Retail return fraud is quietly eating away at profits, and many businesses don’t even realize the full extent of the problem. Every year, retailers lose billions to fraudulent returns, yet the solutions in place to prevent them often rely on outdated processes—ones that fraudsters have learned to exploit. But what is return fraud?
It’s a simple scam: shoplifters steal merchandise, then “return” it for store credit or gift cards, which can be used or resold for cash. Some use fake receipts. Others take advantage of loopholes in return policies. Many offenders hit multiple store locations, knowing that most retailers lack a network-wide system to track their activity.
For years, businesses have relied on security cameras, emailed alerts between stores, and employee memory to identify repeat offenders. But with high turnover and a focus on customer service, store staff aren’t fraud investigators. Without a scalable way to detect return fraud across multiple locations, retailers remain vulnerable.
So what’s the solution? The answer lies in better fraud detection technology—one that creates accountability at every return counter while allowing legitimate customers to shop and return with confidence.
Retailers are no strangers to loss prevention, but return fraud is an often-overlooked loophole that continues to drain revenue. According to industry estimates, return fraud cost U.S. retailers over $101 billion in 2023 alone.
The problem isn’t limited to the U.S., either—UK retailers lost £11.3 billion (US$14.6 billion) in fraudulent returns last year, and 60% of Australian retailers reported experiencing some form of return fraud or policy abuse in the past 12 months.
While exact figures are harder to come by in Canada, the Retail Council of Canada reported a 22% increase in return fraud between 2020 and 2022, suggesting that local retailers face similar challenges. As return policies become increasingly flexible in the name of customer experience, fraudsters are finding new ways to exploit weaknesses in return processes, costing businesses billions globally.
At its core, return fraud is deceptively simple:
Some schemes are even more sophisticated—like receipt fraud, where offenders create fake receipts to match stolen goods. Others involve "wardrobing," where high-value items are purchased, used, and then returned as if they were never worn or used.
"Retailers often focus their loss prevention strategies on theft at the point of sale," says Joel Scott, Head of Product and CISO at Patronscan. "But the return desk is where stolen goods are monetized. Without a clear way to track repeat offenders, businesses are bleeding revenue."
Despite the scale of the problem, many retailers still rely on manual, outdated fraud detection methods, such as:
These methods leave gaps that fraudsters can easily exploit. Without a network-wide return fraud detection system, offenders simply move from one store to the next, repeating the cycle.
"The reality is that most retailers don’t have a centralized way to flag fraudulent returns across all locations," Scott adds. "That’s what makes return fraud such a persistent issue—once a fraudster finds a weak link, they’ll keep exploiting it."
Retailers don’t need to accept return fraud as an unavoidable loss. With the right tools, fraudulent returns can be flagged in real time, allowing businesses to take proactive steps before they result in significant financial damage.
The key to stopping return fraud is accountability and visibility. Instead of relying on store employees to recognize repeat offenders, modern fraud detection solutions like Patronscan’s anti-fraud platform can centralize data and track return patterns across multiple store locations.
Here’s how it works:
"When retailers have access to shared fraud intelligence across all locations, they make it significantly harder for offenders to game the system," says Scott.
With fraudulent returns on the rise, retailers need a scalable, proactive approach to loss prevention. Our ID verification and fraud flagging system ensures that repeat offenders are identified, tracked, and stopped before they can exploit return policies across multiple locations.
By integrating network-wide fraud intelligence, verifiable identity checks, and real-time alerts, Patronscan gives you the tools needed to stop return fraud in its tracks—all without disrupting the experience for honest customers.
Want to learn more about how Patronscan can help your business fight return fraud? Get in touch today to book a live demonstration and see it all in action.