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News & Views
Returns Fraud in eCommerce: The Growing Cost to UK Retailers
26 September 2026 | 👤 By Hayley Cowburn
Returns fraud is becoming an expensive problem for UK eCommerce retailers. Research published by Cifas and the University of Portsmouth in May 2026 estimates that refund fraud could be costing UK online retailers up to £5.76 billion annually. From false non-delivery claims to returning used or substituted products, fraudulent returns create financial losses and put pressure on fulfilment operations.
With billions of pounds of online purchases returned every year, identifying suspicious behaviour without delaying genuine refunds is increasingly important. Better returns data, earlier product assessment and automated decision-making rules can help retailers manage risk while protecting customer experience.
With billions of pounds of online purchases returned every year, identifying suspicious behaviour without delaying genuine refunds is increasingly important. Better returns data, earlier product assessment and automated decision-making rules can help retailers manage risk while protecting customer experience.
Why Returns Fraud Is a Growing Concern
Returns are a routine part of online retail, but their scale creates opportunities for abuse. Retail Economics' 2025 UK Returns Benchmark forecast that £25.1 billion of online non-food purchases would be returned in 2025, equivalent to a returns rate of 19.5%.
Not all returns are fraudulent. However, even a relatively small proportion of dishonest claims can create significant losses across large order volumes.
The UK Government's Economic Crime Survey 2024 found that 8% of retail and wholesale businesses had experienced customers dishonestly claiming refunds, compared with 5% of businesses overall.
Returns are a routine part of online retail, but their scale creates opportunities for abuse. Retail Economics' 2025 UK Returns Benchmark forecast that £25.1 billion of online non-food purchases would be returned in 2025, equivalent to a returns rate of 19.5%.
Not all returns are fraudulent. However, even a relatively small proportion of dishonest claims can create significant losses across large order volumes.
The UK Government's Economic Crime Survey 2024 found that 8% of retail and wholesale businesses had experienced customers dishonestly claiming refunds, compared with 5% of businesses overall.
Common Types of eCommerce Returns Fraud
Returns fraud can take several forms, including:
These methods create different challenges for customer service, warehouse and finance teams, particularly when decisions depend on manual investigation.
Returns fraud can take several forms, including:
- Wardrobing: Purchasing products, using them temporarily and returning them as unused.
- False non-delivery claims: Claiming an order never arrived to obtain a refund or replacement.
- Empty-box or partial-return fraud: Claiming to have returned an item when the package contains something else or is missing products.
- Product substitution: Returning counterfeit, damaged or lower-value items instead of the original purchase.
- Return tracking manipulation: Using misleading or fraudulent tracking information to support a refund claim.
These methods create different challenges for customer service, warehouse and finance teams, particularly when decisions depend on manual investigation.
What UK Returns Fraud Statistics Reveal
Consumer attitudes are adding to the problem. A 2025 Cifas survey of 2,000 UK adults found that 19% had either falsely claimed a failed delivery or knew someone who had. Another 17% did not believe falsely claiming non-delivery was illegal.
More organised activity is also emerging. Research published in May 2026 by the University of Portsmouth, funded by Cifas, analysed nearly 500,000 posts across online forums and messaging platforms. Researchers identified organised refund fraud services, with some operators charging up to 30% of the refund value.
The findings suggest that returns fraud is no longer limited to isolated customer behaviour. Retailers increasingly need consistent processes for identifying suspicious patterns and reviewing higher-risk claims.
The Hidden Costs for Fulfilment Teams
A fraudulent refund is not always the only financial loss. Retailers may also incur costs for collection, carrier labels, warehouse handling, customer service and product inspection.
When an item is returned in an unsuitable condition, its resale value can fall. If a product is missing or has been substituted, the original inventory value may be lost entirely.
These operational costs make accurate, early returns assessment particularly valuable. Processing every return through the same warehouse workflow can increase handling costs, even when a different outcome would be more appropriate.
How Retailers Can Reduce Returns Fraud Risk
A consistent returns process helps retailers identify unusual behaviour without creating unnecessary friction for genuine customers.
Assess Product Condition Before Shipping
Customer-provided photographs can give retailers useful evidence about an item's condition before it enters the reverse logistics network. AI-assisted grading can support earlier approval and product assessment decisions, reducing reliance on physical inspection alone.
Use Return Data to Identify Risk Patterns
Return reasons, frequency, product condition and customer return history can provide useful indicators of potentially risky behaviour. These signals should support proportionate reviews rather than automatically treating frequent returns as fraud.
Apply Consistent Returns Rules
Retailer-defined rules can standardise return approvals, exchanges and routing decisions. This reduces repetitive administration and helps teams apply returns policies consistently.
Route Returned Products to the Right Destination
Not every item needs to return to the original warehouse. Depending on its condition, a product may be suitable for restocking, resale, repair or recycling. Earlier disposition decisions can reduce unnecessary movements and protect remaining stock value.
Managing Returns Fraud With Shipster Returns
Shipster Returns helps retailers manage returns from the initial customer request through to the final product outcome.
Its branded returns portal allows customers to initiate returns and submit product photographs. AI-assisted grading provides condition evidence before the item is shipped back, supporting earlier approval and grading decisions.
The platform also uses return data and risk signals to help identify potentially suspicious behaviour for review. Retailer-defined rules control approval workflows and direct suitable items towards restocking, recommerce, repair or recycling.
For fulfilment teams, this means more consistent decisions, less unnecessary handling and greater control over returns operations.
Protecting Revenue Without Complicating Returns
Returns fraud presents a significant financial and operational challenge, but restrictive policies alone are not the answer. Genuine customers still expect straightforward returns and timely refunds.
Combining earlier product assessment, risk analysis and automated returns workflows can help retailers investigate suspicious claims while keeping legitimate returns moving.
Explore Shipster Returns to see how AI-assisted grading, returns rules and intelligent routing support more efficient returns management.
Consumer attitudes are adding to the problem. A 2025 Cifas survey of 2,000 UK adults found that 19% had either falsely claimed a failed delivery or knew someone who had. Another 17% did not believe falsely claiming non-delivery was illegal.
More organised activity is also emerging. Research published in May 2026 by the University of Portsmouth, funded by Cifas, analysed nearly 500,000 posts across online forums and messaging platforms. Researchers identified organised refund fraud services, with some operators charging up to 30% of the refund value.
The findings suggest that returns fraud is no longer limited to isolated customer behaviour. Retailers increasingly need consistent processes for identifying suspicious patterns and reviewing higher-risk claims.
The Hidden Costs for Fulfilment Teams
A fraudulent refund is not always the only financial loss. Retailers may also incur costs for collection, carrier labels, warehouse handling, customer service and product inspection.
When an item is returned in an unsuitable condition, its resale value can fall. If a product is missing or has been substituted, the original inventory value may be lost entirely.
These operational costs make accurate, early returns assessment particularly valuable. Processing every return through the same warehouse workflow can increase handling costs, even when a different outcome would be more appropriate.
How Retailers Can Reduce Returns Fraud Risk
A consistent returns process helps retailers identify unusual behaviour without creating unnecessary friction for genuine customers.
Assess Product Condition Before Shipping
Customer-provided photographs can give retailers useful evidence about an item's condition before it enters the reverse logistics network. AI-assisted grading can support earlier approval and product assessment decisions, reducing reliance on physical inspection alone.
Use Return Data to Identify Risk Patterns
Return reasons, frequency, product condition and customer return history can provide useful indicators of potentially risky behaviour. These signals should support proportionate reviews rather than automatically treating frequent returns as fraud.
Apply Consistent Returns Rules
Retailer-defined rules can standardise return approvals, exchanges and routing decisions. This reduces repetitive administration and helps teams apply returns policies consistently.
Route Returned Products to the Right Destination
Not every item needs to return to the original warehouse. Depending on its condition, a product may be suitable for restocking, resale, repair or recycling. Earlier disposition decisions can reduce unnecessary movements and protect remaining stock value.
Managing Returns Fraud With Shipster Returns
Shipster Returns helps retailers manage returns from the initial customer request through to the final product outcome.
Its branded returns portal allows customers to initiate returns and submit product photographs. AI-assisted grading provides condition evidence before the item is shipped back, supporting earlier approval and grading decisions.
The platform also uses return data and risk signals to help identify potentially suspicious behaviour for review. Retailer-defined rules control approval workflows and direct suitable items towards restocking, recommerce, repair or recycling.
For fulfilment teams, this means more consistent decisions, less unnecessary handling and greater control over returns operations.
Protecting Revenue Without Complicating Returns
Returns fraud presents a significant financial and operational challenge, but restrictive policies alone are not the answer. Genuine customers still expect straightforward returns and timely refunds.
Combining earlier product assessment, risk analysis and automated returns workflows can help retailers investigate suspicious claims while keeping legitimate returns moving.
Explore Shipster Returns to see how AI-assisted grading, returns rules and intelligent routing support more efficient returns management.