- Some young consumers exploit loopholes like wardrobing and "digital shoplifting" to save money.
- These practices are hurting retailers' bottom line.
- Brands are imposing stricter return policies and fees in some cases to combat the problem.
Some young consumers are trying to make their money go further by taking advantage of retail loopholes such as returning items after wearing them once, using charge-back services on credit cards — or even pretending they didn't receive the things they ordered.
In response, some retailers are hitting back by imposing stricter return policies and fees.
"Returns are very expensive for brands — it's an enormous part of their cost structure," Michael Yamartino, the CEO of Route, which works with some 13,000 brands to track and insure packages, told Business Insider. "If it's being abused, it's easy for that to make the brand unsustainable."
'Shoplifting' in the digital age
Some consumers are engaging in a practice called "digital shoplifting," consumer reports by Sift and Socure have said.
They buy a product online that gets delivered safely to their home, but they lie to the retailer and say they didn't order it or claim it never arrived or was stolen, scoring a refund for an item they're keeping.
They might also report the transaction to their credit-card company and request a charge-back to get their money refunded, while keeping the item.
In a recent survey of 2,000 people by Socure, an anti-fraud company, about half of Gen Z and millennial respondents who earned more than $100,000 a year said they had digitally shoplifted in the past year. Wealthier customers might be savvier about bank and merchant policies and how to abuse them, a Socure executive told Fortune.
Forty-year inflation highs and 5% interest rates for the first time since the financial crisis have turned the screws on many households. Influencers' promotion of digital shoplifting on social media as a money-saving hack and generous refund policies among merchants may help explain the trend.
Serial returners
Returns are also a headache for retailers as it takes time and money to transport products back to warehouses, assess their condition, issue refunds, repackage and ship them to a new customer, or liquidate, donate, recycle, or dispose of them.
The National Retail Federation and Happy Returns, a UPS company, projected in December that the value of returns in the US would be $890 billion in 2024. The 249 retailers surveyed have $500 million in revenue and estimated that about 17% of purchases would be returned.
A previous NRF report said return rates for online purchases in 2023 were 17.3% — far higher than the 10% rate for in-store purchases.
"Serial returners" in the UK send back goods worth almost £7 billion, or about $8.7 billion, of items a year, according to a report by Retail Economics and the returns company ZigZag. The report surveyed 2,000 UK households and used retail sales forecasts based on Retail Economics' data and official national statistics.
Route's Yamartino told BI that the rise in online shopping since the pandemic meant an "increase in the returns rates, particularly with younger buyers."
Route's State of Ecommerce Report 2024 report said that Gen Z was the most likely cohort to engage in "wardrobing" — buying items with the intent to return them after wearing them — with 40% of the zoomers in a survey of 1,250 consumers saying they would do so.
Social media has also popularized shopping hauls — showing off multiple items you bought from one store. Many of these items may be sent back after one use.
"What we're seeing is people buying it, using it lightly, and then returning it," Yamartino said. "So it's just the right item, it's exactly what they want, but they don't want it for that long."
Many young consumers have grown up with social media stars, "so there's a lot of concern about image," he said, adding: "Using something like wardrobing as a tactic can help you fake it till you make it."
Brands fight back
In response, some companies have started adding tags or ribbons to items to prevent them from being returned once worn or charging customers if they send back items too often.
Asos started telling some customers last year that they couldn't make any more orders if they had returned too many things too often, The Cut reported. The fashion retailer has also introduced a rule that customers who "regularly" return items will be deducted £4, or about $5, from their refund unless they keep £40 worth of items from that order. The company has not said how it defines a regular returner.
Other retailers cracking down on repeat refunders include Oh Polly, Zara, and PrettyLittleThing.
It's a difficult balance to strike as many consumers like to purchase multiple items from online stores because they're not sure of the sizing, but they don't want to be penalized for returns.
Route can help brands create profiles for customers, Yamartino said, so loyal customers aren't affected, and others can pay a small amount, such as $2 up front to avoid the shipping and return fees that could add up to $10 to $20 an order.
"It lets us use the data that we have on folks to make the right decision about those purchases," he said, "and lets the brands protect themselves and help offset the cost of these returns programs that are getting more and more expensive."