Tackling Fraudulent Returns: Survey Confirms Wardrobing as the #1 Culprit

OCTOBER 2 2024

THE DISRUPTIVE PRACTICE OF WARDROBING RETURN FRAUD ON E-COMMERCE

In today’s retail environment, return fraud has evolved into a costly and ongoing challenge for businesses of all sizes. Wardrobing, where customers buy merchandise, use it briefly, and then return it for a full refund, is particularly disruptive.

Secure Authentication Brands recently conducted a survey to understand the impact of return fraud and gather insights from business leaders on their most pressing concerns. Here's what we found and how our anti-return fraud tagging solution is helping companies turn the tide.

WARDROBING IS A GROWING CONCERN FOR MOST BUSINESSES

According to our survey, a striking 63% of respondents view wardrobing as an ongoing and growing issue that is affecting their bottom line. This is consistent with the National Retail Federation’s 2023 survey where 49% of respondents said they had experienced instances of wardrobing, or the return of used, non-defective merchandise.

Wardrobing: the fraudulent practice of returning non-defective items after use with a receipt.

This reinforces what many businesses already know — return fraud, in its various forms, is becoming increasingly complex and difficult to manage. While some companies have found partial success with mitigation strategies, most are still in need of a robust solution to significantly reduce their losses.

Wardrobing is committed by people who want to wear something new on a regular basis but without any financial commitment

360 ID TAG: A SOLUTION THAT WORKS

One of the key questions we asked was whether businesses currently use our 360 ID Tag as a cost-effective deterrent to combat wardrobing. Among those who use it, 27% rated the product as "very valuable," with an additional 13% finding it "somewhat valuable." These numbers highlight how the 360 ID Tag can play a pivotal role in addressing the financial losses caused by wardrobing.

For those unfamiliar with the 360 ID Tag, the survey revealed varying interest levels. While 15% of respondents were inclined to explore the product, a smaller percentage remained unsure. At 360 ID Tag, we’re committed to educating businesses about how our new solution can safeguard against return fraud and boost their bottom line.

The 360 ID Tag – a serialized and tamper-evident tag designed to disrupt the wardrobing cycle by making it impossible to wear and return items unnoticed.

Disrupting the wardrobing return fraud cycle with a visible on purpose tag.

THE PREVALENCE OF RETURN FRAUD

It’s not just wardrobing that businesses are dealing with. Other forms of return fraud, like return theft (where stolen merchandise is returned for a refund) and tag switching (altering a product’s tag to increase its return value), are also prevalent. In fact, 20% of respondents cited return theft as a primary concern, while 7% pointed to tag switching.

THE CONDITION OF RETURNED ITEMS: A HIDDEN COST OF WARDROBING

One of the major hidden costs of wardrobing lies in the condition of returned items. According to our survey, 36% of respondents reported that items are returned with obvious wear, stains, or odors and must be cleaned before they can be resold. Additionally, 35% of respondents indicated that some items are returned in such poor condition—due to wear or damage—that they cannot be resold at all. 

This highlights a significant financial burden on businesses, as these items either require costly refurbishment or result in a total loss of their value. The operational costs associated with cleaning or discarding these items further exacerbate the impact of wardrobing on profitability.

WHY RETURN FRAUD MUST BE ADDRESSED NOW

Return fraud, particularly in the context of e-commerce, continues to rise, with the NRF estimating it costs U.S. businesses $23 billion annually. As wardrobing becomes more common, businesses that do not take proactive steps could face mounting losses in the years to come. Fortunately, there are solutions available, and 360 ID Tag is at the forefront of providing one of the most effective tools on the market.

INDUSTRY RECOGNITION

In March 2024, the 360 ID Tag was recognized by the Reverse Logistics Association as the People's Choice Award Winner in its annual Start-Up Competition for its innovative wardrobing solution. 

360 ID Tag Founder, Chelsea Duhs, presented the anti-return fraud tag solution and shared how 360 ID Tag has been invaluable for a range of businesses, from home-based online sellers to luxury e-commerce operations like Net-A-Porter, Stella McCartney, and Retrofete who use a customized version of the tag. 

“Our solution gives businesses of all sizes peace of mind, knowing they can protect their hard-earned revenue from fraudulent returns,” said Chelsea. “We’re proud to have created something that’s truly making a difference in the fight against return fraud at an accessible price.”

360 ID Tag was recognized by the Reverse Logistics Association as the People's Choice Award Winner in its annual Start-Up Competition

THE FUTURE: PREVENTING RETURN FRAUD BEFORE IT HAPPENS

At 360 ID Tag, we believe that prevention is better than reaction. While businesses have traditionally relied on reactive measures to deal with return fraud, tools like the 360 ID Tag enable them to stop wardrobing before it happens due to the strong deterrent factor. 

The survey results underscore the need for companies to invest in preventative solutions and adapt to the changing landscape of fraud where consumers are becoming increasingly comfortable with wardrobing due to the anonymity of e-commerce.

For businesses still on the fence, consider the potential savings. As one of our satisfied customers shared, " I admit I dragged my feet in purchasing. But let me tell you it has stopped the ridiculous returns. It’s professional looking and easy to log with the security numbers to the point I can even log exactly where the loop was attached. This is a must and has literally saved me money." It’s clear that when businesses take proactive steps to tackle return fraud, the financial benefits can be transformative.

A FINAL WORD ON E-COMMERCE RETURN FRAUD

Return fraud is not going away, and its effects on the retail and e-commerce sector are only growing. But with innovative solutions like the 360 ID Tag, businesses can regain control and prevent losses before they happen. 

If you're ready to learn more about how the 360 ID Tag can safeguard your business from wardrobing and other forms of return fraud, reach out to our team today.

CHELSEA DUHS - FOUNDER 360 ID TAG

Chelsea Duhs is the Founder of 360 ID Tag, a highly visible, anti-return fraud tag designed to help e-commerce businesses prevent return policy abuses like wardrobing, wear and return, and counterfeit product switches.

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