Return fraud is climbing alongside e-commerce growth, adding new pressure to margins already strained by fulfillment and processing costs. A new LiquiDonate report shows how shifting tactics are reshaping retail risk and forcing tighter controls across reverse-logistics networks.
Fraud Tactics Expand as Online Returns Outpace Store Activity
LiquiDonate’s analysis shows retailers believe roughly 15% of all returns involve some form of fraud, a proportion that has held steady even as online shopping has grown. Total retail returns hit $850 billion in 2025, with digital purchases recording a 24.5% return rate—nearly triple the in-store rate of 8.9%. Return processing continues to cost retailers an average of $25 to $30 per item once transportation, inspection, and labor are included, according to the report.
This year’s breakdown of fraud methods reflects both opportunistic and coordinated activity. Chargeback abuse remains one of the most expensive issues, as consumers dispute valid transactions through their banks while keeping the merchandise. Wardrobing, temporary product use followed by a return, continues to challenge apparel and specialty retailers, especially during promotional cycles. Counterfeits, empty-box returns, incorrect item swaps, and bracketing behaviors add further operational strain.
LiquiDonate also flags a rise in more structured schemes, including “return-as-a-service” operations in which organized groups manipulate automated return systems at scale. This trend aligns with broader industry concerns raised throughout 2025, when several major retailers increased manual review thresholds to counter similar patterns, according to trade reports.
Pressures Build Across Inventory, Forecasting, and Network Efficiency
Beyond direct fraud losses, returns continue to disrupt inventory accuracy and demand planning. LiquiDonate notes that reverse flows distort real-time stock visibility, creating mismatches between what systems display and what is physically available. These discrepancies ripple through forecasting, replenishment logic, and even vendor performance evaluations, areas that depend heavily on accurate data.
The report outlines mitigation levers now gaining traction: stricter return-policy controls, pre-return authorization workflows, serialized item verification, and more precise routing of goods after they reenter the network. Several retailers have also expanded their use of “keep-it” refunds only for low-value items and only within controlled customer cohorts to limit misuse. Industry groups have been pushing for broader data-sharing on repeat abusers, arguing that fraud patterns often span multiple banners.
LiquiDonate highlights donation pathways as a particularly underused option. Redirecting goods to nonprofits can reduce handling costs, compress cycle times, and limit opportunities for fraudulent activity. It also aligns with waste-reduction commitments many retailers advanced in 2025 as part of sustainability reporting requirements.
Where Retailers Can Look Next for Fraud-Resistant Value
Evidence from several 2025 retail pilots shows that fraud drops sharply when return data is fed into supplier scorecards and used to renegotiate quality thresholds, particularly in categories prone to damage-related returns. As more retailers standardize these feedback loops, the financial impact extends beyond fraud prevention, suppliers are being pushed to tighten manufacturing tolerances, improve packaging durability, and document product lineage more clearly. Those upstream adjustments are proving to be one of the few levers that reduce both return volume and fraud exposure at the same time, without adding friction to the customer experience.
