Many unhappy returns: Retailers combat 'wardrobing'

The nation's retailers are bracing for the annual post-Christmas surge of returns on Friday. And they are preparing for the onslaught of fraud that will eat away at their profits. Merchants expect about five percent of all holiday returns to be fraudulentfor an estimated loss of $3.8 billion, according to a recently released survey by the National Retail Federation (NRF).

"Today's sophisticated technology does well keeping criminals at arm's length, but often isn't enough to completely stop the unethical practices of organized and individual retail fraud occurrences," said NRF's vice president of loss prevention Bob Moraca in a statement.

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Return fraud is a year-round problem that will cost the industry an estimated $10.9 billion this year— something we all pay for in the form of higher prices. One of the biggest challenges continues to be "wardrobing"—the return of a used but non-defective item, such as clothing or electronics. The NRF report noted that an increasing percentage of return fraud is now being done with digital receipts, popular with many customers and being heavily promoted by retailers.

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To combat this crime wave, many stores now require customers to show government-issued identification, such as a driver's license, to make a return. That information may be entered into a database to target "serial" returners.