Bringing it back: 25 Facts about retail returns (including abuse and fraud!) in the U.S.

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Americans returned 8% of their purchases last year – including return fraud and abuse, costing retailers and merchants $15.9 billion annually.

1. Estimates of the total U.S. retail industry sales in 2015 are right around $3.256 trillion.

2. An astounding 8% of all retail merchandise was returned, which amounts to $260.5 billion in returns!

3. Abuse and fraud (abuse has a pretty wide definition) constitutes 6.1% of all returns, costing retailers $15.9 billion.

4. U.S. retailers lose around $9.6 billion annually on return abuse, and $14.8 billion annually on return abuse and fraud, according to research by the National Retail Federation (NRF) and the Loss Prevention Research Council.

5. Did you know that return merchandise is often marked down to a lower price for resale, but sometimes is has to be thrown away if it doesn’t sell or is so damaged/incomplete that it’s not suitable for resale?

6. Fraud alone occurs in 3.5% of all returns, costing companies and stores $9.12 billion last year. To put that in perspective, that’s about the annual revenue of the entire National Football League!)

7. With $260 billion in returns, if that number was an actual company’s profits, it would rank #3 on the Fortune 500 list.

8. But this is just a cost of doing business for these retailers, who still make huge profits, right? Not so fast, as there are other effects of return abuse and fraud with far-reaching negative impacts. Consider that if you factor in the average retail job paying $28,911, that means the extra income lost to fraud or abuse could account for 549,708 more jobs – including 315,406 jobs lost to fraud alone.

9. Additionally, losses caused by return abuse and fraud are costing states $552 million to $962 million annually in sales tax revenues.

10. Return fraud often intersects with shoplifting and bigger criminal offenses. Consider that 9 out of 10 retailers report that stolen merchandise was returned at some point.

11. Many times, store or company employees are in on it, turning a blind eye to fraud, assisting or even doing it themselves. In fact, 70% of retailers found their employees contributing to return fraud in some way.

12. As would be expected, the holiday times are huge for retail returns, with $63.05 billion in returns – but perhaps not quite as significant as you might guess. In fact, the return rate during holiday periods is 10% – only 2% higher than the national average for the whole year.

13. 21.3% of stores and retailers do tighten their return policies during the holiday season to counteract the increase in returns, abuse and fraud, though 3.3% actually loosen their policies.

14. According to a NRF consumer survey, more than one out of three of every gift recipients (38%) returned at least one or more items last holiday season.

15. But 3.35% of all returns during (or right after) the holidays are fraudulent, which costs retailers about $2.21 billion just in that short period.

16. A large part of the problem could be that 31.9% of gift givers rarely or never include gift receipts or any receipts for their purchase when they bestow a present to someone, making it harder to legitimately return or exchange.

17. Year-over-year, the largest increase in return fraud have occurred with gift cards/merchandise credit (+60.7%), while offenders are committing return fraud with items bought with checks 27.8% less.

18. Companies surveyed reported these kinds of return fraud within the past year:

Return of stolen merchandise (shoplifting) 91.9%
Employee return fraud or collusion 77.4%
Return of merchandise purchased with counterfeit or stolen money 75.8%
“Wardrobing” or buying items just to use and return 72.6%
Returns made by organized retail crime groups 71%
Returns using e-receipts 33.9% (This is the top growth area for fraud!)
Returns using counterfeit receipts 25.8%

19. Many serial return fraudsters are choosing to work online, hoping to hide behind the anonymity and sheer volume of e-purchases transacted online. Last year, there was a 5.5% increase in e-return fraud using PayPal transactions and fraudulent e-receipt returns were up 86% from the previous year.

20. What kinds of merchandise/departments do people most frequently return?

Auto parts 21%
Department store items 14.05%
Hard Goods 12.33%
Housewares 12.29%
Home improvement 11.35%
Women’s apparel 11.13%
Apparel 10.5%
Children’s apparel 9.88%
Footwear 9.56%
Sporting goods 9.25%
Beauty products 5.21%

21. California is by far the biggest offender when it comes to returns and return abuse and fraud, leading the nation with $33,699,247,826 in retail returns and a 11.9% return rate. (Remember that the annual average return rate is 8%.)

22. There isn’t even another state in double digits or within 3 percentage points of California’s rate. In fact, the next highest states for returns are Texas (7.49%) and Florida (7.3%).

23. The lowest return rate for any state is the District of Columbia at 0.15%, with Wyoming (0.21%), North Dakota (0.25%), Vermont (0.25%), and Alaska 0.26%.

24. States have different laws governing return policies, both to set a standard for stores and merchants and to protect consumers, though they are often incomplete or ambigous. In California, merchants must clearly post their refund policy (including on their website for online purchases) UNLESS they offer full cash refund, exchange, or store credit within seven days of the purchase date. If they don’t prominently display their policy, then customers may return any items for a full refund within 30 days of the purchase.

25. While there is no federal law that requires a merchant to refund money to a consumer, the Federal Trade Commission (FTC) enforces federal consumer protection laws that are in place to combat fraudulent, deceptive, or unfair business practices such as false advertising. The FTC can sue companies or merchandisers who make deceptive claims about their products or services based on consumer claims, with possible settlements including full refunds to the wronged parties.

But in general, a consumer would be best served asking the store about their specific return policy at the point of purchase, talking to the manager if there are any questions before the transaction occurs, saving the original receipt and packaging, and not removing the tags if possible.

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