Return Fraud, Counterfeits and Other Scams: 2025 Was a Banner Year

Why It Matters

The combined loss threatens retailer margins, erodes brand trust, and forces costly investments in fraud‑prevention technology and compliance.

Key Takeaways

• Return fraud costs US retailers $127 billion in 2025
• Online returns triple in‑store returns, fueling fraud growth
• 1 in 3 shoppers admit to some return trickery
• AI and human review target high‑risk returns
• Counterfeit seizures $467 billion, 90% from China, HK, Turkey

Pulse Analysis

The surge in e‑commerce has reshaped the retail landscape, but it also amplified the financial impact of return fraud. Liquidonate’s 2025 analysis shows that fraudulent returns represent roughly 15 % of the US$850 billion total returned‑goods market, translating into a $127 billion hit for retailers. This pressure is compounded by the sheer volume of online returns, which now exceed physical store returns by a factor of three, stretching logistics, labor, and margin buffers. As merchants scramble to protect profitability, the cost of processing each return—including shipping, inspection, and restocking—has become a critical line‑item on balance sheets.

Fraudsters have refined classic schemes such as wardrobing and counterfeit switching, while organized crime groups have introduced “return‑as‑a‑service” platforms that aggregate refunds and skim percentages. Younger shoppers (18‑34) dominate the offending cohort, with a third of respondents admitting to some form of return manipulation. Retailers are responding with AI‑enabled analytics that flag high‑risk transactions for manual review, leveraging pattern recognition, device fingerprinting, and historical behavior to reduce false positives. However, the same automation that speeds processing can also be exploited, as criminals adapt by gutting products or submitting empty boxes that pass digital validation.

Counterfeit activity ran parallel to return fraud, with the OECD/EUIPO reporting $467 billion in fake‑goods sales and identifying China, Hong Kong, and Turkey as the primary sources of seized merchandise. Online marketplaces, especially in Southeast Asia, serve as distribution hubs, often lagging in enforcement despite public commitments. Regulatory bodies like the European Commission have placed platforms such as Shopee on watch lists, and governments in Thailand are tightening notice‑and‑takedown regimes. For brands, the dual threat of lost revenue and damaged reputation underscores the urgency of coordinated industry standards, robust authentication technologies, and cross‑border cooperation to stay ahead of increasingly sophisticated fraud networks.