2015

Consumer Returns
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Introduction
The Retail Equation (TRE) is pleased to incorporate the results of the National Retail Federation
(NRF) 2015 Return Fraud Survey into the 2015 Consumer Returns in the Retail Industry report.
This executive summary document provides return-related information that retailers may use to
help compare and improve their business processes. Report objectives included:
◾◾ Identify US and Canadian retail industry return metrics—total return amounts, receipted/
non-receipted percentages, various examples of fraudulent and abusive returns, and fraud
by tender type, as identified by retail respondents.
◾◾ Uncover other shortfalls caused by return fraud; for example, lost retail jobs and sales taxes.
◾◾ Understand current practices in the retail industry for processing merchandise returns, both
brick and mortar and online.
◾◾ Compare the relative importance of return fraud and related shrink issues.
◾◾ Generate industry discussion regarding best practices for accepting customer returns and
controlling return fraud and abuse to maximize profits and minimize losses.

Consumer Focus
Preventing fraud is only one of the challenges being contemplated at the retail return desk;
improving the shopping experience is an equally important trend. Therefore, differentiating the
consumer experience during the return process—such as offering “hassle free” returns—is often
under consideration as a potential revenue driver. The ability to offer more flexible and lenient
returns, while still mitigating the risk of fraud and abuse, is critical.

Participating Company Demographics
The NRF Return Fraud Survey was conducted by the National Retail Federation during
October–November 2015 by polling senior loss prevention executives at 62 retail companies.
Executives from all segments of retail including discount stores, department stores, drug stores,
supermarkets, and specialty stores completed the survey. Some responses may represent multiple
brands within a single company.
  The Retail Equation would like to thank all of the retailers who participated in this year’s NRF
Return Fraud Survey. You will notice that no retailer names are mentioned, per the NRF and the
sponsoring company’s commitment to maintain confidentiality of each organization’s data.

2

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

 Annual US Merchandise Returns and Return Fraud
METRIC

2015

NRF retail industry sales(1)

$3,256(2)

Returns as a percent of total sales

8.0%

Amount of merchandise returned

$260.5

Percent of returns without a receipt

10%

Return fraud as a percent of total returns

3.5%

Estimated amount of fraudulent returns

$9.12

Return fraud and abuse as a percent of total returns(3)

6.1%

Estimated amount of return fraud and abuse(3)

$15.9

Close
to the
annual
<revenue
of the
NFL

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.
All dollars in billions.
T  he National Retail Federation’s US retail industry sales figure includes most traditional retail categories including non-store, auto
parts and accessories stores, discounters, department stores, grocery stores, and specialty stores, and exclude sales at automotive
dealers, gas stations, and restaurants. Sales and returns are reported in billions of dollars.
(2)
Retail sales (in billions) estimated by NRF.
(3)
 Return fraud and abuse estimates are derived from trends established in previous years of the Consumer Returns in the Retail
Industry report.
(1)

Key Findings
◾◾ NRF notes that this year’s survey methodology has changed, and it now uses medians. As such, The
Retail Equation feels it is no longer accurately comparable to previous years’ data and chose to display
2015 metrics only.
◾◾ Total merchandise returns account for over $260.5 billion in lost sales for US retailers. This size is
overwhelming; if merchandise returns were a corporation it would rank #3 on the Fortune 500 list.
◾◾ Incorporating return abuse and fraud in merchandise exchange transactions, return fraud and abuse
figures average approximately 2 to 3 percentage points higher than return fraud alone. From prior
results, this year’s return fraud and abuse is estimated at 6.1% of all return dollars, meaning the amount
of fraudulent and abusive return dollars is $15.9 billion.

ANNUAL MERCHANDISE RETURN FRAUD AND ABUSE IS ESTIMATED
BETWEEN $9.1 AND $15.9 BILLION FOR THE US RETAIL INDUSTRY.

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

3

 US Holiday Returns and Return Fraud
METRIC

2015

Amount of holiday merchandise returned(1)

$63.05

Returns as a percent of holiday sales

10%

Amount of fraudulent holiday returns

$2.21

Return fraud as a percent of holiday returns

3.5%

  
  

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.
All dollars in billions.

  

(1)

2%

higher
than
<annual the
rate

 NRF US holiday sales are defined as retail industry sales in the full months of November and December.
Sales and returns reported in billions of dollars.

Key Findings
◾◾ T  he holiday return rate was 2.0% higher than the annual rate.
◾◾  According to an NRF consumer survey, one out of every three gift recipients (38.0%) returned at least
one item last holiday season.
◾◾  From the same study, 31.9% of people rarely or never include a gift receipt or original receipt when
giving a gift, leading to increased potential for non-receipted returns.

Holiday Return Policies
DOES YOUR RETURN POLICY CHANGE FOR THE HOLIDAY SEASON?
2015
100
80
60

YES
24.6%
NO
75.4%

40
20
0

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.

Key Findings
◾◾ Among the retailers who adopt different return rules during the holidays, 21.3% enact tighter policies
and 3.3% loosen their policies.
◾◾ According to an NRF survey released in November 2015, 90.6% of Americans feel retailers’ return
policies are fair.

The Retail Equation Conclusions
◾◾ Retailers that offer generous return policies all year do not need to make adjustments for the holidays
in order to attract customers.

4

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

 Financial Summary of Return Fraud
and Abuse in the US

CATEGORY

PERCENTAGE
RATE

RETAIL
INDUSTRY

EXAMPLE
COMPANY
($1 BILLION
REVENUE)

Retail Sales

100%

$3,256,650,000,000

$1,000,000,000

Returns

8.00%

$260,532,000,000

$80,000,000

Receipted

90.0%

$234,478,800,000

$72,000,000

Non-Receipted

10.0%

$26,053,200,000

$8,000,000

Return Fraud(1)
(low-end estimate)

3.5%

$9,118,620,000

Return Fraud and Abuse(2)
(high-end estimate)

6.1%

$15,892,452,000

RETURN FRAUD
AND ABUSE LOSS
PER $100
OF
SALES

OF
RETURNS

$2,800,000

$0.28

$3.50

$4,880,000

$0.49

$6.10

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.
(1)
(2)

L  ow-end estimates derived from: National Retail Federation 2015 Return Fraud Survey. October & November 2015.
 High-end estimates are derived from trends established in previous years of the Consumer Returns in the Retail Industry report.

The Retail Equation Conclusions
◾◾ Non-receipted returns account for 10% of all returns, but the pie charts on page 8 show the risk of fraud
exists in all return situations.
◾◾ As online sales continue to grow, most retailers allow customers to return merchandise purchased online
in their stores; however, they estimate 1% of those returns are fraudulent.

Lost US Jobs Impact of Return Fraud and Abuse

  

(1)

AVERAGE ANNUALIZED
RETAIL EARNINGS(1)

RETAIL JOBS LOST DUE
TO RETURN FRAUD

RETAIL JOBS LOST
DUE TO RETURN FRAUD
AND ABUSE

$28,911

315,406

549,708

S  ource: U.S. Bureau of Labor Statistics, Retail Trade sector: NAICS 44-45, Earnings and Hours of All Employees
table, November 2015.

The Retail Equation Conclusions
◾◾ R
  etailers must offset the negative business impact of return fraud and abuse by increasing prices
to consumers and by reducing costs—which too often means a loss of jobs.
◾◾ The table on the following page details lost retail jobs on a state-by-state level.

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

5

 Lost US Sales Tax
Impact of Return Fraud
and Abuse
MAP OF LOST STATE SALES TA X BY STATE

Legend
 
 
 
 
 

$0 Lost sales tax revenue
<$10 Lost sales tax revenue
$10–$24 Lost sales tax revenue
$25–$49 Lost sales tax revenue
$50> Lost sales tax revenue

Sales tax revenue in millions, based on high-end estimates
from table.

The Retail Equation Conclusions
◾◾ Because of the significant retail revenue
losses caused by return fraud and abuse,
states are losing a total of nearly $552 million
to $962 million in sales tax revenues at a time
when state budgets are in need.
◾◾ For simplicity, this table lists only state
tax rates; the myriad county and local
taxes are not individually calculated. It is
estimated there are another $134 million
to $233 million lost at the local level due
to return fraud.

% OF
NATIONWIDE
RETAIL SALES(1)

SALES

RETURNS

Alabama

1.50%

$48,849,750,000

$4,247,804,348

Alaska

0.26%

$8,467,290,000

$736,286,087

Arizona

2.24%

$72,948,960,000

$6,343,387,826

STATE

Arkansas

0.91%

$29,635,515,000

$2,577,001,304

California

11.90%

$387,541,350,000

$33,699,247,826

Colorado

1.70%

$55,363,050,000

$4,814,178,261

Connecticut

1.25%

$40,708,125,000

$3,539,836,957

Dist. Of Columbia

0.15%

$4,884,975,000

$424,780,435

Delaware

0.37%

$12,049,605,000

$1,047,791,739

Florida

7.30%

$237,735,450,000

$20,672,647,826

Georgia

3.01%

$98,025,165,000

$8,523,927,391

Hawaii

0.50%

$16,283,250,000

$1,415,934,783

Idaho

0.51%

$16,608,915,000

$1,444,253,478

Illinois

4.05%

$131,894,325,000

$11,469,071,739

Indiana

1.99%

$64,807,335,000

$5,635,420,435

Iowa

0.92%

$29,961,180,000

$2,605,320,000

Kansas

0.79%

$25,727,535,000

$2,237,176,957

Kentucky

1.26%

$41,033,790,000

$3,568,155,652

Louisiana

1.33%

$43,313,445,000

$3,766,386,522

Maine

0.51%

$16,608,915,000

$1,444,253,478

Maryland

1.99%

$64,807,335,000

$5,635,420,435

Massachusetts

2.34%

$76,205,610,000

$6,626,574,783

Michigan

3.10%

$100,956,150,000

$8,778,795,652

Minnesota

1.80%

$58,619,700,000

$5,097,365,217

Mississippi

0.89%

$28,984,185,000

$2,520,363,913

Missouri

1.97%

$64,156,005,000

$5,578,783,043

Montana

0.36%

$11,723,940,000

$1,019,473,043

Nebraska

0.62%

$20,191,230,000

$1,755,759,130

Nevada

1.14%

$37,125,810,000

$3,228,331,304

New Hampshire

0.67%

$21,819,555,000

$1,897,352,609

New Jersey

3.12%

$101,607,480,000

$8,835,433,043

New Mexico

0.62%

$20,191,230,000

$1,755,759,130

New York

5.93%

$193,119,345,000

$16,792,986,522

North Carolina

2.89%

$94,117,185,000

$8,184,103,043

North Dakota

0.25%

$8,141,625,000

$707,967,391

Ohio

3.39%

$110,400,435,000

$9,600,037,826

Oklahoma

1.00%

$32,566,500,000

$2,831,869,565

Oregon

1.27%

$41,359,455,000

$3,596,474,348

Pennsylvania

4.07%

$132,545,655,000

$11,525,709,130

Rhode Island

0.34%

$11,072,610,000

$962,835,652

South Carolina

1.36%

$44,290,440,000

$3,851,342,609

South Dakota

0.32%

$10,421,280,000

$906,198,261

Tennessee

2.10%

$68,389,650,000

$5,946,926,087

Texas

7.49%

$243,923,085,000

$21,210,703,043

Utah

0.84%

$27,355,860,000

$2,378,770,435

Vermont

0.25%

$8,141,625,000

$707,967,391

Virginia

2.63%

$85,649,895,000

$7,447,816,957

Washington

2.26%

$73,600,290,000

$6,400,025,217

West Virginia

0.54%

$17,585,910,000

$1,529,209,565

Wisconsin

1.80%

$58,619,700,000

$5,097,365,217

Wyoming

0.21%

$6,838,965,000

$594,692,609

Total
(1)
(2)

6

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

Source: National Retail Federation        
Source: Federation of Tax Administrators 

 STATE SALES
TAX RATE(2)

RETURN FRAUD

LOW-END ESTIMATE(4)
LOST SALES
TAX REVENUE

LOST RETAIL
JOBS IN STATE(3)

RETURN
FRAUD/ABUSE

HIGH-END ESTIMATE(5)
LOST SALES
LOST RETAIL
TAX REVENUE
JOBS IN STATE(3)

4.000%

$148,673,152

$5,946,926

5,941

$259,116,065

$10,364,643

0.000%

$25,770,013

$0

784

$44,913,451

$0

10,355
1,367

5.600%

$222,018,574

$12,433,040

7,347

$386,946,657

$21,669,013

12,805

6.500%

$90,195,046

$5,862,678

3,592

$157,197,080

$10,217,810

6,260

6.500%

$1,179,473,674

$76,665,789

36,067

$2,055,654,117

$133,617,518

62,860

2.900%

$168,496,239

$4,886,391

5,980

$293,664,874

$8,516,281

10,422

6.350%

$123,894,293

$7,867,288

3,755

$215,930,054

$13,711,558

6,545

5.750%

$14,867,315

$854,871

540

$25,911,607

$1,489,917

942

0.000%

$36,672,711

$0

1,129

$63,915,296

$0

1,968

6.000%

$723,542,674

$43,412,560

25,206

$1,261,031,517

$75,661,891

43,930

4.000%

$298,337,459

$11,933,498

11,185

$519,959,571

$20,798,383

19,494

4.000%

$49,557,717

$1,982,309

1,722

$86,372,022

$3,454,881

3,001

6.000%

$50,548,872

$3,032,932

1,996

$88,099,462

$5,285,968

3,478

6.250%

$401,417,511

$25,088,594

14,020

$699,613,376

$43,725,836

24,435

7.000%

$197,239,715

$13,806,780

8,050

$343,760,647

$24,063,245

14,031

6.000%

$91,186,200

$5,471,172

3,908

$158,924,520

$9,535,471

6,812

6.500%

$78,301,193

$5,089,578

3,096

$136,467,794

$8,870,407

5,396

6.000%

$124,885,448

$7,493,127

4,978

$217,657,495

$13,059,450

8,677

4.000%

$131,823,528

$5,272,941

4,904

$229,749,578

$9,189,983

8,546

5.500%

$50,548,872

$2,780,188

1,917

$88,099,462

$4,845,470

3,341

6.000%

$197,239,715

$11,834,383

6,615

$343,760,647

$20,625,639

11,529

6.250%

$231,930,117

$14,495,632

7,790

$404,221,062

$25,263,816

13,576

6.000%

$307,257,848

$18,435,471

12,054

$535,506,535

$32,130,392

21,009

6.875%

$178,407,783

$12,265,535

7,076

$310,939,278

$21,377,075

12,333

7.000%

$88,212,737

$6,174,892

3,512

$153,742,199

$10,761,954

6,121

4.225%

$195,257,407

$8,249,625

7,604

$340,305,766

$14,377,919

13,252

0.000%

$35,681,557

$0

1,435

$62,187,856

$0

2,500

5.500%

$61,451,570

$3,379,836

2,554

$107,101,307

$5,890,572

4,451

6.850%

$112,991,596

$7,739,924

3,702

$196,928,210

$13,489,582

6,453

0.000%

$66,407,341

$0

2,157

$115,738,509

$0

3,759

7.000%

$309,240,157

$21,646,811

9,356

$538,961,416

$37,727,299

16,306

5.125%

$61,451,570

$3,149,393

2,348

$107,101,307

$5,488,942

4,092

4.000%

$587,754,528

$23,510,181

18,116

$1,024,372,178

$40,974,887

31,574

4.750%

$286,443,607

$13,606,071

10,987

$499,230,286

$23,713,439

19,148

5.000%

$24,778,859

$1,238,943

958

$43,186,011

$2,159,301

1,670

5.750%

$336,001,324

$19,320,076

12,977

$585,602,307

$33,672,133

22,617

4.500%

$99,115,435

$4,460,195

3,557

$172,744,043

$7,773,482

6,199

0.000%

$125,876,602

$0

4,526

$219,384,935

$0

7,888

6.000%

$403,399,820

$24,203,989

15,253

$703,068,257

$42,184,095

26,585

7.000%

$33,699,248

$2,358,947

1,198

$58,732,975

$4,111,308

2,088

6.000%

$134,796,991

$8,087,819

5,311

$234,931,899

$14,095,914

9,256

4.000%

$31,716,939

$1,268,678

1,339

$55,278,094

$2,211,124

2,334

7.000%

$208,142,413

$14,569,969

7,408

$362,762,491

$25,393,374

12,912

6.250%

$742,374,607

$46,398,413

26,103

$1,293,852,886

$80,865,805

45,494

4.700%

$83,256,965

$3,913,077

2,975

$145,104,997

$6,819,935

5,184

6.000%

$24,778,859

$1,486,732

902

$43,186,011

$2,591,161

1,573

5.000%

$260,673,593

$13,033,680

9,735

$454,316,834

$22,715,842

16,966

6.500%

$224,000,883

$14,560,057

6,787

$390,401,538

$25,376,100

11,829

6.000%

$53,522,335

$3,211,340

2,205

$93,281,783

$5,596,907

3,842

5.000%

$178,407,783

$8,920,389

7,399

$310,939,278

$15,546,964

12,896

4.000%

$20,814,241

$832,570

787

$36,276,249

$1,451,050

1,371

$552,233,291

$962,463,736

  alculated from state retail employment, source: National Retail Federation, PricewaterhouseCoopers LLP, The Economic Impact of
C
the U.S. Retail Industry, October 2014 and retail earnings, source: U.S. Bureau of Labor Statistics.
(4)
 Low-end estimates derived from: National Retail Federation 2015 Return Fraud Survey. October & November 2015.
(5)
 High-end estimates are derived from trends established in previous years of the Consumer Returns in the Retail Industry report.
(3)

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

7

 Examples of Return Fraud
WHICH EX AMPLES OF RETURN FRAUD HAS YOUR
COMPANY EXPERIENCED IN THE PAST YEAR?
2015

 

Return of stolen merchandise (shoplifting)

91.9%

Employee return fraud or collusion with external sources

77.4%

Return of merchandise purchased with fraudulent or stolen tender

75.8%

Wardrobing or renting (returns of used, non-defective merchandise)

72.6%

Returns made by organized retail crime groups

71.0%

Returns using e-receipts

33.9%

Returns using counterfeit receipts

25.8%

< Top

growth
area

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.

Key Findings
◾◾ In 2015, 9 out of 10 retailers reported the return of stolen merchandise.
◾◾ Return fraud as a result of employee actions or ORC groups affect more than 70% of retailers.

The Retail Equation Conclusions
◾◾ For the 4th year in a row, shoplifting and returning those stolen items took the top spot, impacting
almost every retailer surveyed (92%), implying that this situation needs to be examined because of its
potential significant negative impact on fraud and shrink.
◾◾ Fraudulent e-receipted returns were 86% higher in 2015.

Analysis of Return Fraud by Receipt and Channel
PERCENT OF RETURNS WITH/WITHOUT
A RECEIPT THAT RETAILERS SUSPECT
ARE FRAUDULENT

Receipted Returns
90%

Non-Receipted
Returns
10%

DO YOU ALLOW CUSTOMERS TO RETURN
MERCHANDISE PURCHASED ONLINE TO
YOUR BRICK-AND-MORTAR STORES?

Return fraud
as a percent of
non-receipted
returns
10%

No
6.6%
Yes
85.2%

Return fraud
as a percent
of receipted
returns
1%

Don’t Sell Online
8.2%

Return fraud
as a percent of
buy online and
return in-store
returns
1.0%

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.

The Retail Equation Conclusions
◾◾ While the risk of fraud exists in all merchandise returns, fraud occurs 10 times more often if items are
returned without a receipt.

8

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

 Current Return Processes
DOES THE CUSTOMER NEED AN ID TO MAKE A RETURN?
Non-Receipted

Receipted
100
80

YES 85.2%

YES 18%
NO 82%

60
40
20
NO 14.8%
0

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.

Key Findings
◾◾ Consumers can make returns without ever showing ID at only 16.4% of retailers.
◾◾ Among retailers who require identification, most (85%) require it for non-receipted returns.

The Retail Equation Conclusions
◾◾ Retailers appear to trust receipts despite the ease with which they can be falsified.

Return Fraud by Tender Type
COMPARED TO THE PREVIOUS YEAR, IN WHICH TENDER T YPES HAS
YOUR COMPANY ENCOUNTERED A CHANGE IN RETURN FRAUD?

Largest
gain

Cash
100
80
60

Increase
30.0%

0

Gift Card/
Merch. Credit
Increase
60.7%

No Change
36.1%
Decrease
10.0%
N/A
3.3%

Credit Card
Increase
44.1%

Debit Card
Increase
21.1%
No Change
59.6%

No Change
56.7%

40
20

<

Decrease
1.6%
N/A
1.6%

No Change
49.2%

Decrease
6.8%

Check
Increase
5.2%
No Change
53.4%

<

Decrease
27.8%
Decrease
14.0%
N/A
5.3%

Steepest
decrease

N/A
13.8%

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.

120
Key Findings
◾◾ The majority
100of retailers reported that fraudulent returns involving cash, debit card, and checks were
similar to last year.
80
◾◾ Retailers reported a 5.5% increase in fraudulent PayPal transactions.

60

The Retail Equation
Conclusions
40

◾◾ All tender types are susceptible to return fraud; therefore, all tenders should be considered when
20
developing a solution for fraudulent and abusive returners.
◾◾ Gift cards/merchandise
credits are especially vulnerable because of their role in non-receipted return
0
cash
gift card
credit
debit
check
refunds and the ease with which they can be converted to cash through online auctions, in-store kiosks,
and pawn shops.

120
100
80

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

9

 Impact of Return Fraud and Abuse vs. Shrink 
Beyond reporting metrics, a significant goal of this survey is to understand how retailers view and
manage return fraud and abuse. How strategic is return fraud compared to something very well
known like shrink?
HOW IMPORTANT WOULD YOU SAY THE ISSUES OF
RETURN FRAUD AND SHRINK ARE FOR YOUR COMPANY?
Shrink
100

Return Fraud

Legend
Very Important

50.8%

23.0%
Important

80

Somewhat Important
32.8%
Somewhat Unimportant

60

Not Important at All
23.0%
26.2%

40

20

21.3%
16.4%

0

4.9%

1.6%

Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.

Key Findings

100

◾◾  55.8% say return fraud is important or very important.

The Retail Equation Conclusions

80

◾◾ F  ewer than half of retailers rated their return policies as “effective” in deterring fraud.
◾◾  Shrink will always be a key metric and has historically been a large focus for LP teams.
◾◾  Return fraud and shrink are highly correlated. In fact, in a study of TRE clients, retailers averaged
0.32% absolute shrink reduction and 12.95% relative reduction to shrink.
◾◾ When working on returns problems, dig deep to find the real metrics. Only with a true return rate,
and understanding of consumers, can you begin to size and solve your return and shrink issues.

60
40
20
0

10

SHRINK

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

RETURN FRAUD

 Annual Canadian Merchandise Returns and Return Fraud
METRIC

2014

RCC retail industry sales(1)

$354.1(2)

Returns as a percent of total sales(3)

8.0%

Amount of merchandise returned

$28.3

Return fraud as a percent of total returns(4)

4.2%
$1.2

Estimated amount of fraudulent returns
Return fraud and abuse as a percent of total returns(5)

6.1%
$1.7

Estimated amount of return fraud and abuse
 

< Approx.

10% of
US
amounts
<

All dollars in billions.

T  he Retail Council of Canada’s retail industry sales figure includes traditional retail categories and food &
convenience stores, and excludes automotive & gasoline. Sales and returns are reported in billions of dollars.
 (2)
2014 retail sales (in billions) reported by RCC in Retail Fast Facts, November 2015.
 
(3)  
Returns as a percent of total sales is estimated from US figures.
 (4)
Return fraud figure reported in the 2012 Canadian Retail Security Survey from RCC and PwC.
 
(5)  
Return fraud and abuse estimates are derived from trends established in previous previous years of the
Consumer Returns in the Retail Industry report.
 (1)

Financial Summary of Return Fraud and Abuse in Canada
RETURN FRAUD
AND ABUSE LOSS
PER $100
CATEGORY

PERCENTAGE
RATE

RETAIL
INDUSTRY

EXAMPLE COMPANY
($1 BILLION REVENUE)

Retail Sales

100%

$354,130,000,000

$1,000,000,000

Returns(1)

8.0%

$28,330,400,000

$80,000,000

Receipted(1)

90.0%

$25,497,360,000

$72,000,000

Non-Receipted(1)

10.0%

$2,833,040,000

$8.000,000

Return Fraud
(low-end estimate)

4.2%

$1,189,876,800

Return Fraud and Abuse(3)
(high-end estimate)

6.1%

$1,728,154,400

(2)

OF
SALES

OF
RETURNS

$3,360,000

$0.34

$4.20

$4,880,000

$0.49

$6.10

Percent is estimated from US figures. Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015. For
statistical reasons, the 2015 figures use a median and are therefore not directly comparable to previous years.
(2)
 Low-end estimates are derived from return fraud figure reported in the 2012 Canadian Retail Security Survey from RCC and PwC.
(3)
 High-end estimates are derived from trends established in previous years of the Consumer Returns in the Retail Industry report.
(1)  

ANNUAL MERCHANDISE RETURN FRAUD AND ABUSE IS ESTIMATED
BETWEEN $1.2 AND $1.7 BILLION FOR THE CANADIAN RETAIL INDUSTRY.

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY 11

 Lost Canadian Sales Tax
Impact of Return Fraud
and Abuse

% OF
NATIONWIDE
RETAIL SALES(1)

PROVINCE

The Retail Equation Conclusions

1.76%

Prince Edward Island

0.40%

$2,005,000,000

Nova Scotia

2.76%

$13,915,000,000

New Brunswick

◾◾ Because of the significant retail revenue
losses caused by return fraud and abuse,
federal and provincial governments
are losing a total of $221 million to
$320 million in sales tax revenues.

2.28%

$11,528,000,000

21.41%

$108,137,000,000

Ontario

34.99%

$176,719,000,000

3.57%

$18,034,000,000

Manitoba
Saskatchewan

3.79%

$19,143,000,000

Alberta

15.56%

$78,582,000,000

British Columbia

13.12%

$66,273,000,000

Yukon

0.13%

$661,000,000

Northwest Territories

0.15%

$774,000,000

Nunavut

0.07%

$355,000,000

Total
(2)

Source: Retail Council of Canada      
Source: Retail Council of Canada

Lost Canadian Jobs Impact of
Return Fraud and Abuse

 

AVERAGE ANNUALIZED
RETAIL EARNINGS(1)

RETAIL JOBS LOST DUE
TO RETURN FRAUD

RETAIL JOBS LOST DUE
TO RETURN FRAUD
AND ABUSE

$19,611

94,048

136,594

S  ource: Government of Canada, Statistics Canada, CANSIM Table 282-0069. November 2015 and Weekly
Hours of Hourly Paid Employees, Average, by Industry (Retail Trade) 2014.

The Retail Equation Conclusions
◾◾ Retailers must offset the negative business impact of return fraud and abuse by increasing prices
to consumers and by reducing costs—which too often means a loss of jobs.

12

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

$8,882,000,000

Quebec

(1)

(1)

SALES

Newfoundland and Labrador

 COMBINED
TAX RATE(2)

RETURNS

$772,347,826

13.000%

LOW-END ESTIMATE(3)
LOST SALES
RETURN FRAUD
TAX REVENUE

HIGH-END ESTIMATE(4)
RETURN
LOST SALES
FRAUD/ABUSE
TAX REVENUE

$32,438,609

$4,217,019

$47,113,217

$6,124,718

$174,347,826

14.000%

$7,322,609

$1,025,165

$10,635,217

$1,488,930

$1,210,000,000

15.000%

$50,820,000

$7,623,000

$73,810,000

$11,071,500

$1,002,434,783

13.000%

$42,102,261

$5,473,294

$61,148,522

$7,949,308

$9,403,217,391

14.975%

$394,935,130

$59,141,536

$573,596,261

$85,896,040

$15,366,869,565

13.000%

$645,408,522

$83,903,108

$937,379,043

$121,859,276

$1,568,173,913

13.000%

$65,863,304

$8,562,230

$95,658,609

$12,435,619

$1,664,608,696

10.000%

$69,913,565

$6,991,357

$101,541,130

$10,154,113

$6,833,217,391

5.000%

$286,995,130

$14,349,757

$416,826,261

$20,841,313

$5,762,869,565

12.000%

$242,040,522

$29,044,863

$351,535,043

$42,184,205

$57,478,261

5.000%

$2,414,087

$120,704

$3,506,174

$175,309

$67,304,348

5.000%

$2,826,783

$141,339

$4,105,565

$205,278

$30,869,565

5.000%

$1,296,522

$64,826

$1,883,043

$94,152

$220,658,197
(3)
(4)

$320,479,762

L  ow-end estimates are derived from return fraud figure reported in the 2012 Canadian Retail Security Survey from RCC and PwC.
 High-end estimates are derived from trends established in previous years of the Consumer Returns in the Retail Industry report.

MAP OF LOST SALES TA X BY PROVINCE

Legend
 
 
 
 

<$5 Lost sales tax revenue
$5-$10 Lost sales tax revenue
$10–$49 Lost sales tax revenue
$50> Lost sales tax revenue

Sales tax revenue in millions, based on high-end
estimates from table.

L

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY 13

 Return Rate by Retail Category
RETAIL CATEGORY

Apparel
Auto Parts
Beauty
Children’s Apparel
Department Stores
Footwear
Hard Goods
Home Improvement
Housewares
Sporting Goods
Women’s Apparel
NRF Survey Median(2)

BLENDED RETURN RATE(1)

 10.5%
21.0%
5.21%
9.88%
14.05%
9.56%
12.33%
11.35%
12.29%
9.25%
11.13%
8.0%

 Retail category rates derived from TRE analysis of 34,000 stores in the specialty and general merchandise
retail segments. TRE reviews return data direct from POS T-Logs—so all returns, exchanges, online returns,
employee sale returns, and every other refund scenario is considered to build an actual return rate.
(2)
Source: National Retail Federation 2015 Return Fraud Survey. October & November 2015.
(1)

Key Findings
◾◾ The NRF survey median return rate (8.0%) is lower than the TRE blended return rate in several of the
retail categories because the NRF survey included retailers outside of these select categories, like grocery
and drug stores, which helped lower the median return rate.

Return Reasons from Around the World
RETURN REASON (1)

Defective/poor quality
Bought wrong item
Buyer’s remorse
Better price elsewhere
Gift returns
Wrong size on item
Return fraud
Didn’t match description
Late delivery of item
Other
Total
(1)

$ US (BILLIONS)

$162.0
$99.3
$88.7
$83.4
$64.1
$62.4
$28.2
$6.1
$4.6
$43.8
$642.6

Global return
fraud is
<approximately
twice as
large as in
US & Canada

 Source: IHL Group/Order Dynamics “Hefty Returns” WWD. July 4, 2015.

Key Findings
◾◾ While the bulk of this booklet focused on returns and return fraud, this separate study looks at
consumers’ return reasons. Interestingly, return fraud is still a significant line item on a global scale
and aligns well with NRF and The Retail Equation’s estimates.
◾◾ In the “US Retail Fraud Survey 2015” conducted by Retail Knowledge, return fraud cost retailers an
average of 0.31% of sales in 2015, right in line with metrics in the table on page 5.

14

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

 Summary
The eleventh Consumer Returns in the Retail Industry report represents the eighth year that
The Retail Equation sponsored the National Retail Federation (NRF) Return Fraud Survey
as a means to present a single source of metrics to the US retail market. The goal is to
understand the extent of annual merchandise return fraud and abuse, which is estimated
to be between $9.1 and $15.9 billion in the United States. By raising awareness of the
problem, we hope to stimulate a dialogue that will lead to best practices and solutions.
  Additionally, this is the fourth year we have included return fraud and abuse estimates
for the Canadian retail market, as calculated from statistics compiled by the Retail Council
of Canada (RCC). Annual merchandise return fraud and abuse in the Canadian retail
market is estimated between $1.2 and $1.7 billion.
  In the competitive world of retail, it is critical to understand how returns and return
fraud reduce net sales and contribute to inventory shortage (shrink). The results within offer
the industry’s best look into the subject of 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 from this source.
  When considering solutions, remember that broad policy-based initiatives impact every
shopper; potentially adversely affecting good customers as well as abusers, and consumer
satisfaction may suffer as a result. Ultimately, implementing the right solution, combined
with employee training that encourages diligent attention to the issue at the store level, will
help result in reduced return fraud and abuse—leading to lower return rates, lower shrink,
increased net sales, higher profits, and improved customer satisfaction.
  For more information on the 2012 Canadian Retail Security Survey that generated
portions of this executive summary report, please contact the RCC at www.retailcouncil.org.
  For more information on the 2015 NRF Return Fraud Survey results that generated
portions of this executive summary report, please contact Kathy Grannis Allen at
press@nrf.com (855.NRF.PRESS) or Robert Moraca, VP, Loss Prevention at moracar@nrf.com.

2015  CONSUMER RETURNS IN THE RETAIL INDUSTRY

15

  

2015

ANNUAL RETURN SURVEY

Consumer Returns
    in the Retail Industry

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TRE3015