Christmas gift fraud costs billions

How can customers return unwanted gifts without raising suspicion? Bring a receipt.

Retailers suspect 12 percent of returns lacking a receipt are fraudulent, while just 1.5 percent of returns with a receipt are worthy of suspicion. In 2013, retailers suspected that 14 percent of returns without a receipt were fraudulent. This is one reason 71 percent of retailers require ID for returns without a receipt.

For the first time, data is also available for online purchases returned to brick and mortar stores. Only 3.5 percent of such returns are suspected of fraud. Eighty-seven percent of retailers accept merchandise purchased online to be returned to a brick-and-mortar store, up nearly five percentage points since last year.

Retailers estimate that $64.7 billion worth of holiday merchandise will be returned this year, or 23 percent of all merchandise returned for the entire year. Fraudulent gift returns are 33 percent of all fraudulent returns in 2014, down from 37 percent in 2013. Eleven percent of holiday sales are returned.

The most common type of return fraud is the return of stolen merchandise, with 92.7 percent of retailers saying it has happened to them in the past year. Another common fraudulent practice is “wardrobing,” the term for when shoppers purchase an item for short-term use (such as a television for the Super Bowl) and then return it right afterward for a full refund. False returns using e-receipts afflict only 18 percent of retail companies. Organized retail crime groups hit approximately 78 percent of retail companies in the past year.

These data come from the National Retail Federation’s 2014 Return Fraud Survey, which surveyed 60 senior loss prevention executives at retailers of various types.

As people look to return unwanted gifts and cash in on gift cards, Dec. 26 will be the number six sales day of the year, according to ShopperTrak, a market researcher.