Schwab Network Return Fraud in Retail Costing Companies Billions Each Year
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May 13, 2025 Gaurav Saran dives into the alarming rise of return fraud in retail, revealing that it costs companies over a hundred billion annually. He shares staggering statistics, noting that returns hit over $1T worldwide, with the U.S. accounting for $685B. Tactics like 'wardrobing' and counterfeit receipts are explored, along with the pressing need for better inspection processes. AI emerges as a game-changer in distinguishing legitimate returns from fraudulent ones, highlighting the evolving challenges retailers face in the e-commerce landscape.
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E-Commerce Drives Return Rates Soaring
- Retail return rates have dramatically increased with e-commerce growth, reaching 30-35% for apparel and 10-15% for electronics.
- The total value of returns hit over $760 billion in the U.S. last year, reflecting how common returns have become.
Fraudulent Returns Cost Billions
- Over 15% of returns are fraudulent, amounting to $104 billion lost last year in the U.S.
- Types of fraud include wardrobing, stolen tender, counterfeit receipts, and bracketing.
AI Enhances Return Fraud Detection
- AI assists the return process through initiation, product inspection, and risk scoring.
- AI helps identify counterfeit items and differentiate between good and abusive returners.