Common Examples of Retail Return Fraud
Laura Fitzgerald
June 10, 2025 (UPDATED ON 06/10/2025)
8 minute read time
Retailers have always faced challenges with returns. However, 2024 saw a notable surge in return and claim fraud, to the tune of $103 billion in losses, according to a consumer returns report by Appriss Retail and Deloitte. More findings include:
Fraudulent returns accounted for roughly 15.14% of the projected $685 billion in returns this year, adding significant pressure to an industry with already slim profit margins.
Total returns comprised 13.21% of overall retail sales, reaching $5.19 trillion, according to the report.
Throughout 2024, many retailers have tightened their returns policies to address surging financial losses. However, these measures can (and have) backfire by alienating legitimate customers.
As we’ll see in this article, return fraud can take many forms, from receipt fraud to “wardrobing.” We’ll dive into the most common tactics, highlight examples of top cases, and explore best practices for preventing these schemes in 2025 and beyond.
What is return fraud in retail?
Return fraud involves customers exploiting a retailer’s return policies for personal gain. While many returns are genuine, where a buyer returns an item that’s defective or unwanted, fraudsters often leverage policies or loopholes in store or online procedures to secure unmeritorious refunds.
This misconduct may involve stolen merchandise, falsified receipts, or other manipulations intended to unlawfully receive money or store credit.
Within the retail industry, there’s an ongoing tension between maintaining customer-friendly policies and preventing systemic abuse, and it can look like:
Some companies may opt for no-questions-asked returns to boost customer satisfaction, only to experience higher levels of fraud because the system is too lenient.
Others implement strict guidelines but risk frustrating honest buyers.
Striking the right balance is crucial for mitigating losses while preserving brand loyalty.
How fraudsters use return fraud
Despite an uptick in security measures, return fraud remains a significant concern for retailers. Appriss Retail’s research reveals the most common types of return fraud and abuse reported in 2024. Let’s examine the most prevalent tactics:
60% of retailers noted “wardrobing,” where consumers buy an item, use it, then return it for a full refund.
55% cited returns of items obtained through fraudulent or stolen tender, like stolen credit cards, counterfeit bills, or gift cards obtained via scams.
48% of retailers face incidents of stolen merchandise being returned as if it were legitimately purchased.
The data underlines how quickly criminals adapt to new store policies or e-commerce systems.
Receipt fraud
Receipt fraud typically involves creating fake or altered proof of purchase to claim refunds on products that were never legitimately bought. For instance, a fraudster might photocopy a real receipt and tweak the item or price.
Another variation is “receipt swapping,” where a con artist picks up a discarded receipt with a valid return date, locates the corresponding item on store shelves, and attempts a return.
Example: Someone finds (or steals) a receipt for a high-value gadget at the local electronics shop, then steals it in-store and proceeds to “return” it using the found or doctored receipt. The store loses both the inventory and the refunded money.
Wardrobing
As noted, “wardrobing” occurs when consumers purchase items—often apparel or electronics—use them briefly, then return them for a full refund while they are still in like-new condition.
It’s commonly seen with expensive attire worn once for a special event or high-end electronics used for a short-term project, only to be returned for a refund.
Example: A customer buys a designer dress for a wedding, wears it once, and then returns it with the tags reattached. The retailer can’t sell the item at full price if wear is detected, leading to financial losses.
Cross-retailer returns
In cross-retailer returns, the fraudster purchases or steals an item from one store, then returns it to a different store that sells a similar product line. This abuse is easier to achieve if the second retailer has a lax returns policy or no universal standard for verifying barcodes and SKU numbers.
Example: A fraudster purchases a mid-priced designer purse at a discount chain but returns it to a luxury store for a higher refund or store credit. By exploiting differences in brand pricing, they gain an unearned profit.
For more tactics that plague retailers, see our discussion of loss prevention in retail—an exploration of how many small and large businesses fight back against elaborate scams, inside theft, and other manipulative behaviors.
Top example cases of return fraud in 2024
While most return fraud incidents occur on a smaller scale, retailers continue to identify creative tactics that exploit systemic vulnerabilities.
Below are the typical schemes documented in 2024 industry reports and previous case analyses (like Retail Dive) related to return fraud.
Example #1: The electronics resale racket
Retailer surveys and reports describe a pattern in which high-end electronics—like laptops or tablets—are bought legitimately, then removed from the box and replaced with items of similar weight (e.g., clay, old batteries, or even random electronics parts). Unaware returns clerks accept the “sealed” box and process a full refund.
By the time inventory staff discover the discrepancy, the fraudster may have repeated the trick at multiple store locations. This scheme is similar to documented cases from prior years as well, where losses ranged from a few thousand dollars to more significant sums.
Example #2: Fraudulent gift card exchanges
According to several industry sources, like the Division of Financial Institutions, gift card return fraud often surges post-holiday season. Scammers may use fake or stolen receipts to “return” merchandise for store credit and convert that credit into gift cards that can be resold.
Even the Federal Trade Commission consumer advice says to check out gift cards before you buy them. After all, gift card fraud is the most common form of fraud, with 26.6% of victims indicating that money was taken using gift cards or reload cards, according to Capital One’s 2024 shopping research. They also found:
Target gift cards represent the highest reported losses to fraud, with victims reporting an average of $2,500 and 30% reporting losses of over $5,000.
The median reported losses from victims of Google Play gift card scams is $1,380, the second most common card used in gift card fraud cases.
Example #3: Social media–driven scam
Past years have seen viral social media challenges encouraging consumers to exploit generous return policies by, for example, purchasing items for one-time use or making other suggestions.
Social media and messaging apps-driven scams illustrate how quickly fraudulent behavior can spread when participants believe they’re gaming “rich corporations,” ignoring the potential legal consequences. It was also recently found that online returns fraud finds a home on Telegram, costing retailers billions, by exploiting retailers’ return programs in an organized crime way.
Example #4: Fake return apps
In previous fraud cases, unscrupulous developers created mobile apps that claimed to streamline returns, enticing users to scan valid receipts and then altering the details (for instance, swapping item codes or adjusting prices).
Retailers often discover clusters of overlapping addresses or phone numbers tied to suspicious returns, ultimately prompting a police investigation or collaborative efforts with corporate security teams.
How to combat return fraud in 2025 and beyond
Given the continued rise in fraudulent returns, companies must adapt policies and security measures beyond basic checklists. Below are some recommended strategies:
Stricter verification: Barcodes and item tags that match digital receipts are required. Staff should escalate the matter if the item doesn’t scan properly in the store’s system.
Advanced data analytics: Implement machine learning to detect patterns of suspicious behavior, such as serial returners or multiple returns across geographically distant stores.
Multifactor customer authentication: Tools like phone-based verification or identity checks can thwart criminals who rely on easy refunds over remote calls. For more information, see our article on how MFA can be used in retail.
Employee training: To spot red flags early, staff handling returns should be updated with common scams (receipt switching, wardrobing, cross-retailer returns).
For a detailed look at practical countermeasures, visit our article on combating return fraud. Ultimately, taking a balanced approach—reinforcing security without sacrificing customer service—can drastically reduce the prevalence of scam returns in your store or e-commerce platform.
Mitigate losses from return fraud with Pindrop® Solutions
As we have learned, despite tightening policies, the retail industry struggles to stop fraudsters who continually evolve their tactics. One promising solution is voice analysis.
Merchants can intercept fraudulent refunds before approval by using technology that can catch anomalies, like a mismatch in the caller’s voice or device data.
Implementing voice analysis helps merchants:
Secure return processes: Combine voice biometric authentication with standard return procedures to flag potential scammers.
Reduce fraud costs: Identify suspicious callers and reduce the number of fraudulent refunds.
Build stronger relationships: Provide genuine customers with a smoother experience by minimizing repetitive, high-friction ID verifications.
Why Pindrop?
Pindrop® solutions are designed for businesses seeking robust, user-friendly security tactics to:
Cut down authentication costs: Leverage voice analysis in the background, enabling a thorough risk analysis without occupying agent time on repetitive queries.
Reduce distractions: Agents can focus on genuine customers instead of navigating lengthy authentication scripts.
Enroll callers in seconds: Voice analysis can be used to verify returning enrolled customers quickly.
Save agents and customers time: Enhancing the customer experience doesn’t mean compromising security—it means removing friction where it’s unneeded.
Stop deepfake attacks early: Pindrop technology can detect AI-generated voices with 99.2% accuracy, detecting advanced threats quickly.
For more on Pindrop® solutions, including advanced voice authentication, check out voice analysis and discover how we’re helping the retail industry tackle everything from return fraud to deepfake-based impersonations.