New research reveals retailers are losing money through two very different kinds of problematic returns: deliberate fraud and opportunistic abuse of generous return policies.
The study, from Griffith University criminologists Professor Michael Townsley and Dr Andrew Childs with Professor Joseph Clare from The University of Western Australia, showed retailers needed to distinguish between outright deception, such as using fake receipts or returning stolen goods, and grey-area conduct such as wardrobing, where a customer buys an item to use once before returning it.
Lead author Professor Michael Townsley, from the Griffith Criminology Institute, said treating all returns misconduct as the same problem made it harder for retailers to respond effectively.
“Fraud involves deliberate deception whereas abuse is more often opportunistic behaviour where customers bend the rules and rationalise it as harmless,” Professor Townsley said.
“That distinction matters because the response needs to be different.
“Fraud prevention relies on better verification, joined-up data and clear escalation pathways. Abuse prevention depends more on clear policies, consistent staff practice and helping customers understand the real costs of these behaviours.”
The research examined the scale and nature of returns misconduct through a customer survey, a scan of online fraud communities, and a step-by-step analysis of how return fraud and abuse are carried out.
Professor Townsley said wardrobing was a useful example of return abuse because many customers did not see it as serious misconduct.
“Wardrobing is when someone buys an item, uses it once, and then returns it for a full refund,” he said.
“Customers often justify this by telling themselves the retailer can simply resell the item, or that it was only a one-off, but retailers carry the cost of processing, inspecting, discounting or writing off those returns.”
The study also highlighted the role of online fraud communities, where people shared methods, scripts and advice for carrying out fraudulent returns.
Co-author Dr Andrew Childs said these online spaces could make return fraud easier to learn and repeat.
“We found online communities where people exchange detailed instructions for fraudulent returns, including what to say to retailers and how to avoid detection,” Dr Childs said.
“Some of these spaces also operate like informal mentorship markets, where less experienced offenders pay for advice from people who have already worked out which methods are most likely to succeed.”
The report recommended retailers build three core capabilities before adding more friction to the returns process: stronger governance of returns policy, joined-up data from purchase through to refund, and better support for frontline staff.
Once those foundations were in place, retailers could target fraud through stronger verification, risk scoring and escalation for repeat deception, while reducing abuse through clearer return rules, staff training and customer-facing education.
“Retailers do not need to make returns harder for every honest customer,” Professor Townsley said.
“The better approach is to know which problem they are dealing with.
“Fraud is mainly a verification and data problem: can the retailer link the customer, product, payment and return claim with enough confidence to spot deception?
“Abuse is different. It is often about ambiguous rules and customer rationalisations, so staff training, clearer policies and simple customer education can make a real difference.
“Once retailers have their data joined up and their staff supported, they are in a much better position to target deliberate fraud without punishing the customers who are using returns legitimately.”
Return Fraud and Abuse: Diagnosing the Problem, Targeting the Response has been published at ecrloss.com
