Summer Vacation Leads to a Surge in "Wardrobing" Retail Fraud
As summer vacation season kicks off, a particular type of retail fraud, known as "wardrobing," is on the rise. Wardrobing is a practice where shoppers purchase expensive items, wear them with the tags on, and then return the product for a full refund. This trend, fueled by the desire for new clothes for summer vacations and events, is causing headaches for retailers, especially as return rates soar during the months of July to September.
Key Takeaways:
- Summer vacation season leads to a significant spike in wardrobing. Returns rates during the summer months, particularly July to September, are two to three times higher than other periods, with swimwear making up a substantial portion.
- Wardrobing is most prevalent among younger shoppers. Data shows that 40% of shoppers between the ages of 18 and 29 engage in this activity.
- Retailers are facing challenges managing the influx of returned items. Seasonal items like swimwear and cruisewear need quick inspection and restocking to retain value before the season ends.
- Retailers are implementing strategies to mitigate the financial impact of wardrobing. This includes reducing return windows, eliminating free returns, and requiring in-store returns with inspection.
- Artificial intelligence is playing a key role in managing returns and identifying fraudulent activities. AI-powered software can analyze return data, identify patterns, and optimize the return process, ultimately helping retailers recover costs and maximize profitability.
Wardrobing: A Growing Challenge for Retailers
Returns management software company Optoro has observed a dramatic increase in return rates and wardrobing during the summer months. Amena Ali, CEO of Optoro, highlights the critical challenge retailers face: "During the summer and cruise season, from July to September, we see wardrobing and overall return rates spike by two-to-three times, with swimwear alone making up between 5% and 15% of returns. This highlights the fine line between habitual returners and fraudsters."
Optoro data reveals that wardrobing is particularly prevalent among younger shoppers, with 40% of 18-to-29-year-olds admitting to the practice. Furthermore, a November 2023 Optoro returns survey found that 30% of shoppers admitted to purchasing items specifically for an event and then returning them after the occasion.
The Impact of Wardrobing on Retailers
Wardrobing poses significant financial challenges for retailers. Returned items require careful inspection, re-packaging, and restocking, all of which incur costs. If the returned product is no longer in sellable condition due to wear, retailers are left with damaged goods, adding to their losses.
Scot Case, executive director of the Center for Retail Sustainability at the National Retail Federation, explains the impact: "Wardrobing can drive up costs and waste for retailers if the product can no longer be resold."
H2: Retailers Fight Back
Concerned about the financial implications of wardrobing, retailers are taking proactive steps to address the issue, implementing strategies like:
- Reducing return windows: This limits the amount of time customers have to return items, deterring those seeking to wear and return.
- Eliminating free returns: Introducing a fee for returns discourages frivolous returns, particularly for low-cost items.
- Requiring in-store returns: Mandating returns in-store allows employees to examine the product and ensure it is returned in acceptable condition.
The Role of Artificial Intelligence in Combating Wardrobing
Artificial intelligence is emerging as a powerful tool for retailers in the fight against wardrobing. AI-powered software solutions like Optoro’s are being deployed to:
- Streamline return processing: AI can automate tasks like inspection, sorting, and routing of returned items, reducing manual effort and speeding up the process.
- Identify fraudulent returns: By analyzing return patterns and comparing them to customer purchase history, AI can flag suspicious returns and prevent fraudulent activities.
- Optimize inventory management: AI can identify popular items that are frequently returned, enabling retailers to replenish those items promptly and reduce discounting.
Amena Ali emphasizes the role of AI: "Time is literally money. The more quickly you can turn the product, the less likely you will need to discount it. Having a smart disposition system can recover costs and maximize profitability."
A Shift Towards a Circular Economy
Steven Lamar, CEO of the American Apparel and Footwear Association, sees returns, including those resulting from wardrobing, as a driving force towards a more circular model for fashion retail. He explains: "Supply chain technology, powered by AI, is increasingly being deployed so that consumers can find and enjoy the fashion they want at the right price, the right quality, and the right time. As companies build and integrate take back programs to repair and resell used items, returns take on a new role, fueling a new circular market."
Beyond Wardrobing: The Challenge of Returns
The issue of returns extends beyond wardrobing, encompassing returns due to product dissatisfaction, sizing issues, and other factors. Retailers are looking at ways to reduce the overall cost of returns, which includes:
- Third-party drop-off locations: Expanding drop-off locations provides more convenient options for customers, reducing delivery costs for retailers.
- Box-less, label-less returns: Offering alternative return options reduces packaging and shipping materials, contributing to environmental sustainability and cost savings.
Amena Ali emphasizes the potential of AI to further streamline returns: "AI and software can reduce the number of touches on a returned product by 50%. Using AI in an end-to-end digitized return system can also help a retailer identify a trusted shopper and get the like-new goods identified and restocked at full price."
The Bottom Line: Returns Are Here to Stay
While retailers face challenges related to returns and wardrobing, the trend is unlikely to disappear. By embracing innovative technologies like AI and implementing strategies for managing returns effectively, retailers can navigate the challenges and ensure their continued success. The future of returns will likely involve a more circular model, where returned items are given a second life, reducing waste and minimizing the environmental impact of the fashion industry.
