Retailers face growing challenges in providing consumers with seamless merchandise return options as the process becomes increasingly complex and costly. According to a research collaboration between Appriss Retail and Deloitte, consumers returned $685 billion worth of items in 2024—13.21% of total retail sales—with $103 billion in losses tied directly to return and claims fraud in 2024. To navigate these challenges, retailers must face the brutal reality that rampant return and claims fraud in 2024 may hinder their growth in 2025 if not addressed immediately.

Consumer returns in 2024, and the growing impact of return and claims fraud 

Consumers spent a record-breaking $241.4 billion online during the 2024 holiday shopping season. Combine this spending surge with the fact that most Gen Z and millennial consumers now consider free returns a necessity, and you begin to set the stage as to why fraudulent returns and claims, primarily through online channels, have seen such a rampant increase in return fraud.

The 2024 Consumer Returns in the Retail Industry Report by Appriss Retail and Deloitte unpacks the critical trends involving return and claims fraud in 2024. For example, a staggering 15.14% of all consumer returns were classified as fraudulent, with 60% of retail executives identifying wardrobing as a significant type of return fraud they encounter.

More significant highlights from the Appriss Retail and Deloitte 2024 Consumer Returns in the Retail Industry report include:   

• 84% of retail executives report their companies have changed return policies in the past year to combat return fraud  
• 55% of consumers have decided not to buy from retailers due to restrictive strategies and policies on how to reduce customer returns 

The most common types of return fraud in 2024

The most common forms of retail return and claims fraud in 2024 were gift card fraud, stolen merchandise returns, and “friendly” return fraud such as wardrobing and bracketing, which involves buying multiple items with the intent to return some of them. While many consumers consider wardrobing just an act of shopping, it is, in fact, a form of fraudulent returns and one of the fastest-growing types of retail fraud.

In the past year, most types of retail fraud have also seen a precipitous rise due to online anonymity giving cover to “bad actors” because of a lack of human interaction or retailers having no digital checks and balances during the return transaction. When identifying fraudulent returns, retailers stated that the most common return and claims fraud indicator in 2024 was empty boxes at 31%—fraudsters simply did not return items and yet, in many cases, reaped the rewards of their account being credited.

Furthermore, Buy Online Return Instore (BORIS) and Buy Online Return Online (BORO) combined accounted for over 52% of all consumer returns in 2024. These growing retail return channels challenge retailers through increased claims and appeasements. Claims arise when shoppers report missing deliveries, damaged items, or product defects online with little vetting by the retailer. Because of this uptick in BORIS and BORO, claims and appeasement fraud and abuse are now estimated to be worth $21 billion; these burgeoning types of retail fraud will require loss prevention and law enforcement monitoring throughout 2025 and beyond.  

How to reduce customer returns and prevent return and claims fraud in 2025

In 2025, retailers face a delicate balancing act of controlling costs, and stopping return fraud and claims fraud, while maintaining customer flexibility. To avoid the missteps that fueled rampant return and claims fraud in 2024, retailers need to look backward to map their new path forward.

Appriss Retail and Deloitte reported that most retailers lack a dedicated role to manage returns, including ecommerce return rates. Instead, the burden is shared across multiple departments, creating redundancy and confusion. Establishing an executive role focused on returns could help achieve an optimal in-store and ecommerce return rate in which consumers are confident, and the business retains its sales.

This year, retailers need to implement a more personalized, nuanced approach to tackling fraudulent returns and reducing overall losses.

By leveraging AI to analyze shopper behavior and return patterns, suspicious actions with the potential for return fraud can be permanently flagged while ensuring valuable customers aren’t lost in the shuffle.

Future trends in return and claims fraud: Insights from 2024 to prepare for 2025   

Learning from the challenges of return and claims fraud in 2024 allows retailers to make necessary changes in 2025. One key change is retiring blanket rules-based return policies and instead taking a data and AI-driven approach to drive down return fraud and abuse without compromising customer satisfaction.

Shifting from outdated one-size-fits-all return and claims policies in 2025 can also help weaken the strength of organized retail crime (ORC). While ORC rings are typically portrayed in the media as smash-and-grab theft, these criminal groups also exploit grey areas within retail return policies.

Retailers that embrace a data and AI-driven approach to enforce return policies benefit from AI-powered risk profiles to make informed decisions during returns and halt fraudulent returns in real-time. By using the right technology, retailers can disrupt organized retail crime rings that orchestrate return fraud through stolen merchandise, effectively connecting all the players within the ring.

The role of law enforcement in combating return and claims fraud and organized retail crime

2024 showed an increase in the sophistication of fraud committed across brick-and-mortar stores, ecommerce, and call centers. This year, collaboration with law enforcement agencies will be essential for retailers. While law enforcement is focused on combatting organized retail crime, loss prevention leaders need to establish and maintain a symbiotic relationship with local law enforcement agencies to keep the threat of ORC high above petty one-off shoplifting.

Returns can no longer be considered simply an ugly, necessary evil for retailers. Retailers must acknowledge the trends facing consumer returns in 2024 and recognize that in 2025, returns are a moving target actively being manipulated by criminal entities. While the instinct might be to tighten return policies to reduce customer returns, retailers that embrace technology to make return decisions will see less conflict and happier, loyal customers.

To learn more about the trends and patterns that shaped return and claims fraud in 2024, read the Appriss Retail and Deloitte 2024 Consumer Returns in the Retail Industry report.