Return policies were once a symbol of good customer service — a reassuring promise that if something didn’t work out, a shopper could bring it back, no questions asked. But in today’s digital retail landscape, those very policies are being turned against companies. The cost? A jaw-dropping $101 billion in fraudulent returns in 2023 alone, according to the National Retail Federation.

As e-commerce booms and competition pushes brands to offer increasingly flexible return options, a growing number of shoppers have learned how to game the system. From sending back empty boxes to wearing clothes once and then returning them — a scam known as "wardrobing" — the creativity of return fraudsters is getting more sophisticated by the day.

The Cost of Convenience

Total returns in 2023 added up to a staggering $743 billion, and return fraud made up a significant $101 billion slice of that pie. The combination of generous return windows, free shipping, and no-questions-asked refunds was designed to win over customers, especially in the hyper-competitive online marketplace. But that very leniency has become a playground for deception.

Arun Sundaram, VP and senior equity analyst at CFRA Research, believes the rise in return fraud is directly linked to the explosion of online shopping. “The flexible return policies that come with e-commerce were meant to improve customer experience,” he says. “But they’ve become a loophole for fraudsters, hurting margins, disrupting inventory, and increasing operational costs.”

Common Scams in the Digital Aisles

One of the most prevalent forms of return fraud is “wardrobing,” where a customer buys clothes, wears them — often for a special occasion — and then returns them for a full refund. The product may appear new, but it’s been used, sometimes even damaged, and is often unfit to be resold at full price.

Then there’s the “empty box” scam. A shopper claims the package arrived with nothing inside, prompting a refund. Unless a retailer weighs every package at every stage, this fraud can slip through the cracks, and by the time anyone realizes, the refund is already processed.

Another scam, known as “bricking,” is particularly common with electronics. Fraudsters remove internal components, such as hard drives or batteries, and return the now-worthless item. On the outside, the gadget looks untouched — but inside, it's been stripped of value.

Retailers Caught in a Tough Balancing Act

With such scams on the rise, retailers are investing heavily in advanced return management systems. Gaurav Saran, CEO of ReverseLogix.com, points out that the shift to online shopping forced many brands to adopt customer-friendly policies — like free 30- or 60-day returns — to stay competitive. “But that same friendliness opens the door to fraud,” he warns.

ReverseLogix has developed tools to help companies verify if what a customer says they’re returning actually matches the item received. Their system helps flag potential fraud, offering companies the flexibility to tailor return policies per customer based on return behavior.

Retailers are also leveraging data analytics to identify patterns and catch suspicious return activities early. However, cracking down on fraudulent returns without scaring away genuine customers remains a delicate task. More than 90% of shoppers admit that lenient return policies influence their buying decisions, according to Blue Yonder’s 2024 Consumer Retail Returns Survey. Younger generations, especially Gen Z and millennials, are likely to abandon a purchase if return rules feel too rigid.

Is the Return Policy Era Coming to an End?

Retailers are walking a tightrope — trying to prevent fraud while maintaining trust and convenience for honest customers. The solution may lie in personalized return policies, advanced tracking systems, and smarter logistics.

But until that balance is achieved, one thing is clear: return scams are not just a few bad apples — they’re a billion-dollar storm quietly shaking the foundations of retail. And if companies don’t act fast, what started as goodwill could turn into their greatest vulnerability.