Study: Merchandise returns cost retailers nearly $270 billion in lost sales

IRVINE, Calif. — Merchandise returns in 2013 cost retailers in the United States more than $267 billion in lost sales. That’s one of the findings contained in the Retail Equation’s "2013 Consumer Returns in the Retail Industry" study, which analyzes results from the National Retail Federation’s annual survey on merchandise returns and the "2012 Canadian Retail Security Survey" from the Retail Council of Canada National Retail Federation.

The report found that retail fraud and abuse accounted for $9.1 billion to $16.3 billion in the U.S., an increase of 2.6% from last year.

“In the competitive world of retail, it is critical to understand how returns and return fraud reduce net sales and contribute to shrink – clear causes of lost profits,” Mark Hammond, chairman and CEO of the Retail Equation, said. “The results within this report offer the industry’s best look at merchandise return policies and procedures, as well as potential fraud and abuse. This information can be used by loss prevention professionals to compare and contrast their own program results to those reported here, with an eye toward reducing losses.”

The report showed a 15% increase in employee collusion versus last year, from 80.7% to 93.1%. This implies that exception reporting systems are not sufficiently preventing this type of fraud, according to Retail Equation.

The report also revealed that 4-out-of-5 main tender types (e.g., cash, gift card/merchandise credit, credit card, debit card and check) showed increased fraud. In fact, fraud increases outpaced decreases by 42%.

Click here for a complete copy of the report.