A new report from the National Retail Federation (NRF) and Appriss Retail shows that, much to their chagrin, retailers won’t be leaving issues with returns behind as 2024 approaches.
Returns have long been problematic for retailers, especially those in fashion and apparel, causing monetary loss, increased waste and, in some cases, a less-than-satisfied consumer.
While the 2023 report from NRF and Appriss showed lower overall return rates among retailers than in previous years, the problem is still a big one. Retailers have not yet figured out how to successfully deter consumers from bringing merchandise back, nor have they solved issues with fraudulent returns.
The report stated that the total return rate as a percentage of sales came in at 14.5 percent, or $743 billion, of $5.13 trillion in U.S. retail sales in 2023.
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That figure has fallen by a few percentage points compared with data from 2021 and 2022; in 2021, the return rate came in at 16.6 percent, and in 2022 the average return rate was 16.5 percent, per data from NRF and Appriss.
The NRF report stated that the online returns are expected to account for 17.6 percent of online sales in retail. But for fashion and apparel purveyors, the online return rate could be even higher.
A Coresight Research report from April estimated that the average return rate for online apparel sales comes in at 24.4 percent.
Even as retailers watch sector-agnostic return rates fall, that trend may not extend to companies in the fashion and apparel spaces. Forty-five percent of respondents to Coresight’s study reported that apparel return rates had “increased moderately or significantly over the last two years.”
In addition to their issues with returns at large, retailers have to consider how fraud activity could further their losses.
Despite advances in technology and the growing use of artificial intelligence to mitigate efficiency snags, retailers are still dissecting the best way to deal with fraudulent returns.
Per the NRF and Appriss data, of the estimated $743 billion in returns, retailers lost $101 billion—or 13.7 percent—to return fraud. That has increased by over three percentage points from 2022, when the NRF reported that 10.4 percent of returns were fraudulent.
And retailers noted that they expect return fraud rates during the holiday season to be higher than the year’s average. The report projects that, of an estimated $966 billion in 2023 holiday sales, $148 billion worth of merchandise, or 15.4 percent, will be returned to retailers. Fraudulent returns may account for $24.5 billion of that $148 billion, the report estimates. That’s 16.5 percent—nearly three percentage points higher than the 2023 average.
In 2023, retailers’ largest return fraud issues came from two categories: wardrobing, or returning non-defective, used merchandise, and return of shoplifted or stolen merchandise. Nearly 49 percent of surveyed retailers reported experiencing wardrobing in 2023, while just over 44 percent of retailers said they had seen the return of shoplifted or stolen merchandise.
In 2022, the same top issues prevailed—the percentage of retailers reporting wardrobing remained nearly flat year over year, while retailers’ accounts of returned stolen merchandise increased by less than three percentage points in 2023, as compared with 2022.
Other problems included returns from organized retail crime groups and returns of merchandise purchased with fraudulent or stolen tender.
And though allowances for non-receipted returns have come down by half year over year, the percentage of non-receipted returns that have been fraudulent has risen.
In 2022, retailers permitted 22.1 percent of returns to be processed without a receipt, noting 14 percent of those returns were fraudulent. In 2023, retailers allowed just 11.5 percent of returns to be handled with no receipt, but 17 percent of those return transactions were fraudulent.
But even as no-receipt, no-return policies continue to rise, the report noted, fraudsters have uncovered new ways to scam retailers, like engaging in counterfeit returns.
The 2022 data shows that just over 11 percent of retailers struggled with returns made with a counterfeit receipt. But that issue has skyrocketed in 2023, as over one-fourth of retailers say they noticed attempts to return with counterfeit receipts.
