When we started talking to retailers about returns a few years ago, the conversations were pretty straightforward: Returns are expensive. Returns are messy. Returns are growing.
Today, those conversations sound vastly different. Return logistics have changed, and not totally for the best.
Returns have quietly evolved into something much bigger than a cost center. They’re now a fraud risk, an operational bottleneck, and a growing question mark for many teams. Most retailers agree it’s getting worse. What’s changed is how fast the tactics are evolving, often faster than teams can reasonably respond.
That’s why we wrote this report.
Not to point fingers. Not to scare anyone. But to help retailers stay informed about how returns fraud is actually showing up right now – and what can be done about it.
The full report goes deeper into the data, examples, and strategies behind what we’re seeing.
Returns Didn’t Become the Problem Overnight
Returns fraud isn’t new. What’s new is the environment it’s operating in.
Over the last decade, returns have moved from staffed counters to self-service portals, automated labels, unattended drop-offs, and instant refunds. Those changes were made for good reasons: customer experience, scale, and efficiency.
But they also quietly removed friction. That friction, as it turns out, was doing more work than we gave it credit for.
What that friction really represented wasn’t inconvenience. It was human judgment. Returns used to pass through people who could ask questions, notice patterns, and slow things down when something felt off. As that layer disappeared, returns widened. More volume, less scrutiny, and far fewer natural checkpoints.
Today, roughly 15% of retail purchases are returned, and retailers estimate that about 15% of those returns are fraudulent. On paper, those percentages don’t sound catastrophic. In practice, when the average return already costs $25–$30 per item, fraud compounds losses very quickly – especially in a business where net margins hover around 5%.
Most Returns Fraud Exploits the Same Gaps
One of the biggest takeaways from this research is that “returns fraud” isn’t a single behavior. It’s a spectrum.
It includes:
- Chargebacks and so-called “friendly fraud”
- Wardrobing and bracketing
- Counterfeit returns
- Item substitution, empty boxes, and gutted electronics
- Abuse of keep-it and refund-without-return policies
- Even organized “Return-as-a-Service” fraud rings
Some of this is intentional and criminal. Some of it lives in the gray area of policy abuse. All of it creates real operational drag.
And importantly: most of these tactics exploit the same weaknesses: low-touch workflows, weak connections between refunds and inspection, and fragmented systems that don’t talk to each other.
The Goal Isn’t to Punish Customers
One thing I want to be clear about: this report isn’t advocating for harsher return policies or worse customer experiences.
Retailers are walking a tightrope. Tighten controls too much and you hurt loyalty. Loosen them too much and you invite abuse.
What we saw consistently in our research is that the retailers making progress aren’t choosing one extreme or the other. They’re designing smarter return flows.
That includes:
- Controlling where and how returns enter the system
- Adding verification where it matters most
- Using technology to support, not replace, human judgment
- Routing high-risk returns differently than low-risk ones
- Collaborating across the industry instead of fighting fraud alone
Why I Believe Returns Can Become a Strategic Advantage
Here’s the optimistic part – and, yes, I really do believe this.
Returns are one of the few places where operations, inventory, payments, sustainability, and customer trust all intersect. That makes them complex. But it also makes them powerful.
When returns are handled thoughtfully:
- Fraud exposure goes down
- Costs become more predictable
- Inventory decisions improve
- Waste is reduced
- And customer trust actually increases
Some of the most effective strategies we studied do something counterintuitive: they remove unnecessary physical handling altogether: donation-based pathways.
By rerouting returned items to be donated, rather than returned to warehouse, allows retailers to bypass several logistics costs: unnecessary handling for unsellable or high-risk returns, reducing fraud exposure, cutting operational costs, and keeping value in the system instead of sending it to waste.
It doesn’t solve every problem. But it shows what’s possible when returns are designed with intention, not resignation.
Why This Report Exists
We wrote this report to give retailers a clearer, current picture of:
- How returns fraud is evolving
- Where the real costs hide
- Which interventions actually help
- And how returns can shift from a liability to something more strategic
We wrote this report for teams who’ve been doing everything they’re supposed to do and still feel stuck. For anyone who’s tightened policies, added tools, absorbed more cost, and wondered why returns keep getting harder to manage.
This isn’t about working harder inside the same system. It’s about recognizing where that system stops serving you, and considering new pathways that weren’t on the table before.
Returns aren’t going away. But the path forward doesn’t have to look like the past. That’s a future worth investing in.
For an overview of key findings and official commentary, see the accompanying press release.
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