By Mike Viscione, Interim New Business Sales Director at ReBound Returns

Retailers are losing as much as 2% of gross merchandise value (GMV) to a murky space between customer entitlement and outright criminal fraud. As many brands work to provide seamless, customer-friendly returns, lots are inadvertently creating opportunities for exploitation – and the financial impact is significant.

Clear-cut scams such as fake tracking numbers or empty-box returns are easy to categorise as fraud. But a different type of behaviour, sometimes termed “legal abuse”, is just as damaging, harder to prove, and often impossible to prosecute.

Practices such as wardrobing (using and returning items), excessive or habitual returns, and exploiting policy loopholes fall into this category.

According to the National Retail Federation, returns fraud and abuse cost U.S. retailers over $103 billion in 2024. For some individual brands, annual losses run into tens of millions of dollars, even when no law has been broken.

Who are the perpetrators?

Offenders range from opportunistic individuals to organised return rings. High-profile scams involving counterfeit goods or “pavement filler” returns – where shoppers send back worthless items – make headlines but represent only a small share of the problem.

Methods vary from sending back completely different items, such as bottled water instead of new shoes, to returning damaged goods while claiming they are pristine. Some consumers commit parcel fraud by sending empty boxes or falsely claiming returns.

The most common form of abuse, however, is wardrobing. Shoppers use apparel, electronics, or other goods and then return them in unsellable condition. This hits retailers twice: they issue refunds and bear the cost of items that can’t be resold without expensive refurbishment – if at all.

The impact and hidden costs

Beyond the immediate loss of the item or refund, there are hidden costs for retailers. In many cases, fraudulent returns aren’t flagged until they reach central distribution centres, meaning retailers are paying unnecessary transport costs to ship used or worthless goods across long distances.

Then there’s storage. In many regions, customers have the right to request disputed items back, so retailers need to store the goods for at least 60 days, just in case. Even if the item does ultimately get returned to the consumer at their expense, the operational cost of managing the process still falls on the retailer.