognized and treated as theft or robbery. Meanwhile, in other states, it is recognized as a felony or misdemeanor. Return fraud is being taken more seriously and so are the repercussions following this crime. 


How do you know if you are a victim?

Return fraud is a delicate matter and should be treated as such. Even if you might be suspicious of a specific return or client account, it is very important to remain calm. Never make any accusations you cannot prove because that could lead to losing customers and damaging your business’s reputation. 

Know the most common types of return fraud and look out for patterns in behaviors. Not all returns are bad, that is why the most important step to prevent this type of fraud is by first revising your return policy, especially during the holiday season.

Here are the most commons ways “return fraud” comes in:

  • Stolen Merchandise – this happens when someone returns shoplifted goods to receive cash back or store credit. 
  • Receipt Fraud – A reused, stolen, or fake receipt is used to return discounted, old, or fake merchandise back to the retailer. 
  • Price Switching – This can happen by switching the tag of an item with the one from a higher-priced item for a bigger return payback. This can be done with either the same item that is now discounted or with similar-looking merchandise.
  • “Wardrobing” or Renting – Another very common form of this fraud is wardrobing, which means the client will buy an item with the intent to return it after wearing it once or twice.


The industry of counterfeiting is rampant. There are many variations to return fraud, the things you need to look out for are:

  • High inventory shrink rate
  • Increase in returns – mainly occurring at opening or closing times
  • Return policies not being enforced by employees and/or managers 



You can protect yourself by:

  • Refine your return policy and make sure it is easily accessible.
  • Train staff to turn a return into an opportunity to find what the client needed.
  • Tweak the return policy before the holiday rush. 
  • Use hard, verifiable data to determine the legitimacy of a return.
  • Track your clients’ shopping transactions.
  • Have store-specific SKU codes. 

You can also hire a company like Real Authentication as your professional authentication service to track this data for you and help you protect your business from return fraud. 

Return Fraud Prevention