Returns Fraud: How ‘Wardrobing’ Costs Retailers Billions
Returns fraud is a major issue plaguing the retail industry, costing retailers billions of dollars every year. One particular type of returns fraud, known as “wardrobing”, has become increasingly prevalent and is causing a significant loss of revenue for retailers. Here, we will delve into what wardrobing is, how it affects retailers, and what can be done to combat this costly phenomenon.
What is Wardrobing?
Wardrobing is the practice of purchasing an item from a retailer with the intention of using it once before returning it for a full refund. This can occur with clothing, jewelry, accessories, and even electronic devices. Essentially, the customer is “renting” the item for free, using it for a specific occasion, and then returning it without any intention of keeping it. This deceptive practice has become increasingly prevalent due to the rise of online shopping and lenient return policies.
How Does Wardrobing Affect Retailers?
The impact of wardrobing on retailers is staggering. According to the National Retail Federation, returns fraud accounted for $24 billion in losses in 2018, with wardrobing being a major contributor. Not only does it result in a direct loss of revenue for retailers, but it also creates operational and logistical challenges. Returned items may become damaged or unsellable, making it difficult for retailers to recoup their costs. Additionally, wardrobing often leads to an increase in product markdowns and discounts, as retailers struggle to sell previously returned items.
The Impact on Small Businesses
Small retailers are particularly vulnerable to the effects of wardrobing. Unlike large retailers, they may not have the resources to absorb the losses caused by returns fraud. It can also have a trickle-down effect on their supply chain, leading to difficulties in restocking and maintaining inventory. This can significantly impact the financial stability and growth of small businesses.
Why is Wardrobing So Prevalent?
The rise of online shopping has made wardrobing a lot easier to execute. With traditional brick-and-mortar stores, customers would have to physically bring the item back to the store. However, with the convenience of online shopping, customers can easily return an item without ever stepping foot in a physical store. The lack of strict return policies and the ease of the process make it a tempting option for customers.
Fueled by Social Media
Social media has also contributed to the rise of wardrobing. With the prevalence of outfit posts on platforms like Instagram, customers feel pressured to constantly have new and trendy items. As a result, they may engage in wardrobing to keep up with the fast-paced fashion world and avoid being seen in the same outfit multiple times.
Combatting Wardrobing: What Can Retailers Do?
To combat the issue of wardrobing, retailers need to take a proactive approach. One way to do this is by implementing stricter return policies. This can include limiting the time frame for returns, requiring the original tags to be intact, and only offering store credit instead of a full refund. Additionally, implementing technology solutions such as tagging items with electronic chips can help track returned items and identify patterns of abuse.
Educating Customers
Another important aspect is educating customers about the impact of wardrobing on retailers. This can be done through social media campaigns, in-store signage, and even at the time of purchase. By raising awareness about the issue, customers may be less likely to engage in wardrobing.
In Conclusion
Returns fraud, particularly wardrobing, poses a significant challenge for retailers, both large and small. It not only results in a direct loss of revenue but also impacts their operations and ability to maintain a stable inventory. By implementing stricter policies and educating customers, retailers can take steps to combat this costly phenomenon and protect their bottom line.
