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LiquiDonate’s 2026 Returns Fraud Report: An Eye-Opening Analysis

In a rapidly evolving retail landscape, the surge of online shopping has brought about an unprecedented rise in merchandise returns. LiquiDonate, a pioneering retail-tech company, has released its 2026 Returns Fraud Report, shedding light on the alarming increase in return-related fraud strategies and their implications for retailers. The report not only highlights the growing challenges but also suggests actionable strategies for businesses to protect themselves from financial losses incurred through fraudulent returns.

The Growth of E-Commerce Returns and Fraud

The rapid growth of e-commerce has greatly increased the volume of product returns, which has become a significant burden for retailers across various sectors. With online returns standing at an astounding 24.5% as opposed to just under 9% for in-store purchases, the financial implications are staggering. Retailers estimate that approximately 15% of all returns are fraudulent, contributing to the overall $850 billion total retail returns in 2025. Given that the average cost of processing a return can reach up to $30, the financial strain on retailers continues to escalate.

Disney Petit, the CEO and founder of LiquiDonate, comments, "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." It's evident that there's a major challenge at play; more than one in three consumers admit to committing some form of return-related fraud. Notably, 85% of retailers surveyed have experienced some type of return fraud, making this issue a pivotal concern for businesses today.

Types of Returns Fraud Identified

The report identifies several notable types of returns fraud:

• - Chargebacks: Consumers dispute legitimate transactions to obtain refunds without returning the purchased items.
• - Wardrobing: This practice, often seen in the fashion industry, involves temporary use of clothing before returning it.
• - Counterfeiting: Fraudsters may return counterfeit items in place of genuine ones, deceiving retailers.
• - Item Substitution and Empty-Box Returns: Instances where incorrect items or empty boxes are returned offer criminals an avenue of exploitation.
• - Keep-it Fraud: Customers exploit return policies by obtaining refunds for low-value items without returning them.
• - Bracketing: Consumers purchase multiple items to find one that meets their needs and return the rest, which increases operational costs for retailers.
• - Return-as-a-Service (RaaS): Organized crime groups leverage return systems for profit through various manipulations.

Understanding the Costs of Returns

The financial impacts of returns fraud are multifaceted:

• - Direct logistics costs include shipping, labeling, refurbishing, and disposal.
• - Financial and payment costs involve processing transaction fees, the cost of chargebacks, and margin losses.
• - IT and system costs incur through software, analytics, and automation expenses.
• - Operational impacts manifest as inventory distortions, forecasting challenges, and complications in channel management.

Strategies to Combat Returns Fraud

To mitigate risks posed by returns fraud, LiquiDonate emphasizes the importance of adopting several strategic measures:
1. Control Return Channels: Implementing pre-return authorization and utilizing AI-based inspection systems can help manage returns effectively.
2. Strengthen Return Policies: Utilizing tiered policies and proof-of-purchase requirements will encourage accountability.
3. Utilize Advanced Verification Technologies: Embracing RFID, AI image comparisons, and blockchain tools enhances the verification process.
4. Optimize Post-Return Routing: Establishing structured workflows will aid in detecting fraud during the return process.
5. Foster Industry Collaboration: Sharing data about fraudulent practices among retailers can bolster defenses.
6. Donation Initiatives: Redirecting returns to nonprofits not only mitigates fraud but also contributes to sustainability goals.

Conclusion

The LiquiDonate 2026 Returns Fraud Report underscores the notion that returns fraud is not merely a minor concern but a growing risk embedded within the retail landscape. For retailers operating on thin margins, reassessing how returns are handled, verified, and routed is crucial for maintaining operational efficiency and trust.

Disney Petit emphasizes that technology holds the key to addressing these challenges, stating, "Our hope with this report is to help retailers understand that they have options when it comes to return fraud. Technology can help."

In this ever-evolving digital commerce era, those retailers investing in modern return infrastructures can expect to gain an edge in competitiveness while meeting consumer expectations for sustainability. To delve deeper into the findings and insights, one can access the full report on LiquiDonate's official website.