What: The US retail industry faced a $103 billion loss from fraudulent returns in 2024, driven by deceptive practices like 'wardrobing' and the return of stolen merchandise.

Why it is important: This surge highlights the urgent need for retailers to adopt innovative, data-driven loss prevention strategies to combat fraud while maintaining customer loyalty.

Fraudulent returns reached 15.14% of total merchandise returns in 2024, according to Appriss Retail and Deloitte, contributing to $103 billion in losses. Total merchandise returns amounted to $685 billion, 13.21% of the $5.19 trillion in retail sales. Practices like 'wardrobing' (reported by 60% of retailers), fraudulent tender (55%), and stolen merchandise returns (48%) are driving this alarming trend. Rising online shopping has exacerbated the issue, with younger consumers, particularly Gen Z, increasingly engaging in practices like 'wardrobing' and 'bracketing.' Traditional return policies are proving ineffective, prompting experts, including Appriss Retail CEO Michael Osborne, to advocate for AI-powered solutions to balance fraud prevention with a seamless customer experience.

IADS Notes: The findings align with key trends throughout 2024. In January, the NRF reported total return values of $743 billion, highlighting the growing challenge early in the year. By September, 39% of consumers were returning online purchases monthly, contributing to mounting operational costs. November data revealed that 69% of Gen Z shoppers were engaging in return-related behaviors like 'wardrobing,' and holiday season returns surged by 28% in December, reaching $122 billion. These developments underscore the critical need for retailers to adopt innovative, AI-powered solutions to protect their bottom lines without compromising the customer experience.

Fraudulent returns cost retailers USD 103 billion in 2024