What is “Return Fraud” and How is it Costing You?

What is “Return Fraud” and How is it Costing You?

Return Fraud Scammers Cost Everyone

Return fraud is costing the retail industry billions of dollars in revenue. Unfortunately, many retail stores don’t have an effective way to combat the troubling trend. 

Abusive return fraud schemes have grown at an alarming rate, putting merchants in a complex no-win situation—losing revenue from fraud versus needing to keep returns amenable. 

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 these types of crimes.

So, what exactly is return fraud?

Individuals or an organized retail crime ring (a group of professional criminals) prey on retailers for an illegal profit. They usually work in teams to create counterfeit handbags, belts, jewelry, watches, shoes, and clothing to return them for cash or store credit. They often collaborate with shop employees to ensure the return scheme is smooth. 

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 

We find the specific types of counterfeiting for return fraud impact our Real Authentication community more than others. According to the National Retail Federation (NRF) and the Loss Prevention Research Council, these are the types to look out for: 

  • Returns made by organized retail crime groups – 71%
  • Return fraud through the help of employees – 77.4%
  • Return fraud through manipulated e-receipts – 33.9%

It is not only so-called customers and organized criminals taking advantage of this crime. There are documented cases of competitors trying to make a quick buck at your expense.

Yes, Boutiques and Stores Accidently Sell Counterfeit Items

How to Combat Return Fraud

Regardless if you are a buyer or a seller, return fraud is a delicate matter. Even if you might be suspicious of a specific item, it is essential to remain calm. Never make any accusations you cannot prove because that could lead to ruining relationships, losing customers, and damaging your business’s reputation. 

Resellers and stores need to know the most common types of return fraud and look out for patterns in behaviors. The most crucial step to prevent this type of fraud is by training using an authentication partner. 

Buyers, never pay cash for an item unless you really know the seller. Always use PayPal, credit cards, or other legitimate marketplace platforms. Ask the seller for their proof of authentication, or better yet, get your potential purchases authenticated with a reputable luxury authentication service like Realauthentication.com