Retailers’ ability to offer customers many happy returns is becoming more difficult and costly.
Total returns in retail amounted to $743 billion in 2023, according to a report from the National Retail Federation. That equates to $145 million in merchandise returns for every $1 billion in sales. This year, shoppers are expected to return $890 billion in merchandise, which represents nearly 17% of retailers’ annual sales, according to a recent NRF report.
Faced with the escalating challenge of returns, retailers are taking diverging approaches to dealing with the issue. And while not all returns involve fraud, that is one of the issues retailers are addressing. Most of the retailers surveyed in the NRF’s latest report said return-related fraud and other exploitative behavior was an issue for their business.
“The rise in e-commerce shopping has led to an increase in return rates and volumes across most categories because online shoppers can’t touch and feel products before they buy,” David Morin, vice president of customer strategy at returns company Narvar, said via email. “The notion that ‘the living room is the new fitting room,’ where consumers try items at home before deciding whether to keep them, has led retailers and brands to review their return programs, including tightening their return policies.”
Buying multiple items with the intent to return some of them, also known as bracketing, has grown among younger people, the NRF found, with 51% of Generation Z consumers acknowledging they’ve done it.
Morin said Narvar’s research has found rising rates of what it terms “friendly fraud” — behaviors like bracketing or wardrobing, where someone buys and wears an item with the intention of returning it. But Narvar also found rising rates of potentially criminal return policy abuse.
“The increase in fraud, along with the heavy incurred costs to retailers, is driving a larger focus on strategies that identify potential fraudsters and create unique workflows to deter the behavior,” Morin said. “Retailers are also balancing out strategies that still reward trusted customers to maintain the sense of ‘peace of mind’ that is critical in returns.”
Indeed, a return abuse or fraud crackdown must be balanced with maintaining customer experience, Katherine Cullen, the NRF’s vice president of industry and consumer insights, said in the organization’s latest report. Other experts echoed that perspective.