A luxury bag returned as 'damaged' turns out to be a fake. A dress worn to a party arrives back in spotless packaging the very next day. These aren’t rare stories — they’re part of a growing trend online retailers are battling daily.
Return fraud accounts for approximately €101 billion in total losses for retailers, equating to about €13.70 lost for every €100 worth of returned merchandise.
But just how serious is the impact of return fraud in e-commerce, and what can you do about it?
Detect return fraud behavior
Return fraud often sneaks under the radar, but knowing what to look for can make all the difference. Spotting fraudulent activities not only protects your profits but also ensures you’re staying one step ahead of fraudsters.
Suspicious activity you shouldn’t ignore
Not all returns are what they seem. Some stand out for all the wrong reasons, making it clear that something isn’t adding up. Spotting these red flags early can save you both time and money.
Repeated claims of 'faulty' items
Customers who consistently report issues with their purchases might not always be telling the truth.
High-value returns with vague explanations
Be cautious when expensive items come back with little to no justification for the return.
Receipts that don’t align with the purchase
Mismatched or manipulated receipts are a common indicator of a potential receipt fraud.
Price switching
The price switching tactic occurs when customers attach higher-priced tags to lower-cost items before returning them for a refund.
Wardrobing
Customers buy items, wear or use them for a short period, and then return them as if they were brand new, leaving subtle signs of wear or damage that compromise resale value.
The patterns of high-risk customers
Fraudulent customers often follow patterns. They aren’t always obvious, so make sure you spot them in time — before it's too late.
Some common high-risk behaviors to keep an eye on include switching between accounts or using temporary emails to mask activity; exploiting stolen accounts through account takeover fraud; submitting just enough claims to avoid raising immediate suspicion; attempting to commit fraud by returning items that clearly weren’t purchased from your store.
By staying alert, you can build a return fraud prevention strategy that’s both effective and fair. It’s about being smart, not harsh, and balancing protection with a legitimate customer experience that builds trust.
Fraud prevention strategies that actually work
The best way to fight return fraud is to stop it before it happens. By blending smart tech with thoughtful policies, you can secure profits and build loyalty with your customers, all while staying ahead of refund fraud.
Don't just take our word for it. Netthandelsgruppen improved returns management and reduced inquiries by 25%. The result? Less room for refund fraud, a smoother return process, and happier customers all around. Here’s how you can take a similar approach with these proven strategies.
AI-driven customer profiling
Spot credit card fraud
Detect unusual payment activity, like stolen credit card use or multiple declined transactions.
Monitor account behavior
Identify suspicious actions like creating multiple accounts, using disposable emails, or mismatched addresses.
Track purchase and return patterns
AI flags customers who frequently return high-value items or make multiple returns during sales.
Behavior-based return policies
Instant refunds for trusted customers
Allow verified, low-risk shoppers to receive immediate refunds upon initiating a return, providing a smoother experience for your best customers.
Extra documentation for high-risk returns
Simple steps like asking for receipts or photos help tackle friendly fraud — also known as a chargeback fraud when a customer's credit card or account information is stolen or used without their permission — without overcomplicating the process.
Return frequency limits
Reduce the number of returns or exchanges for customers showing high-risk behavior, such as excessive returns during sales or bulk purchases.
Loyalty perks for reliable shoppers
Reward dependable customers with exclusive benefits like loyalty points or extended return windows.
Photo-validation technology
Validate damage claims
Ask customers to upload photos of reported damage, like scratches or tears, before approving returns.
Flag inconsistent returns
Use photo comparisons to spot mismatches between the item returned and the product originally sold — such as different serial numbers or modified tags.
Simplify warehouse inspections
Allow warehouses to use submitted photos to evaluate claims before physical items even arrive, saving time and cutting operational costs.
Create policies your customers (actually) respect
Done right, return policies become more than just a fraud prevention tool — they’re part of what makes your brand worth sticking with.
The key is balancing business protection with customer satisfaction. By customizing policies based on shopper behavior, you can deter fraud, including unauthorized purchases, all while creating long-term customer loyalty.
Keep it clear and transparent
It's best to avoid overly complex language — keep policies simple and easy to understand. Communicate stricter measures but from a customer-first angle, so that your customers can understand how the policy creates a better shopping experience for them.
Stricter policies for high-risk behaviors
Implement shorter return windows, require additional documentation, or hold refunds for inspections when necessary. Show fraudsters your system isn’t easy to exploit while staying fair to genuine customers.
Reward loyal customers
Treat your best customers with perks like instant refunds, free return shipping, or extended return windows. Tailor messaging to make these perks feel like exclusive benefits rather than just policy rules.
Turn returns into wins
Returns often feel awkward, slow, and full of challenges, but they don’t have to be.
What if returns could feel seamless and intentional while improving the overall shopping experience? Platforms like Ingrid are helping make that possible.
Hubso is a great example. They simplified their returns management process and saw customer satisfaction rise to 96%. By creating a smoother experience, they also reduced the chances for fraud, showing how optimized returns can protect profits while keeping shoppers happy.
Read more about how Hubso achieved these results with Ingrid
Smart returns start with data
Fraudulent returns are a growing issue. Patterns like repeat high-value refunds or suspicious claims often go unnoticed. At the same time, customers lose patience with slow processing or unclear policies.
So, how do you fix it? Well, data is a great place to start. Tools like Ingrid Returns analyze customer behavior and return trends to flag potential fraud — like stolen credit card use — before it becomes a bigger issue.
These solutions also help you identify loyal shoppers, so you can offer them faster, more personalized returns that build trust and keep them coming back.
Automating the process
Manual returns are prone to errors and delays, often leaving customers dissatisfied.
Automation changes that. Features like photo validation, instant refunds for trusted customers, and AI-driven fraud detection make returns faster and more reliable. Offering store credit instead of cash refunds reduces fraud risks while still keeping shoppers happy.
With the right tools, returns can become an opportunity instead of a challenge — for everyone involved.
Finding the sweet spot
Returns are tricky. Customers want their refunds fast, but speed can come with risks — especially when fraudsters exploit the system.
Our friends at Commerce Thinking have also been exploring this issue, shedding light on how returns can go wrong.
One example they highlight is the risk of instant refunds triggered by courier scans. It’s a system designed for convenience, but fraudsters have figured out how to work around it — sending back empty boxes or random items and cashing in before anyone notices.
So, what’s the solution? Commerce Thinking explores smarter alternatives. They suggest strategies like holding refunds until returns are inspected or using data to flag high-risk behaviors.
They’ve also worked with premium brands to find creative fixes — like limiting instant refunds to international returns, where delays are expected, or using third-party providers to inspect returns in bulk.
The goal isn’t to slow things down — it’s to make returns smarter. With a thoughtful approach, you can keep your customers happy while keeping your business safe.
Rethinking e-commerce fraud
Return fraud is a growing challenge. From receipt fraud to online payment fraud, the risks are out there. These tactics can eat into your profits if you’re not prepared.
Let smart tools and strategies do the heavy lifting for you. With fraud detection, tailored policies, and a customer-first approach, you can protect your revenue while keeping legitimate customers happy.
It’s all about staying one step ahead. Clear policies and the right tools make all the difference in building trust and safeguarding your business.
No stress. No headaches. Just smarter returns.
Explore more insights on returns and fraud prevention
Transform your returns process and tackle return fraud with confidence. Keep reading exclusive industry benchmarks from top fashion retailers and hands-on return optimization strategies that deliver real impact.
