U.S. Retailers Combat Rising Fraudulent Returns with Advanced Technology

Retailers are grappling with a significant rise in fraudulent returns, with estimates indicating that $101 billion, or 13.7% of returns, were deceitful last year, adding to the already hefty processing costs averaging 21% of an order’s value.

During the peak holiday season in 2024, fraudulent returns are anticipated to reach 16.5%, valued at $24.5 billion. Fraudulent tactics encompass various schemes such as returning different items or falsely claiming non-delivery.

Retailers, including Saks, are witnessing an uptick in fraudulent complaints, prompting the adoption of stricter policies and advanced technologies like AI to combat fraud effectively. Amazon leads with proactive detection measures using advanced machine learning models.

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Fighting Fraudulent Returns

The share of returned items deemed fraudulent or abusive jumped to 13.7 percent, more than double the prior year, as dishonest customers adopted inventive new schemes such as ‘bracketing’ and ‘wardrobing.’

Bracketing refers to buying multiple similar items in the same order, and then keeping one and returning the rest, while wardrobing involves buying an expensive item, wearing it extensively, and then returning it.

Retailers are leveraging advanced technologies to combat returns fraud in online shopping. Artificial intelligence and machine learning enable real-time detection of fraudulent returns by analyzing various data.

Blockchain technology ensures tamper-proof tracking of products, preventing fraudulent returns. Biometric authentication, like fingerprint scanning, verifies the identity of customers during returns, preventing unauthorized returns and protecting high-value items. These innovations aim to enhance security and protect retailers from losses due to fraudulent activities.