Despite the complexities around returns, brands shouldn’t think of them as an unwelcome part of ecommerce. Things happen: The fit is wrong, the color is off, the item is not as expected, or a product arrives damaged. Whatever the reason a customer has for their return, think of it as an opportunity instead; for additional revenue or to drive loyalty.
That said, brands should work to reduce returns. After all, it’s an enormous challenge, both logistically and because it can significantly impact the bottom line. But more importantly, returns open the door to fraud, a growing issue that retailers are battling, costing them billions each year through return fraud and abuse.
The scope of the returns challenge
According to recent data, total retail returns in 2024 were projected to reach $890 billion, 12.25% of all sales ($7.265 trillion per the U.S. Census Bureau). The NRF found that online return rates ran much higher than in-store, primarily due to lack of physical inspection prior to buying, bracketing, and insufficient product information.
For brands, these returns are not only costly, they’re also a major factor in customer experience and loyalty, with the returns experience swaying shoppers positively or negatively. But beyond the sheer volume of returns, the bigger story is the rising cost of retail return fraud, with billions lost each year to abusive and fraudulent practices.
By the numbers: Current state of return fraud
Last year, $103 billion, or about 15% of all returns, were fraudulent according to Appriss and Deloitte’s data. Additionally, a Navar survey found that nearly 40% of consumers return at least one online item per month.
The growth of ecommerce continues to drive these figures upward. The same Appriss report found that online orders are returned at nearly three times the rate of in-store purchases:
- 24.5% return rate for online sales
- 8.7% return rate for in-store sales
Within that, Buy Online Return In-Store (BORIS) and Buy Online Return Online (BORO) combined to account for more than $362 billion in returns.
Return fraud and abuse take many forms, but retailers reported several common tactics they encounter most often:
- Wardrobing (wearing and returning used items); 60%
- Fraudulent or stolen payment tender (e.g., gift card scams); 55%
- Returns of stolen merchandise; 48%
- Counterfeit receipts or e-receipts; 48%
- Bracketing (ordering multiple sizes/styles, then returning most); 47%
- Employee collusion; 39%
On top of product return fraud, claims and appeasement abuse, such as falsely reporting missing or damaged deliveries to receive credits or refunds, added another $21 billion in losses in 2024.
Retailers are trying to fight back. According to the Appriss and Deloitte report, 84% of retail executives changed return policies in the past year to combat fraud. Common measures include:
- Requiring receipts or proof of purchase (67%)
- Shortening return windows to 30 days or less (59%)
- Manually monitoring transaction data (54%)
- Implementing real-time approval or denial systems (35%)
But there’s a catch. These stricter policies often backfire with customers. More than half (55%) of consumers said they avoided making a purchase because of restrictive return policies, while 31% stopped shopping with certain retailers after negative return experiences. On the flip side, positive return experiences drive loyalty: 70% of shoppers made additional purchases after a smooth return, and 89% said good return experiences make them more likely to buy again.
The data paints a clear picture: returns are both a financial risk and a customer loyalty touchpoint. Retailers must walk a fine line between preventing return fraud while keeping the return process simple, fair, and customer friendly.
Unintentional return fraud: When consumers don’t realize
Not everyone is out to scam retailers. Sometimes, commonplace behavior isn’t recognized as fraudulent. In some cases, shoppers make decisions they believe aren’t harmful but actually are. To make things more complicated, this behavior is often normalized.
For example, a customer might order multiple shoe sizes with the intention of returning most, using this tactic as an ecommerce fitting room. At one point, Amazon offered “Prime Try Before You Buy,” normalizing this habit called bracketing, where multiples are bought and the excess returned. These shoppers may not know that bracketing is costly for retailers, and that they would prefer that customers use virtual try-ons, personalized size recommendations, and other methods that don’t require returns management.
Consumers may also see wardrobing, wearing an item once for an event and then returning, as harmless because it’s “part of the retailer’s customer service promise.” Many also feel justified since generous return policies and marketing around “risk-free shopping” make it seem like acceptable behavior rather than return fraud.
Other, more insidious, types of return fraud
Unfortunately, return fraud goes much deeper than bracketing and wardrobing, and is done with the intent to deceive retailers. Some of the most common types of return fraud include:
Receipt fraud
When fraudsters use fake or doctored receipts to return merchandise for cash or store credit, it’s called receipt fraud. Those using this tactic might photocopy a real receipt and adjust an item or price to get a refund for items that were never bought. Another form of receipt fraud is when someone picks up a receipt someone threw away or dropped, finds the item in the store, and tries to return it.
Stolen merchandise returns
In this scenario, a person steals items from retail stores. The thief then attempts to return the item(s) to the same store, or a different one. If they can’t, they may also try to exchange or get store credit. It’s not uncommon for thieves using this tactic to target brands that have extra lenient return policies, like returns without a receipt.
Payment fraud
Payment fraud is using illegal or unauthorized credit cards, bank account details, or gift cards to buy merchandise. Scammers have also used identity theft to open accounts to buy items. In this case, they may also return those items for cash. Online purchases are most susceptible to this method of fraud, since card owners are not present, making these transactions more challenging to verify.
Counterfeit returns
In recent years, counterfeit products have gotten better; and in some cases, are almost indistinguishable from the real thing. The rise of high-quality fakes is influenced by technology and the fact that some fakes are created in the same factories that produce the authentic items. This can lead to counterfeit returns. In other words, returning fakes in place of authentic products, which is easier with looser return policies or minimal inspections.
Serial returns
Many elements can lead to serial returns, which is when consumers repetitively return items. While some are malicious and aimed to exploit or commit fraud, others are a symptom of impulsivity, poor fit, or wardrobing. However, retailers can also contribute to poor or inconsistent product descriptions and exploitable return policies.
Striking the balance between seamless experience vs. return fraud prevention
Before implementing a strong returns process and policy and strategies to thwart fraud, retailers should assess their returns data to identify any consistent areas of weakness and preventable returns. They should also track return rates by channel, fraud/abuse patterns, customer segments with high return frequency, and their current policy’s impact on loyalty and repurchase behavior.
Return policies should be designed to prevent fraud; however, overly strict policies can hurt customer loyalty and conversions. It’s about balance. To develop a clear, preventative, and palatable returns policy, brands should use the following best practices:
Best practices for policies and return fraud prevention
| Best practice | How to execute | Why it matters |
| Use AI/data-driven fraud detection | Implement fraud detection software that flags suspicious behavior (e.g., frequent high-value returns, serial claims). Integrate with POS and ecommerce systems. | Reduces false returns, saves billions in fraud losses, and allows retailers to act before abuse escalates. |
| Tailor policies by product category or customer behavior | Set stricter rules for high-risk items (luxury, electronics) while keeping flexible policies for low-risk goods. Use customer history to personalize return windows. | Balances fraud prevention with a positive customer experience, rewarding loyal shoppers while limiting abuse. |
| Educate consumers about acceptable vs. fraudulent practices | Provide clear messaging on websites, receipts, and checkout pages about what qualifies as legitimate vs. fraudulent returns. | Closes the perception gap; helps consumers understand behaviors like wardrobing or bracketing can be abuse, not harmless. |
| Offer flexible options (store credit, exchanges) | Instead of defaulting to cash refunds, encourage exchanges, store credit, or digital gift cards. | Retains revenue within the business while still providing flexibility for customers. |
| Benchmark against peers | Study return policies of brand competitors, then adapt competitive but fraud-conscious practices. | Ensures policies are in line with industry norms, preventing customer drop-off while staying competitive. |
| Policy clarity | Make return terms highly visible at checkout, on product pages, and in packaging. | Prevents confusion and disputes; transparency builds trust while deterring abuse. |
| Tiered flexibility | Create loyalty-based tiers; generous returns for reliable customers, stricter checks for high-risk profiles. | Encourages repeat purchases and rewards good customers while mitigating abuse. |
| Omnichannel alignment | Standardize policies across online, in-store, BORIS, and BORO channels. | Prevents loopholes where fraudsters exploit differences between channels. |
| Customer communication on impact | Educate shoppers on costs and sustainability issues tied to returns via marketing and packaging inserts. | Builds consumer awareness and encourages more responsible shopping/return habits. |
Kase for your reverse logistics needs
Returns and reverse logistics are a reality, but return fraud doesn’t have to be.
With billions lost each year, retailers can no longer rely on outdated policies that frustrate customers and fail to stop abuse. The key is balance: combining smart policies, customer education, and AI-driven fraud detection to reduce risk while keeping the return process seamless and loyalty-building.
At Kase, we help brands scale smarter by pairing flexible, customer-friendly returns with the technology and expertise to stop fraud before it happens.
Ready to rethink your returns strategy? Connect with an expert today.
