Web and mobile fraud
Santa’s Little Help “Thems-Elves”
Merry Christmas and Happy New Year, or Many Unhappy Returns as Serial Refunders Create Existential Crisis for Online Retailers
The much-anticipated holidays may be coming, but so are expensive headaches and hangovers for retailers and e-tailers trying to manage the rise of Grinch-like serial refunders who are killing the spirit of the season.
Indeed, the cost-of-living crisis and Gen Z influencers “pouting, flouting, and touting” for likes on social media platforms could be two of the main drivers for the expected rise in fraudulent online purchase refunds this Christmas and New Year, as retailers brace themselves for many unhappy returns.
Figures from December 2023 and January 2024 revealed a fragile online ecosystem of high online sales—up to £24.4 billion over Christmas (3.7 per cent more the previous year)—partly driven by discounted prices and the fact that £3.3 billion of the sales were driven by “buy now pay later” (BNPL) offers which were up by almost 13 per cent on 2022.
Year-on-year, online retail sales have mushroomed, but the figures were always skewed because they did not include the high rate of returns resulting from the basic fact that a customer ordering three pairs of trousers in different sizes, for example, is only likely to keep one. In fact, they may not even keep that pair if they do not like what landed on their doorstep because it was not “as seen on screen”.
Online shopping has revolutionised consumer behaviour in terms of greater choice and time and cost saving, but arguably the ability to over-order has over-complicated what should be a simple transaction. It requires a logistical precision that allows for perpetual inventory with more stock in motion at any one time, and robust processes in play to repatriate and replenish stock in a timely fashion.
Indeed, over-ordering online could genuinely be a result of more choice, busy lifestyles, and/or the inability to regularly get to the high street to try on items in shops. But multiple purchases may also mask a darker truth—the fact that they never intended to keep the items in the first place—an issue that is raising an existential challenge for many online platforms in terms of their long-term viability.
Questions are therefore circulating about whether fashion brands are now having to “cut their cloth” and their losses accordingly with the end of the free return now a looming reality.
According to the Product Returns Research Group (PRRG) at the University of Southampton, 70 per cent of returns are due to customers changing their minds, with an average cost of £11 to handle a return for an £89 item.
But the significant rise in so-called “wardrobing” and #OOTD (outfit of the day) scams and trends—where clothes are worn once by social media influencers and then returned for a full refund—could see this trend super-charged in January 2025.
This copycat activity, which we look at in more detail later on in this article, has been trending on some social media platforms and costing online fashion brands millions in expensive returns processes.
When online sales were in their infancy and started to grow exponentially, social media trending was not “a thing”, and while refund scams could not be predicted, they could at least be managed. Now the power of the platforms has become the accelerant of quasi-fraudulent behaviour with more people encouraged to “try and not buy”.
These are actions that are not necessarily malicious in their criminal motive to steal, because the buyer does not intend to “permanently deprive”—the legal definition of theft—but they do reflect a stretching of the limits of the law and the credulity and profit margins of the impacted businesses.
Managing returns is a significant challenge for online retailers, because handling costs are much higher than customer contributions, a factor made more acute in the post-holiday season, particularly January with its surge in returns.
Consequently, online retailers are now facing “the biggest-ever wave” of January refunds, according to returns provider ZigZag which said the percentages are likely to be much higher than a year ago, even though many online shoppers now have to pay for returns.
The fashion industry is particularly vulnerable to the extremes of the returns crisis in the UK as a result of internet purchases worth £7 billion being returned every single year, according to the British Fashion Council.
With over 20 per cent of clothes bought online ending up being returned, major retailers like Boohoo and ASOS have felt the winter chill of economic reality. Boohoo, for example, experienced a 94 per cent drop in pre-tax profits in 2022 due to the surge in returned items, while ASOS suffered a £100 million hit to its profits last year because shoppers are buying up discounted clothes only to return most of them.
The business has announced plans to slash more than two hundred jobs at its head office as the company grapples with widening losses and plummeting sales.
In April, it reported that losses had widened to £120 million in its half-year results, with sales declining by nearly 20 per cent. The company’s share price has also plummeted more than 90 per cent since 2021, reflecting the difficulties faced in the post-pandemic retail landscape.
Some online fashion houses such as Boohoo and ASOS have now introduced charges and even the threat of suspending accounts of frequent high refunders, a move that has created a major backlash from many customers.
This has come in the form of ASOS deducting £3.95 from the refund they give but claiming that “nothing’s changed” for the majority of its customers.
“We’re making this change so that we can continue offering free returns to all our customers,” the company told the BBC.
“For a small group of UK customers with a frequently high return rate, whose shopping habits make offering them unconditional free returns unsustainable, they can still get free returns when they keep £40 or more worth of their order,” ASOS said in a statement.
The retailer said that customers signed up to ASOS Premier will get free returns if they keep at least £15 worth of their order.
Kayley Cornelius, a media analyst, said the popularity of ASOS among influencers and online content creators was a factor in the company’s decision to charge some customers for returns.
“It’s common to see influencers doing huge “hauls” where they spend hundreds of pounds and then decide on camera what they’re keeping or returning,” she said.
“Regular shoppers probably followed suit, leading to an influx of returns after the initial purchase, which might have forced ASOS to tighten their return policy to make people think more carefully before buying.”
Other analysts also argue that the move was inevitable because of the normalisation of the rate of returns as well as rising competition from ultra-fast fashion brands like Shein, and the continued squeeze on customer budgets due to the higher cost of living.
Legitimate customers who have not engaged in fraudulent returns are far from happy. Forums on platforms such as Facebook and TikTok have been vocal in sharing their feelings.
Sowda from London, a regular customer of ASOS, said the change would “definitely” make her less inclined to buy there.
“The point of online shopping is that it is a risk, but you can claim all your money back if you’re not satisfied,” the 22-year-old said.
“Although £3.95 is not a hefty sum, that could add up over the year, and it’s a waste of money.”
She added that ASOS was “notorious” for its inconsistent sizing. “Just recently I got the same jeans three times to finally get the right fit,” she added.
“I would never have been that committed to the jeans if there was a £3.95 fee every time I sent them back.”
Another customer named Charlotte wrote on X, formerly Twitter: “The problem for large returns is the fact half of your stock is ill fitting and poor quality—I’ll take my custom somewhere else.”
Earlier this year, PrettyLittleThing (PLT), part of Boohoo, was also criticised by customers who had their accounts deactivated because of the number of times they returned items.
It came shortly after PLT introduced a £1.99 fee for returns, including for those members of its “royalty” service.
In an email seen by the BBC, shoppers were told that their accounts had been reviewed and shut down so they would not be able to place any further orders.
Some of those affected have used social media to criticise the new policy, claiming they had only made one return so far this year, or suggesting they would return fewer items if the firm was more consistent in its sizing of clothing items.
One PLT customer branded the latest move a “joke” and said returns would not be necessary if the sizing and the quality of the clothing was not “awful”.
Posting on X, they said: “You don’t have a physical store, [of course] people will return things.”
Another wrote that they had received the email telling them their account was being deactivated despite the fact their last return to the company was three months ago.
Last year, fashion giant H&M backtracked on a similar policy after criticism.
Some other platforms have also been accused of making their free returns policy overly opaque and complex to discourage the practice.
Returns are not just a UK issue, and as long as a year ago had already triggered a major crisis for US retailers and e-tailers. A 2022 report by the National Retail Federation (NRF) and Appriss Retail estimated that of the approximately $212 billion worth of returned online purchases, around $22.8 billion, or 10.7 per cent, are likely to be fraudulent.
Online retailers face additional expenses in the form of time and money when they process fraudulently returned items, restock them, re-evaluate their worth, and determine how or if they can be resold. This can negatively impact sales, gross margins, inventory management, and profitability.
Wardrobing and “Snap and Send Back”
An increasingly prevalent form of refund fraud is “wardrobing”—carried out by genuine customers who purchase wearable or usable items with the plan of returning them once they have been briefly used. As it relates to the fashion industry, this typically involves a shopper who buys, wears, and then returns clothing, shoes, and accessories.
The rise of e-commerce has made wardrobing even easier as customers benefit from the anonymity of online shopping and can now return used apparel without any awkward face-to-face interaction with retail staff.
Unfortunately, wardrobing is becoming increasingly popular among consumers who deliberately abuse all-too-forgiving returns policies, with a recent study finding that one in four shoppers admit to engaging in this practice.
According to Appriss, 50 per cent of retailers experienced wardrobing in 2022, and its continued prevalence means it is at risk of becoming normalised and socially acceptable as shoppers share stories of their experiences and how effortless it was to carry out, often on social media.
The false reality of social media leads to a pervasive sense of social pressure to emulate the fashion choices of influencers. As a result, people with intense needs to keep up appearances resort to fraudulent practices because they are reluctant to be seen wearing the same outfit more than once.
While validation and approval in the form of “likes” are the currency of these influencers, wardrobing makes it economically easier for their followers to maintain appearances on a tighter budget without constantly buying new clothing, particularly during economic downturns and the cost-of living crisis.
And so, the inevitable rise of behaviours and sharp practices fit well with the persona they wish to maintain but has become a tight squeeze for fashion brands attempting to preserve their margins.
The prevalent trending of #OOTD mentioned earlier, and so-called “snap and send back” practices which actively encourage individuals to repeatedly engage in returns scams are both examples of feral consumer behaviour detached from economic reality to the point that the perpetrators simply choose not to recognise their conduct as criminal.
They convince themselves that it is harmless and victimless because the fashion houses get their stock back regardless of the fact that it costs to re-process the goods and get them back to “sale ready” condition, or in some cases even having to be written-off.
The trend of “snap and send back” is driven partly by the desire to post fashionable #OOTD on platforms such as TikTok.
Influencers feel pressure to constantly maintain their status by showcasing trendy looks to their followers, leading them to engage in fraudulent behaviour by only wearing items once for a photo opportunity and then returning them.
Under-Consumption
Online returns systems are also prone to abuse. Britain is “being buried” under an “avalanche” of returned clothes thanks to Gen Z influencers touting “underconsumption” as a life philosophy, according to an article in the Telegraph.
These “Post-Millennials” or “Zoomers” are aiming to make fewer purchases and hold onto older items for longer. This push towards saving money is likely a reflection of the youth’s current economic struggles, and their apparent interest in the environment is driving sustainability efforts
The Telegraph article said: “Hordes of young TikTok posters are trying on outfits for an appreciative audience of millions and after they wordlessly cycle through dress after dress, hundreds of commentators hold forth on which they think should be kept, and which should be sent back”.
The “immensely popular” posts are commonly racking up views in the hundreds of thousands and are “emblematic” of how buying and returning masses of clothes is easier than ever, the article concludes.
While wearing something twice is considered taboo in their world, it becomes a culturally toxic narrative for the impacted businesses.
In a recent returns policy abuse webinar hosted by Forter, the research organisation shared a shocking incident highlighting the gross exploitation of a merchant’s return policy. They reported on the case of a fashion blogger who bought current season merchandise, blogged about her creative looks, and then returned 85 per cent of the outfits to the merchant within the return period for a full refund.
Cost to Retailers
In the face of these issues, some commentators claim that retailers are making it gradually more complicated to return products.
Amazon returns have now “gone to hell”, according to Ian Bogost of the digital US business publication, The Atlantic, where he wrote that online retailing’s “blanket promise” that “you can always send it back” has become “unsustainable”, so the biggest online retailers have gradually “revised, modified, and amended the logistics processes” for returns. All those “small changes” have started to compound, so what used to be a simple system for consumers is getting more complex”.
“So, if the returns process “put customers off just enough to dissuade some returns”, but without upsetting the precious idea of free returns, that would be a net benefit for retailers”, he continued.
Workable and Working Solutions
But the industry is not taking high levels of returns lying down. With a high price to pay for both retailers and the environment, innovative solutions are emerging to tackle the problem. For example, companies like Greenlist, a technology company which enables customers to sell returned items to others rather than back to the company that sold them in the first place at discounted prices through peer-to-peer platforms.
Another innovative returns management company—Loop—promotes exchanges instead of returns, offering one-click options, bonus credit, and free shipping.
Retailers are also becoming more proactive by utilising third-party resale marketplaces or establishing their own resale sites in order to adopt a circular fashion model. They are also implementing more frictionless returns processes like offering free returns to stores or third-party pick-up locations and box-free returns in order to streamline the returns experience and enhance customer satisfaction.
Retailers are also investing more in business intelligence and stock file accuracy and control to help mitigate the impact of returns by understanding their customer profiles and improving inventory management to respond more proactively to patterns in returns data. To address the issue properly, a collaborative effort between retailers, customers, and technology providers is essential to a more sustainable and efficient future.
The UK returns crisis is creating challenges for online retailers—both financially and environmentally—and as Christmas approaches it appears larger than life as the ghost at the feast. The narrative of the season is Father Christmas delivering billions of gifts every year to those children and adults who had been good rather than focussing on Santa’s little helping “thems-elves”.
Retailers and e-tailers are now getting real with those who abuse the process and whose actions put prices up for all consumers. They are introducing tougher policies and terms and conditions to help take back control of runaway costs and refund abuse.
Far from businesses being accused of behaving like Scrooge in A Christmas Carol, such strategies can help to save Christmas by acting as sanity clauses at a time when people may have stopped believing in the magic of Santa Claus.
