Return fraud is running rampant

Business Insider

6 days ago

Bill Stewart, the owner of LI Toy and Game on Long Island, New York, estimates that he gets "screwed over" by return shenanigans twice a month. Customers falsely claim an item he shipped wasn't as described or doesn't work, or they send back something in much worse condition than how he released it. Recently, a customer returned a Scooby Doo Mystery Machine model kit after two weeks with the box open, the toy half assembled, and pieces missing. Given the condition, there was no way for him to resell it. "Went right into the trash," Stewart says. "The kid played with it, was probably too young for it."
Adding up the price of the item itself, two-way shipping costs, and merchant fees charged by the third-party platform he used to sell the item — Walmart Marketplace, in this case — Stewart estimates the exchange resulted in a net loss of $55. For the big guys, he recognizes that's nothing, but for a small business like his, it's a hit, and one for which he has no recourse. "With Walmart, the customer's always right," he says.
The ability to return an item you've purchased has become a core part of the shopping experience. Customers may buy a few more items than they would otherwise because it's a no-harm, no-foul situation on returns. Backsies are allowed. But retailers say consumers are engaging in too many backsies. Some are committing outright return fraud — shipping back empty boxes, swapping out different items, or claiming a package never arrived. Others are abusing generous return policies by attempting to send back items after days, weeks, and even months of use. And while it's tempting to blame organized criminals, retailers and return logistics operators say a lot of everyday consumers are the culprits, too. People are strapped for cash, they've been trained to expect super loose return policies, and they don't feel bad about pulling one over on a faceless company.
"Consumers who would never go into a physical store and take an item off without paying and stealing are actually being trained socially that it's actually acceptable to take advantage of retailers in these small ways," says David Morin, the vice president of client strategy at Narvar, a retail logistics company. "They think it's OK, right? Stick it to the man."
America is becoming a nation of small-time return fraudsters, one box of fibs at a time.
A recent report from Appriss Retail and Deloitte found that the total value of merchandise returned in the US reached $685 billion in 2024. Fifteen percent of that — $103 billion — was fraudulent, the report said, meaning the product shouldn't have qualified for a refund under the retailer's policies.
America is becoming a nation of small-time return fraudsters, one box of fibs at a time.
Morin says it's hard to suss out who, specifically, is responsible for fraudulent behavior — organized criminals versus everyday consumers — but it's clear that a wider range of people are partaking than you may expect. In 2024, Narvar ran a survey of US consumers that found that more than half of consumers admitted to engaging in fraudulent returns at least once. In a separate 2023 survey of US online shoppers from Loop Returns, a returns management software company, nearly four in 10 people admitted to having engaged in returns policy abuse themselves or knowing of someone who had.
"There seems to be this mentality that consumers feel entitled to do it," says Jessica Meher, the senior vice president of marketing at Loop.
The spectrum of returns mischief is quite broad, and your mileage may vary on what's acceptable versus what's abuse. On the more benign end is " bracketing," when consumers buy the same item in different sizes or colors and send back whatever doesn't work. It's a logistical headache and bad for the environment, but it's generally above board. Inching into the fraud territory is the practice known as " wardrobing," which Thomas Borders, the vice president of operations for Inmar Supply Chain, a reverse logistics company recently acquired by DHL, says is when consumers treat return windows as "free rentals." The practice will sound familiar to a lot of shoppers: You buy a dress or a pair of shoes for a special occasion, you wear it to said special occasion, and then you return it and get your money back.
"In an effort to avoid customer dissatisfaction, retailers will process the consumers' refund before items are properly assessed and any damage identified," Borders says. "This results in premature refunds, leaving retailers with very little recourse."
E-commerce makes this sort of return abuse even easier to engage in than brick-and-mortar shopping — warehouse employees often don't closely scrutinize every single item to make sure it's in tip-top condition like employees at a retail counter might. In a digital world, the retailer will probably see the wine stains on the dress you wore to that wedding only when it's too late, if they ever notice at all.
There seems to be this mentality that consumers feel entitled to do it.
On the more nefarious side of the equation, consumers lie and say a package never arrived or was stolen, or they stick a different product back in the box. Morin says Narvar had a client during the pandemic who started to see a trend of consumers returning three empty CD cases to them. Someone online figured out the cases weighed the same as some of their core items, so when the return box initially got weighed in by the carrier, no red flags went up that it was the wrong item inside. Once the box was actually opened, the refund had already gone out. Another trick is when consumers tamper with return labels in order to send empty packages to the wrong destination, so they can just claim it got lost if the retailer tries to check. They keep the product, and they get an automatic refund when the package gets put in the mail.
Hilary Koziol, who runs the Cellar Sellers, an online consignment business, has dealt with her fair share of dishonest customers. She recently sold a sealed box of trading cards to someone on eBay for hundreds of dollars, and the buyer claimed Koziol actually sent a box with a pair of jeans inside, returned those, and demanded a refund for the trading cards. She wound up opening a case with the US Postal Service over it. On another occasion, a customer bought a $50 dress from her on Depop and, in return, sent back an old, makeup-stained version of the same style. "You find that happens a lot with clothing," she says. When she encounters these problems, she disputes them with the Postal Service and the platforms she's selling on, and it's "kind of a crapshoot" whether she wins or loses, though as she sells more stuff and accumulates more reviews, the platforms tend to side with her more. "Especially if it's a larger-value item," she says, "it's impacting my business a ton."
A lot of people get ideas online and on social media for different return tricks they can pull. It took me about five minutes of searching on TikTok to come across videos with tips and advice for getting free refunds from Amazon. There's tons of content about Target's Cat & Jack kids line's generous one-year return policy that leads many parents to try their hand at returning well-worn clothes. On Reddit, there's a forum where people compare notes on Costco returns, including users asking about the chances the company might accept a furniture return five years after it was purchased or exchange a Christmas wreath after the leaves start to brown. There are also hot debates about which REI returns may count as abuse.
"It's almost like coupon sites where consumers have been trained to look for coupons and discounts," Meher says. "That's starting to happen with what companies offer loose return policies."
I don't think my social circle is the most crime-prone group in the world, but the more I chat with people in my life about return fraud and abuse, especially in online shopping, the more I realize how prevalent it is. A coworker told me about a friend of theirs who'd returned a box of rocks to a retailer instead of a television. A friend told me they'd never steal — only to acknowledge they'd once returned a big-ticket item they broke to Amazon and claimed it arrived broken, while their partner regularly sends back items they've worn. Another friend said that whenever they send back used items to replace new ones and get the refund, they make sure the seller is a big corporation, not a small mom-and-pop shop. I tried to do the bracketing thing with two sets of curtains last summer but failed. I was too lazy to return the set I didn't want within the return window, so it's accumulating dust under my bed.
To many people, low-level return fraud feels like a victimless crime — they're not exactly losing sleep over a giant corporation losing a few dollars here and there. People assume retailers don't really care that much, since they'll often send a refund before getting the item back, if they bother to recollect an item at all. Companies have also given people such a long leash on accepting returns that consumers may not blink at hauling grass shears smeared with clippings back to the Target counter after six months of use.
Megan Wyatt, the owner of Wit & Whimsy Toys, a brick-and-mortar retailer in California, says the lax return policies the big guys offer customers have been a headache for her. "They'll just take pretty much any return, it feels like, these days. And so customers feel like they can do that at small businesses as well," she says. Her store has to essentially "train customers that you can't expect to return things at a small business the way that you would at Target, Walmart, Amazon, places like that."
Retailers big and small aren't having a good time with return fraud and are cracking down. Many are axing free returns, tightening return windows, or otherwise implementing stricter returns policies. Companies such as REI and ASOS have started to ban certain customers over return abuse. Some retailers are using aggregated data to try to identify bad actors, whether they're a previous customer or not. If a consumer is continually taking advantage of return policies at X retailer, Y retailer may know even before they click to buy.
Meher, from Loop, says personalized return policies are starting to become more common, too. "So, being able to incentivize good customers and giving them good return policies and disincentivize bad consumers and people who return a lot and giving them different return windows or different return policies," she says. "That is also starting to become more important as retailers look into, 'How do I make sure that I don't piss off my good customers?'"
Across the consumer economy, there's a pervasive us-versus-them sentiment between companies and their customers. Many consumers feel like businesses — especially the big ones — are swindling them and squeezing them for every penny, so when they have a chance to strike back, why not? Maybe that means putting a brick in a return box and hoping nobody notices it's not an iPad. Or maybe it's just seeing that package you'd already declared stolen arrived three days late and not trying too hard to give back that refund that already came through.