Tag: returns

OM in the News: The Inventory Return Scam

Retailers nationwide have seen online returns skyrocket over the past four years after rolling out generous returns policies to attract customers amid a pandemic-driven surge in e-commerce. The returns policies have helped change shopping habits: Consumers have grown accustomed to ordering items online in several sizes and colors, then returning what they don’t want.

Shoppers last year returned 17.6% of items they purchased online, valued at more than $247 billion and more than double the percentage of goods returned in 2019. Returns have become such an entrenched part of online commerce that companies have sprung up to handle the growing business. UPS acquired one of those specialized operators, Happy Returns, for $465 million.

The ease of shipping goods back has also given criminals new tools to exploit in an online environment in which buyers don’t need to interact with store employees–and the scale and organization of the fraud is getting more ambitious, and organized.  More than $100 billion in merchandise was returned fraudulently in the U.S. last year, estimated to be 9-15% of the $850 million returned goods retailers received in 2024-2025, reports Supply Chain Brain (Feb. 2, 2026). 

Organized criminal groups “are taking advantage of the omnichannel retail environment,” said on industry expert. In some cases, fraudsters are returning knockoffs in place of designer goods and sending back boxes full of bricks or other filler rather than the original items. Others are manipulating shipping labels to receive a refund just from mailing back an empty envelope. Fraudsters marketing their services on Telegram and through other websites often sell their services in return for a cut of customers’ refunds.

Apparel retailer PacSun recently noticed a sharp increase in returns of online purchases, including one customer who had returned some 250 orders worth $24,000.  PacSun had issued the refunds, but the company never received the actual merchandise at its warehouse. Instead, workers found “used or different merchandise returned in the box, or even empty shoeboxes.”

Some retailers such as Amazon are taking legal action. It just sued the refunding-services group REKK that it claimed was “responsible for stealing millions of dollars of products from Amazon’s online stores through systematic refund abuse.”

Classroom discussion questions:

  1. How can the quality control inspections engaged during returns processing be defrauded?
  2. How has e-commerce made this fraud easier?

Guest Post: Fashion Influencers and Revamping Costly Product Returns

 

Temple U. Professor Misty Blessley raises an interesting inventory issue–returns.

Fashion influencers and their followers are contributing to the increase in rising product returns. According to the National Retail Federation, returns accounted for 17% of retailers’ total 2024 sales. Online purchases have a 26% return rate compared to in-store purchases (10%). Many online shoppers intentionally buy items they plan to return. Statista reports that clothing (24%), shoes (16%), and accessories (12%) are the most returned products – the exact product footprint of fashion retailers. Several recent articles shed light on the influencer effect and tips for revamping costly product returns in retail fashion. 

Fashion influencers have popularized trends that promote returns behavior:

  1. Hauls: Influencers showcase purchased fashion items, then decide whether to keep or return them based on follower feedback.
  2. Wardrobing: Influencers buy items for temporary use such as content creation and return them afterward.
  3. Bracketing: Influencers buy multiple sizes or colors of a product to find the perfect fit, with the intention of returning the rest. About 58% of consumers buy multiple sizes for this reason, with 75% of returns attributed to fit.
  4. Influencing: 56% of followers make purchases recommended by an influencer, many of which are later returned.

Returns come with significant costs, including shipping, restocking, reselling at a discount, and administrative expenses. Retailers are adopting strategies to curb or better manage returns:

  • Charging return fees: Brands like Zara and H&M now charge for returns.
  • Clarifying return policies: Shortened return windows, stricter conditions for full refunds, and more items marked as final serve to narrow return opportunities.
  • Improving sizing tools: Enhanced size charts, virtual reality fitting tools, and online fitting rooms help shoppers make better choices.
  • Implementing logistics systems: Retailers are investing in digital tools to streamline and manage returns more efficiently.

As discussed in Chapter 1 of your Heizer/Render/Munson textbook, best practice can be achieved when operations and supply chain management, marketing, and finance work together.

Classroom discussion questions:

  1. After 89% of retailers adjusted their policies to deter returns, 59% saw return rates increase. What factors could explain why these policies fail to get the desired result?
  2. The SCOR Model, discussed in Chapter 11, outlines attributes for processes like source, make, and deliver. How are the attributes for returns like or different from these processes?