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When Christmas Brings Retailers Many Unhappy Returns

The holiday gift-giving season is prime time for retail-return fraud
Shoppers pass clothing stores and outlets inside the Westfield Stratford City shopping mall in London on Dec. 27, 2012
Shoppers pass clothing stores and outlets inside the Westfield Stratford City shopping mall in London on Dec. 27, 2012Photograph by Chris Ratcliffe/Bloomberg

Now that the holiday shopping frenzy is over, merchants are bracing for a less-welcome wave of business: merchandise returns and the con games that go along with them. According to a National Retail Federation survey, return fraud cost merchants an estimated $8.9 billion in 2012, with nearly 30 percent occurring during the holiday season. Overall, the survey shows that about 4.6 percent of holiday returns are fraudulent.

Of 60 retailers surveyed, 96.5 percent reported being ripped off by criminals who collected refunds for stolen items this year, and almost half said they’d received fake receipts. Nearly two-thirds of the retailers said customers had returned items they’d worn or used. NRF spokesmen were not available for comment. Vicky Brock, chief executive officer of Clear Returns, a Scotland-based startup that’s developing data analysis software to track and prevent retail fraud, says wear-and-return scams can be surprisingly costly. “When a product comes back covered in makeup, and it has clearly been worn, that comes out of somebody’s pocketbook,” says Brock. “You can’t just wash it and resell it as new. That stock gets shredded in most cases.”