Returning worn items and faking stolen packages: Consumer fraud is on the rise

To receive the Vogue Business newsletter, sign up here. Returning a used or counterfeit item, pretending a safely delivered package has gone missing or arrived damaged — they’re all examples of “friendly fraud”, meaning a brand’s customers are defrauding them. And it’s a problem on the rise, raising alarm bells for brands and retailers. Fraud prevention platform Ravelin recently surveyed more than 6,000 adult online shoppers in the UK, France and Germany, finding that 40 per cent have committed fraud in the last 12 months. Consumers over 45 are the biggest culprits, mainly because they don’t recognise their actions as criminal. Almost half of French respondents (47 per cent) admitted to committing fraud, compared to 39 per cent in the UK and 36 per cent in Germany. By 2025, fraud will cost sellers upwards of £39 million, according to Ravelin. Fraudulent activity comes to a head during peak sales season, so with holiday shopping promotions on the horizon, retailers should be vigilant, the report says. “Merchants are aware they have a problem with their own customers committing fraud, but the scale to which this is happening has not been clear until now,” says Ravelin CEO and co-founder Martin Sweeney. “We live in difficult times, so it is perhaps not surprising that some consumers find themselves tempted into fraudulent behaviour.” The cost of living crisis is a leading factor in why fraud is on the rise, according to the survey, with 51 per cent of respondents agreeing that it has triggered their fraudulent activity. This skews higher in the UK at 65 per cent, where consumers have been hit hardest, and France at 55 per cent, compared to 37 per cent in Germany. Other factors cited include the pandemic (29 per cent), unemployment (18 per cent), having children (15 per cent), starting school or university (15 per cent) — all times where pockets are pinched. Heavy shoppers are most likely to commit fraud, with 62 per cent of those who admit to commiting fraud more than four times having shopped online more than 11 times in the past year. According to Ravelin, dishonest activity has helped 29 per cent of fraudsters to gain more than £100 in profits the last year, with 13 per cent gaining over £500 — and 37 per cent of people who committed fraud believe their monetary gain outweighs the company’s loss. E-commerce is more vulnerable to this sort of activity. “The impersonal nature of online shopping may reduce the sense of ethical obligation, making it easier for consumers to justify such actions to themselves,” says Kate Hardcastle, broadcaster and global consumer specialist at Insight with Passion. It’s an ongoing problem: 36 per cent of survey respondents said they have considered committing fraudulent activities in the future, and 39 per cent admit they commit fraud as often or more than previous years. The majority of fraudsters say it’s easy to get away with committing fraud. This sort of activity can have significant impacts on brands. “Financially, it leads to lost revenue and additional costs associated with processing returns and chargebacks. This can be particularly damaging for small businesses with tighter margins,” says Hardcastle. “Moreover, it can skew inventory and sales data, making it harder for companies to make accurate business decisions when it comes to forecasting. There’s also a reputational risk, as frequent returns and disputes can lead to a perception of poor product quality or customer dissatisfaction.” Returns policies in particular have been tough to get right. There’s a lack of logistics infrastructure to support returns, which means it’s often more cost effective to destroy or discard unused products than it is to process a return and put the item back in a warehouse. For luxury, there’s the added pressure to preserve the brand reputation, which means promotional activity is less desirable for clearing excess inventory. Some are now positioning their returns strategy as a competitive advantage, limiting free returns, using technology to offer more accurate fit, incentivising exchanges and aggregating parcel drop-offs, but it’s a lot of work for legitimate returns, let alone those that are fraudulent. There are a number of solutions that brands can use to mitigate fraudulent activity, including implementing stricter return policies and having more vigilant processes to detect fraud, perhaps using automation. However, it’s a fine balance. “Retailers and e-commerce merchants need to balance the need to clamp down on fraud with offering customers an easy and safe shopping experience,” says Sweeney. For Hardcastle, the root of the problem is poor customer engagement. “In an era where the consumer-brand relationship becomes colder and more transactional, pushed by relentless and impersonal marketing, customers’ emotional connection to the brand diminishes. This mechanical interaction paves the way for consumers to act against their own values, such as wearing and returning garments, without the moral qualms they might otherwise feel,” she says. Retailers should work on improving customer service, personalised marketing and ensuring customers feel connected to the brand ethos. “Strengthening these emotional bonds, alongside practical measures to discourage such behaviour, is key in nurturing not only brand loyalty but also ethical consumer practices. When consumers feel a stronger emotional bond with a brand, they’re less likely to engage in behaviours that could harm it.” Comments, questions or feedback? Email us at feedback@voguebusiness.com. More on this topic: After reconsidering free returns, fashion brands get creative How fashion can minimise the billion-dollar return problem British Fashion Council sets out 10-step plan to slash returns

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