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Just as online shopping has taken the hassle out of going to the store, it has also taken the hassle out of shoplifting. Digitally shoplift is a growing problem, with about half of wealthy Generation Z and millennial consumers and a third of Americans overall admitting to the practice.
This makes it harder for honest consumers to return items bought online and could make the convenience of online shopping less accessible to them in the long run.
Key Takeaways
- Almost half of wealthy Gen Z and millennial shoppers admit to digital shoplifting, which takes many forms, from returns fraud to credit card disputes.
- The practice is costly for retailers, who report a loss of 3.75 times the transaction value for each instance of digital shoplifting.
- These costs are poised to be passed on to consumers via higher fees for return services, longer wait times for refunds, and higher prices on ecommerce platforms.
How Digital Shoplifting Works
Digital shoplifting comes in many forms. For example, it could mean claiming you did not receive a small item in the mail, knowing that the retailer will either automatically reimburse you without needing a physical return or that you can dispute the charge with your credit card company. It could also mean consumers returning a box without the product inside, either empty or full of rocks, hoping the retailer won’t check its contents.
While it might seem like an easy hack to those looking to score free goods, retailers face a loss of 3.75 times the transaction cost.
These massive losses might explain why retailers are seeking to fight digital shoplifting despite overall losses from shrinkage—or loss of inventory due to non-sales reasons, such as administrative errors, damage, supplier fraud, and both internal and external theft—being expected to plateau or even decline this year.
Important
Retailers face a loss of 3.75 times the transaction cost for each case of digitally shoplifting.
Retailers Fight Back: Why Your Returns Are Under a Microscope
Retailers could soon seek to pass these losses off to consumers, says Lou Haverty, owner of Tank Retailer, an online marketplace for tank and truck parts.
Haverty said these pass-on costs come in two forms:
- First, retailers are incentivized to implement small price hikes for future customers to offset the cost of product loss.
- Second, companies are likely to reconsider their return policies and offer more restrictive terms for future consumers.
“Some larger businesses will process a customer refund back to their credit card prior to receiving the returned product at the warehouse,” Haverty said. “This is a good policy that gives customers immediate access to the refund proceeds, but businesses rely on customer goodwill to follow through and return the product.”
He added: “In my business, we have a slightly more restrictive policy and require customers to return the product first so we can inspect it prior to issuing a refund. This return policy still works for customers, but it takes longer for them to receive the return proceeds back to their credit cards.”
More restrictive policies are coming for retail giants, too. Amazon (AMZN), for example, ended its Try Before You Buy service, which entitled Prime members to a seven-day trial of select apparel.
Getting Your Money Back for Legit Returns
Due to the practice of digital shoplifting, consumers who have legitimate returns to make might now have to wait longer to get their money back.
“Many retailers historically credit back/refund as soon as the box is shipped,” said Amrita Bhasin, co-founder and CEO of Sotira, a shipping logistics company. “Now, retailers are shifting policies such that … you will not be refunded or credited until the item is physically received in the warehouse and the box is opened and checked that the item is returned.”
Bhasin said it is becoming more common for consumers to wait up to a week to get their money back, which poses a significant issue for consumers who live paycheck to paycheck.
Additionally, more customers will have to start paying for legitimate returns. According to Narvar, a returns solutions provider, about 25% more retailers began charging for return shipping in 2024.
The Bottom Line
According to Marty Bauer, an ecommerce expert at Omnisend, an ecommerce marketing platform, the problem of digital shoplifting is getting worse and making life harder for everyone.
“Each return claim means manual checks, system alerts, and sometimes unnecessary disputes with payment processors, all of which only drive up costs and lead to stricter policies for everyone,” he said. “You add extra checks before approving refunds, customers then have to wait longer, answer more questions, and sometimes fight for refunds that should be easy to receive. And any dragged-out process is a frustrating one.”
In the near future, your favorite online retailer is likely to start charging for returns, take longer to return funds to your account, and be more diligent about checking boxes and processing returned items.
