Retailers are calling on AI to stop customer return fraud

Retailers are calling on AI to stop customer return fraud as reverse logistics volumes rise and abuse becomes more sophisticated. Industry discussions cited fraud that can include label swapping, empty-box returns, counterfeit substitutions, overstated return quantities, and “wardrobing,” where items are used briefly before being returned. The National Retail Federation and Happy Returns’ 2025 Retail Returns Landscape report estimated that about 9% of returns are fraudulent. Happy Returns, part of UPS, told media that merchants are moving away from highly manual processing and toward AI systems to identify patterns at scale. Organizations such as Narvar and Loop are described as using AI to process large datasets and automate fraud decisions. Gartner Consulting partner Jackie Swanson said retailers shifted over the last 18 months from machine-learning-enhanced detection to broader AI systems. The aim is to reduce losses and speed legitimate returns so inventory can be restocked quickly.