Bill Stewart, the owner of LI Toy and Game, a small business located on Long Island, New York, faces significant challenges due to return fraud. He estimates that he is affected by dishonest return practices at least twice a month. Customers often falsely claim that the items he shipped were either not as described or defective. In some cases, they return products in a far worse condition than when they were received. A recent incident involved a customer returning a Scooby Doo Mystery Machine model kit after two weeks, with the box opened, the toy half-assembled, and several pieces missing. Given its condition, Stewart had no option but to dispose of it, stating, "Went right into the trash." He believes the child who played with it was likely too young for such a product.
When factoring in the cost of the item, two-way shipping fees, and merchant fees imposed by the third-party platform he used—Walmart Marketplace—Stewart calculates that this return resulted in a net loss of approximately $55. While this amount may not significantly impact larger retailers, for a small business like his, it represents a considerable setback, especially since he has no recourse. "With Walmart, the customer's always right," he remarks, highlighting the challenges small retailers face in dealing with returns.
The ability to return purchased items has become a fundamental aspect of the modern shopping experience. This leniency encourages customers to buy more products, operating under the assumption that they can easily return what they don't want. However, retailers are increasingly voicing concerns that some consumers are exploiting these generous return policies. Instances of outright return fraud are becoming more common, including returning empty boxes, swapping different items, or claiming that a package never arrived. Retailers and return logistics experts have noted that many everyday consumers, not just organized criminals, contribute to this growing problem.
David Morin, vice president of client strategy at Narvar, a retail logistics company, suggests that societal attitudes are evolving. Many consumers who would never consider stealing from a physical store feel emboldened to cheat online retailers, viewing it as a way to "stick it to the man." This shift reflects a troubling trend in American consumer behavior, with many seeing low-level return fraud as a victimless crime.
A recent report from Appriss Retail and Deloitte revealed that the total value of merchandise returned in the U.S. reached an astonishing $685 billion in 2024, with 15%—or $103 billion—classified as fraudulent returns. This means that a significant portion of returned items should not have qualified for refunds according to retailers' policies. Morin indicates that distinguishing between organized crime and casual fraud is complex, but surveys suggest that a large segment of the population participates in return abuse.
In 2024, Narvar conducted a survey revealing that over half of U.S. consumers admitted to engaging in fraudulent returns at least once. Additionally, a separate 2023 survey from Loop Returns, a returns management software company, found that nearly four in ten online shoppers acknowledged participating in or being aware of returns policy abuse. Jessica Meher, senior vice president of marketing at Loop, noted a prevailing sense of entitlement among consumers regarding return abuse.
Return abuse exists on a spectrum, ranging from benign practices to outright fraud. One common practice is bracketing, where consumers purchase items in multiple sizes or colors and send back what doesn't work for them. This is generally acceptable but poses logistical challenges and environmental concerns. On the more fraudulent side, wardrobing refers to the practice of treating return windows as free rental periods. For instance, a consumer may buy a dress for a special occasion, wear it, and then return it for a full refund.
Retailers are often forced to process refunds before thoroughly assessing returned items for damage, leaving them with minimal recourse. The rise of e-commerce has made return abuse easier, as warehouse employees may not scrutinize every return as closely as in-store staff would. In this digital landscape, retailers might only discover damage, such as wine stains on a dress, well after the refund has been issued.
Some consumers engage in more deceptive practices, such as claiming that a package was never received or returning a different product in place of the original. Morin recounts a case where a client received three empty CD cases returned, as they weighed the same as the actual products. By the time the box was opened, the refund had already been processed.
Hilary Koziol, who runs an online consignment business known as Cellar Sellers, has faced her share of dishonest customers. In one incident, a buyer claimed that she sent a box of jeans instead of the sealed trading cards they had purchased. Such fraudulent returns have significant implications for her business, and she often finds herself in disputes with both the Postal Service and the platforms she sells on.
The prevalence of return fraud is also fueled by social media, where tips and tricks for manipulating return policies circulate widely. A simple search on platforms like TikTok reveals numerous videos offering advice on obtaining free refunds from major retailers. Parents have taken advantage of generous return policies, such as those offered by Target's Cat & Jack kids line, to return well-worn clothes. Online forums on platforms like Reddit allow users to discuss return strategies, such as the feasibility of returning furniture years after purchase.
Megan Wyatt, owner of Wit & Whimsy Toys, a brick-and-mortar retailer in California, expresses frustration with how lax return policies at large retailers have led consumers to expect similar treatment from small businesses. "Customers feel like they can do that at small businesses as well," she explains, underscoring the challenges faced by independent retailers.
To combat return fraud, retailers of all sizes are tightening their return policies. Many are eliminating free returns, shortening return windows, and implementing stricter guidelines. Companies like REI and ASOS have begun banning customers who consistently abuse their return policies. Retailers are also leveraging data to identify repeat offenders, allowing them to flag potential fraud before a purchase is completed.
Personalized return policies are becoming increasingly common, enabling retailers to reward good customers with favorable return terms while penalizing those who frequently abuse the system. Meher highlights the importance of balancing consumer satisfaction with the need to protect businesses from return fraud.
In a climate where many consumers view companies—especially large corporations—as adversaries, a growing sentiment of "us versus them" emerges. This dynamic encourages some people to exploit return policies, believing they are striking back against businesses that prioritize profits. This mentality can lead to increasingly creative schemes, such as returning mismatched items or claiming theft of packages that later arrive.
As return fraud continues to rise, retailers must navigate the complexities of consumer behavior and adapt their strategies to protect their businesses while maintaining customer satisfaction. The landscape of return policies is evolving, and both consumers and retailers will need to adjust to this new reality.
