According to the latest industry benchmarking and analytics from Appriss Retail, retailers worldwide faced an estimated $796 billion in total losses during 2025 due to shrink, fraudulent activity, and return abuse. This figure highlights the mounting financial pressure facing retail margins as traditional inventory shrink converges with increasingly sophisticated return-related losses.
Returns: The Leading Source of Retail Loss
Appriss Retail CEO Michael Osborne emphasizes that returns overwhelmingly power the majority of financial loss that retailers endure, surpassing traditional theft and inventory shrink in impact. Returns have evolved beyond typical customer dissatisfaction or buyer’s remorse into a central profitability challenge for omnichannel retailers.
Industry research shows that the retail returns ecosystem remains massive — with other estimates indicating overall returns nearing $850 billion in 2025, driven by both legitimate returns and abusive practices.
A significant portion of this return value is linked to abusive or fraudulent behaviors, including so-called return fraud (where customers intentionally exploit return policies) and wardrobing (using a product and returning it after use). Studies have found that more than 15 % of returns were fraudulent, costing retailers over $100 billion as recently as 2024.
Shrink and Broader Fraud Still Bite Into Margins
While returns now dominate the conversation around total retail loss, “shrink” — the inventory that disappears due to theft, errors, damage, or fraud — remains a foundational component of overall loss figures. Shrinkage traditionally stems from external theft, internal theft, and operational control failures, and though it may represent a smaller share compared with returns, it still contributes materially to the overall $796 billion impact.
Moreover, broader fraud — encompassing claims fraud, stolen merchandise returns, and digital payment fraud — continues to erode profitability across both physical and e-commerce channels, especially as criminal behaviors adapt to exploit retail policy gaps.
Why This Matters for Retailers
The escalation of return abuse and fraud has profound implications across the retail landscape:
- Profit Margin Compression: Retail operates on razor-thin margins; large volumes of non-productive returns and fraud directly reduce net revenue.
- Policy Design Challenges: Stricter return policies can deter abuse but may also alienate legitimate customers if not implemented carefully.
- Operational Strain: Reverse logistics, staff workloads, and fraud investigations require significant cost and coordination.
Retailers are increasingly recognizing that a reactive approach is insufficient — total loss now requires integrated strategies leveraging data intelligence, AI-driven fraud detection, and cohesive policies that balance risk mitigation with customer experience.
Retailer Responses and Tech Solutions
In response to these mounting losses, companies like Appriss Retail are advocating for unified systems that link transactional data across in-store, online, and customer service channels. These systems aim to identify patterns of abuse, shrink trends, and fraudulent behaviors in real time, helping retailers swiftly pinpoint risk and reduce loss.
Retailers are also experimenting with technology solutions such as:
- AI-based return authorization tools that flag potentially abusive return behaviors before refunds are issued.
- Exception-based reporting (EBR) and analytics that highlight suspicious patterns across channels.
- Customer risk scoring models that differentiate high-trust consumers from potential fraud actors.
These efforts demonstrate a shift toward data-driven and machine-assisted loss prevention models, which are increasingly vital as the collision between omnichannel complexity and sophisticated fraud tactics accelerates.
What’s Next for Retail
As retailers head deeper into 2026, the emphasis on Total Retail Loss — encompassing shrink, return abuse, and broader fraud — will likely intensify. Recognizing the interconnected nature of operational loss, profit protection strategies are evolving from isolated tactics to enterprise-wide frameworks involving finance, operations, customer experience, and technology.
Understanding the full scale of retail loss and deploying intelligent solutions to mitigate risk will remain central to preserving margins and sustaining growth in a highly competitive and loss-prone industry environment.
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Staff Report
Staff Report
Nathan Sellars
