A holiday shopping display at the mall.

Retailers give insight into fraud after the holidays

Posted on Dec 23, 2015 · 3 min read

Fraud comes in all shapes and sizes and is especially prevalent in the retail industry. Many retailers have reported experiencing fraud with consumers stealing, credit fraud or taking advantage of exclusive discounts for military members or students. For the 2015 holiday season the NRF is reporting that the biggest issue for retailers will face is return fraud.

Return fraud is the act of defrauding a retail store via the return process. Offenders have been caught returning stolen merchandise to secure cash, or stealing receipts or receipt tape to create a falsified return. Return fraud has been on the rise especially due to the heavy traffic during the holiday season both online and in-store and the growing popularity of e-receipts by retailers is also a likely connection.

According to an NRF survey, it is estimated that 3.5% of holiday returns this year will be fraudulent, which is expected to cost retailers $2.2 billion, up from $1.9 billion last year. Throughout the entire year of 2015 retailers have estimated that they will have received $9.1 billion in fraudulent returns of the $260.5 billion returns made.

“Return fraud remains a critical issue for retailers with the impact spanning far and wide, in-store and online. While technology has played a significant role in deterring many in-person fraudulent transactions that would have otherwise gone unseen, there is little that can be done to prevent a determined criminal who will find a loophole one way or another. When it comes to retail fraud retailers can build taller walls, but criminals continue to find taller ladders,” said the NRF Vice President of Loss Prevention, Bob Moraca.

Retailers surveyed said that the two biggest issues they have with return fraud in the past year are stolen merchandise and return of used clothing.

  • 91.9% of retailers surveyed said they have experienced the return of stolen merchandise
  • 72.6% of retailers surveyed said they have experienced wardrobing (return of used, non-defective merchandise)

While all the talk about return fraud is disheartening, there are a few positives that came out of the NRF survey, including:

  • The return of merchandise purchased on fraudulent tender is down 6% from last year
  • Return fraud made by known organized retail crime groups is down 7.2% from last year
  • Employee fraud or collusion with external forces is down 4.4% from last year

Technology has played a huge part in decreasing the amount of fraud in the retail world and there are many more positive changes to come. At SheerID we are dedicated to helping retailers make these changes throughout 2016.

 

Photo credit: Flickr user Sharon Hahn Darlin

Madeline Boehmer by Madeline Boehmer