LiquiDonate’s Returns Fraud Report Reveals Rise in Return-Related Fraud

LiquiDonate’s 2026 Returns Fraud Report reveals the rise of return-related fraud in e-commerce, outlining various fraudulent return mechanisms and their implications for retailers.

"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," says Disney Petit, CEO and founder of LiquiDonate. "By adopting smarter, more sustainable return practices, businesses can protect their bottom line while creating a better experience for customers and a positive impact on the environment."

Key takeaways:

Major types of returns fraud

• Chargebacks: Consumers dispute legitimate transactions to obtain refunds while retaining purchased items, bypassing retailer processes.
• Wardrobing: Temporary use of items followed by returns, common in apparel and fashion sectors.
• Counterfeiting: Fraudsters return counterfeit items in place of genuine products.
• Item substitution and empty-box returns: Fraudsters return incorrect items, empty boxes, or gutted products.
• Keep-it fraud: Abuse of policies where customers receive refunds without returning low-value items.
• Bracketing: Purchasing multiple versions of an item and returning those that don't meet expectations, increasing operational costs.
• Return-as-a-Service (RaaS): Organized crime groups manipulate return systems for profit.

Scale of the problem

• Retailers estimate that 15% of all returns are fraudulent, contributing to significant financial losses.
• Total retail returns reached $850 billion in 2025, with online return rates at 24.5%, compared to 8.9% for in-store purchases.
• Fraudulent returns amplify costs, with average return costs ranging from $25 to $30 per item.
• More than one in three consumers admit to committing at least one form of return-related fraud.
• 85% of retailers have experienced some form of return fraud.

Costs of returns

• Direct logistics and processing: Shipping, labeling, refurbishment, and disposal costs.
• Financial and payment costs: Transaction fees, chargeback fees, and lost margins.
• IT, systems, and data costs: Software, analytics, and automation expenses.
• Operational and inventory side effects: Inventory distortion, forecasting challenges, and channel management costs.