New report reveals the rise of return-related fraud in e-commerce and how retailers can combat financial losses
SAN FRANCISCO, Jan. 12, 2026 /PRNewswire/ — LiquiDonate, a retail-tech company that helps retailers sustainably manage unsellable returns and excess inventory, announced today the release of its 2026 Returns Fraud Report. The report reveals the rise of return-related fraud in e-commerce, outlining various fraudulent return mechanisms and their implications for retailers, along with strategies to mitigate such fraud.
The rapid expansion of online shopping has driven a surge in merchandise returns, creating a meaningful cost burden for retailers across categories. As return rates climb, so does the prevalence of return fraud, compounding the financial strain on retail businesses.
“This report highlights the rising challenges of returns fraud, but it also underscores the opportunity for retailers to rethink returns not just as a cost, but as a strategic advantage,” said Disney Petit, CEO and founder of LiquiDonate. “By adopting smarter, more sustainable return practices, businesses can protect their bottom line while creating a better experience for customers and a positive impact on the environment.”
The report findings examine the primary types of return-related fraud, how these schemes occur, the magnitude of the issue, and their impact on retail operations and reverse logistics. The report also offers strategies to curb fraudulent returns while repositioning returns as an opportunity to strengthen competitiveness and advance sustainability goals. Key findings include:
Major Types of Returns Fraud
- Chargebacks: Consumers dispute legitimate transactions to obtain refunds while retaining purchased items, bypassing retailer processes.
- Wardrobing: Temporary use of items followed by returns, common in apparel and fashion sectors.
- Counterfeiting: Fraudsters return counterfeit items in place of genuine products.
- Item Substitution and Empty-Box Returns: Fraudsters return incorrect items, empty boxes, or gutted products.
- Keep-it Fraud: Abuse of policies where customers receive refunds without returning low-value items.
- Bracketing: Purchasing multiple versions of an item and returning those that don’t meet expectations, increasing operational costs.
- Return-as-a-Service (RaaS): Organized crime groups manipulate return systems for profit.
Scale of the Problem
- Retailers estimate that 15% of all returns are fraudulent, contributing to significant financial losses.
- Total retail returns reached $850 billion in 2025, with online return rates at 24.5%, compared to 8.9% for in-store purchases.
- Fraudulent returns amplify costs, with average return costs ranging from $25 to $30 per item.
- More than 1 in 3 consumers admit to committing at least one form of return-related fraud.
- 85% of retailers surveyed by LiquiDonate have experienced some form of return fraud
Costs of Returns
- Direct logistics and processing: Shipping, labeling, refurbishment, and disposal costs.
- Financial and payment costs: Transaction fees, chargeback fees, and lost margins.
- IT, systems, and data costs: Software, analytics, and automation expenses.
- Operational and inventory side effects: Inventory distortion, forecasting challenges, and channel management costs.
Strategies to Combat Returns Fraud
- Control Return Channels: Implement pre-return authorization, in-store returns, and AI-based inspection systems.
- Strengthen Return Policies: Use tiered policies, proof-of-purchase requirements, and customer verification methods.
- Deploy Advanced Verification Technologies: Utilize Radio Frequency Identification (RFID), AI image comparison, package sensors, and blockchain tools.
- Optimize Post-Return Routing: Establish structured workflows for inspection and routing to detect fraud.
- Industry Collaboration: Share fraud data and best practices across retailers.
- Donation: Route returns to nonprofits to reduce fraud and promote sustainability.
“Returns fraud is a significant challenge for retailers, particularly in e-commerce,” said Petit. “Our hope with this report is to help retailers understand that they have options when it comes to return fraud. Technology can help.”
The report concludes that return fraud is no longer a marginal issue but rather a growing risk embedded across the retail value chain. Retailers operating on thin margins must rethink how returns are handled, verified, and routed. Retailers that invest in modern return infrastructure today will be better positioned to strengthen trust, improve operational efficiency, and meet rising consumer expectations around sustainability.
To explore the complete findings and insights, read the 2026 Returns Fraud Report here.
About LiquiDonate:
LiquiDonate is a sustainable social impact solution for retailers, businesses, nonprofits and community organizations. The platform matches unsellable items with local nonprofits saving large retailers billions of dollars every year while helping them meet their ESG goals. For more information about LiquiDonate, visit www.liquidonate.com.
Media Contact:
Melanie Anderson
Pitch Public Relations
melanie@pitchpublicrelations.com
480-225-7148
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SOURCE LiquiDonate
