WardrobingThe Next Big Thing in First-Party Fraud?

December 14, 2022 | 14 min read

Wardrobing

In a Nutshell

As if return fraud weren’t daunting enough by itself. One of the fastest rising trends in the first-party fraud category involves wardrobing, or buying items and wearing them with the intention of returning them for full price later on. Why is this such a big deal in eCommerce? And, what can you do to stop it? Let’s find out.

Wardrobing: How to Stop Buyers From Using & Returning Your Goods

At its core, wardrobing is a form of first-party fraud. It happens when a shopper buys an item that they intend to use or wear just once, then return it to get their money back.

This is actually a pretty common occurrence. According to the National Retail Federation, return fraud scams like wardrobing (among others) are estimated to cost the retail industry $12.6 billion in lost sales each year.

We have a full article about different return fraud attack methods, which you can check out here. Today, though, we're going to focus specifically on wardrobing and the threat it poses for retailers.

What can merchants do to protect their businesses from this fast-growing retail threat? Let’s take a closer look.

What is Wardrobing?

Wardrobing

[noun]/wôrd • rōb •iNG/

Wardrobing is a type of return fraud committed by legitimate shoppers who buy wearable or usable items with the intention of returning them after use. For example, an expensive outfit that is worn once then returned, or a book that is returned after reading.

Unfortunately, this new trend in fraud is becoming quite popular with the public. A recent study discovered that one in five shoppers have engaged in wardrobing at some point. As many as 43% of shoppers aged 16-24 will continue the trend in the future.

These numbers add up. According to an NRF survey, merchants collectively rack up $166 million in merchandise returns for every $1 billion in sales. The average seller also loses $10 to return fraud for every $100 of returned merchandise accepted. Wardrobing, in particular, can have a profound impact on your bottom line, as we’ll see in the next section.

The Financial Impact of Wardrobing

To many shoppers, wardrobing can seem like a victimless crime. It helps them recoup quick cash, and the seller gets their stuff back. No harm, no foul.

In reality, fewer than half of all goods returned to retailers actually make it back on the shelf at full price. In fact, another study stated that merchants lost almost $13 billion in sales in 2021 due to returns.

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Simply put: shoppers don’t want used goods. Items that have clearly been used, particularly clothing, often can’t be resold for full value. Often, to resell these items, they must be displayed on a discount or clearance rack, and priced at half (or even less) of the original price. Plus, items returned out-of-season, such as holiday gear, are difficult to resell, and any that have stains, tears, or odors often cannot be resold at all, even on clearance. 

Other consequences of wardrobing include:

Wardrobing

Higher Labor Costs

With an influx of returned items, a merchant would need to allocate resources to figuring out a plan for reselling goods, as well as processing and fulfilling the orders in question. Costs are bound to go up. Additionally, each item that is returned needs to be inspected before it can be returned to inventory.

Wardrobing

Inconsistent Inventory

It’s harder to predict which items will be in stock if a merchant is busy managing returns. They may end up with a shortage of one item, then suddenly have an excess of the same goods, which makes it harder to plan inventory in advance.

Wardrobing

Environmental Problems

Billions of dollars’ worth of returned merchandise winds up in landfills in the US every year. Sustainability is something that many merchants and consumers can agree is extremely important. Yet, the 40% of consumers who are engaging in wardrobing ignore this every time they commit return fraud for frivolous reasons.

This proves that wardrobing and other forms of return fraud are not harmless at all. It’s also not a problem limited to merchants. The practice will come back to bite consumers with higher ticket prices and lower inventory later on.

1 in 5

One in five shoppers have engaged in wardrobing.

$16

The average merchant sees see $16 in returns for every $100 in sales.

$13B

Merchants lost almost $13 billion in sales in 2021 due to returns.

How to Identify a Case of Wardrobing

As we mentioned above, wardrobing is a serious problem that is getting worse every year.

In our increasingly digitized and instant-gratification-seeking economy, merchants and retailers must consistently raise the bar to attract and retain customers. One of these might be a “no questions asked” return policy, or at most, a “limited questions asked” policy.

Whatever the case may be, the onus to detect and resolve a wardrobing situation is going to rest solely with the retailer and their employees. A few common red flags for wardrobing include:

  • Frequent or successive returns from one customer.
  • Items that look, feel, or smell like they have been worn or used.
  • Items with missing tags or tags that are the wrong type and color.

Keep this in mind: if something feels off about a return request, there could be a good reason for it. It’s best to be very clear about return policies from the start, and stick to it, despite any argument to the contrary.

Reasons Why Customers Engage in Wardrobing

Some argue that wardrobing is driven by a combination of social media, as well as resurgent out-of-home activities and post-pandemic events. In either case, if the stats above are any indication, it is going to continue to be a problem for quite a while. 

However, it’s important to recognize that consumers who engage in wardrobing usually aren’t doing it maliciously. Sometimes they simply don’t realize what they’re doing is wrong. For instance, here are several reasons why otherwise legitimate customers may buy something with the intent to return it later on:

Special Events

Weddings, cocktail parties, interviews, or other formal occasions could be one reason a customer might engage in wardrobing. They could consider high-dollar items (ball gowns, prom dresses, bridal party dresses, etc.) a luxury item they would only use once, and thus, are fair game for a return.

Insta-Clout

Social media influencers (and aspiring influencers) are often cited as a driving force behind the wardrobing phenomenon. For these individuals, the pressure of maintaining an online image and status is powerful enough to motivate them to commit return fraud over and over.

Social Pressure

The drive to always be “on trend” is a real thing. Like the above item, this is also driven by social media and its arbiters. However, most social media influencers and their followers are projecting a false image of themselves to the public. The real people behind online personas are likely unable to afford the lifestyle they advertise.

Financial Shortfalls

Average people can’t afford to buy new outfits everyday. Least of all, buy designer-made brands and accessories that run between a few hundred and a few thousand dollars per item.Many people will resort to wardrobing just to maintain appearances, especially in an uncertain economic climate.

Buyer’s Remorse

Sometimes, it’s not a simple matter of a customer being unable to afford the items they paid for. Some simply fall out of love with a purchase, then return items after one or two uses. Often, they’ll convince themselves that the return is justified, and that it isn’t hurting anyone (despite the statistics above proving otherwise).

As we’ve demonstrated, wardrobing is not a victimless crime. In fact, the practice can come back to haunt these very same customers in the long run through higher prices, shorter return times, limited inventory, and even blacklisting.

Merchants who are frequently victims of fraud aren’t going to take losses lying down. and remember, they’re losing billions each year to irresponsible consumers like these. 

Tips to Prevent Wardrobing

We now have a good idea of what wardrobing is, how bad it actually is, what causes it, and how it affects merchants. The next rational link in the chain is to look at how best to prevent it.

The bad news here is that, no matter what a merchant does, they will still be impacted by fraud to some degree.

There’s no reliable solution to “prevent” first-party fraud entirely. The wise thing to do is limit exposure as much as feasibly possible, and set solid best practices for staff to follow. To that end, a few best practices for first-party fraud prevention include:

#1 | Fine-Tune the Return Policy

It’s crucial to develop and implement a clear, reasonable set of parameters for returns. Your policies should be practical, yet adaptable. Things to consider include:

Expectations

Clearly define what condition is expected should an item be returned. For example, products should be unopened or unworn, with tags attached, and include an invoice or other product-specific data.

Time Limits

Establish hard time limits for the return of merchandise. The time frame is usually a few weeks, but can vary. Keep in mind, the longer it is, the more likely used merchandise will be returned.

Return Shipping Guidelines

For card-not-present purchases, merchants should fully explain the return shipping process. Include such things as acceptable carriers, packaging, and insurance requirements.

Fees

Are there additional charges associated with the return, such as a restocking fee? Who will pay for return shipping, if necessary? Are return labels provided?

Exceptions

If certain merchandise (such as a customized item) is subject to alternate policies, be sure to thoroughly explain this difference and get confirmation from the customer prior to the sale.

Special Circumstances

Standard return policies may vary depending on the product category, location, currency, or other conditions. For example, international customers may require more time for returns. Every facet should be explained in full.

#2 | Make Sure One’s Policy Is Accessible

If customers can’t find or understand a return policy, it might as well not exist. Once a merchant develops a transparent return policy, they must ensure that it is easily accessible and legible. This means prominently displaying the policy in as many places as possible.

Terms should be easy to find from every page of a business’s website (including checkout). They should be accessible on invoices and other customer records, on receipts, and even on packaging.

#3 | Inspect Every Return Thoroughly

When items are returned, there is often pressure to process those returns quickly and return them to shelves. Don’t fall into this trap! There can be very subtle signs that an item has been wardrobed that may be missed during a rushed inspection. 

Watch for giveaways the item has been used and returned, including:

  • Damaged tags
  • Reattached tags
  • Deodorant or lipstick stains present inside the fabric
  • The scent of faded perfume or cologne 
  • Dirt or debris present on shoes or fabric
  • Stretched fabric at the collar or arms of shirts and jackets
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Responding to Wardrobing Scams

If a merchant suspects that a buyer is engaged in wardrobing, they may proceed in a few different ways. First, they may simply ignore the situation and accept the return. This is not unreasonable; while wardrobing is costly, it’s not hard to imagine a retailer deciding an isolated incident is not worth the trouble of fighting.

Another option is to accept the return, but blacklist the user. The buyer would be unable to make new purchases for a predetermined period of time.

Finally, the merchant may reject the return. Be warned, however: the latter option could result in a chargeback.

Is Blacklisting the Answer?

Perhaps the simplest option for responding to potential wardrobes is to blacklist those caught red-handed. For example, if a customer returns an object for a refund, and there is clear evidence that the item has been worn, the merchant can inform the customer that they are barred from making purchases or returns for a specific period of time. 

Remember: product returns are part and parcel of the retail experience. No matter how effective a merchant’s return policy and practices are, they will still receive illegitimate returns from time to time. The key is to provide as transparent a return policy as possible, in order to make the buyer’s journey as seamless and enjoyable as possible. 

However, this isn’t to say that merchants should overlook simplicity strictly for the sake of prevention. As we’ll see, preventing fraud and limiting chargebacks is a delicate dance that requires careful balance. 

Rejecting Refunds & Risking Chargebacks

Aside from highlighting and honing return policies, it’s also critically important to consider wardrobing from a risk-assessment perspective.

Buyers will find a way to get what they want… one way or another. If a buyer wants a refund, but their request is rejected by the merchant, the buyer may turn to the bank and file a dispute. This would be an example of friendly fraud; another form of first-party fraud by which the buyer abuses the chargeback process, rather than the return process, to get something for free.

For practicality’s sake, it’s important to strike a balance between consumer-friendly return policies and practical risk prevention. There are a couple of ways this can be managed:

  • While the return policy should be simple to access, this doesn’t mean that its terms should be overly generous. Stricter requirements, such as a 14-30 day return window for wearable items, can drastically limit the number of worn item returns. 
  • Mandating that all wearable items cannot be returned if previously worn, and also including language that asserts each returned item will be inspected before the return is accepted– can also limit the amount of wardrobe return requests. 
  • With chargebacks and disputes in mind, these policies should be clear and visible on the website, and the customer should have to accept that policy before making a purchase. They may still attempt to file a dispute for that item, but the additional documentation will prove essential if the merchant decides to fight back.
  • Look into anti-wardrobing tag placements. Make tags and other validation items much more difficult to conceal or replace.
  • Asserting that there may be a “restocking” fee for items returned in less-than-pristine condition could also be beneficial. This intimates that the return will be accepted, but they will not receive a full refund for previously worn items. 

Need Help?

eCommerce is constantly evolving, and the methods merchants use to keep return rates low — without seeing a spike in chargebacks — need to evolve, too. Sometimes the secret to building the ideal refund rate and chargeback reduction strategy is who you know. Chargebacks911® can help on that front.

Chargebacks911 offers the most comprehensive chargeback management services and products available today. No other provider can deliver our level of transparent, end-to-end chargeback management, going beyond prevention to revenue recovery and future growth.

FAQs

What is the meaning of wardrobing?

Wardrobing is a type of return fraud committed by legitimate shoppers who buy wearable or usable items with the intention of returning them after use. For example, an expensive outfit that is worn once then returned, or a book that is returned after reading.

Is wardrobing illegal?

Wardrobing isn’t illegal, per say. However, it almost always goes against a merchant’s established return policy, and is not supported by card networks or banks as a legitimate reason for a return.

How common is wardrobing?

Unfortunately, this new trend in fraud is becoming quite popular with the public. One study discovered that one in five shoppers has engaged in wardrobing at some point, and up to 43% of shoppers aged 16-24 will continue the trend in the future.

How do I stop wardrobing?

You should fine-tuning your return policies, and set parameters that you are comfortable with, while making those return policies clear, visible, and accessible. This will ensure customers have seen it. Another tactic would be to include return policy items like limited returns, or stricter terms in general for pre-worn items.

Inspecting items thoroughly for use and wear is also crucial to prevent wardrobing. Lastly, employing blacklists against customers who attempt to pass off worn items as legitimate returns is also effective.

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