In 2025, U.S. retailers lost $796 billion to returns and shrink.
The other $706 billion went out the door as merchandise returns — and $100 billion of that was preventable loss from fraud and abuse. That's not a rounding error against the shrink number. It's the shrink number, multiplied by eleven, sitting in a category most LP teams don't formally own.
It's not that shrink doesn't matter. It's that shrink may be the smaller half of the problem retailers are finally waking up to.
The numbers nobody has a clean column for
The 2026 Total Retail Loss Benchmark Report from Appriss Retail — built on transaction data tied to 250 million unique customer identifiers — puts 2025 retail loss at $796B, broken down like this:
Returns: $706B in merchandise sent back
Shrink: $90B (the figure that dominates every LP conference)
Preventable returns loss (fraud + abuse): $100B — 14.2% of all returns
Preventable shrink: $66B — 73% of total shrink
Add the two preventable buckets and retailers are looking at $166B in losses they could meaningfully reduce. Returns account for 60% of it.
Now look at how the $100B in preventable returns loss splits:
Returns abuse: $86B — legitimate returns used abusively (wardrobing, serial returners, post-promo returns)
Returns fraud: $14B — fake receipts, stolen merchandise, identity-based fraud
Returns abuse is six times larger than returns fraud. That distinction matters more than the industry has admitted, and we'll come back to it.
The channel breakdown is equally uncomfortable:
Buy in-store, return in-store: $367B (52%)
BORIS (buy online, return in-store): $208B (29%) — and the fastest-growing fraud and abuse vector
BORO (buy online, return online): $131B (19%)
Cross-channel BORIS fraud alone: $4B
BORIS is what happens when omnichannel convenience meets a returns desk that can't see the original transaction. It's the seam where most of the new losses are hiding.
Why LP doesn't own this
Walk into a returns desk in any major retailer and ask who is responsible for the dollars walking back out. You'll get four answers.
Customer experience owns the policy — they set the return windows, the receipt requirements, the no-receipt exceptions. Operations owns the process — the labor at the desk, the restocking, the disposition decisions. Finance owns the reporting — but typically lumps return-related losses into a generic "returns reserve" line. And loss prevention owns fraud cases that get formally escalated, which is a small fraction of the actual leakage.
Returns has four owners on paper and one owner in practice: nobody.
This isn't an accident. The returns function was designed in an era when most returns were small, in-store, and rare. The org chart never caught up to the fact that returns now move $706B per year — almost as much as the entire U.S. apparel industry generates in sales. The accountability gap is structural, not personal.
It also creates a measurement problem. Most LP teams report shrink as a percentage of sales and chase it quarterly. Returns loss has no equivalent metric in most LP scorecards. If you can't measure it on your own dashboard, you can't be expected to manage it.
Why "abuse vs. fraud" matters more than retailers admit
The single most important number in the Appriss report is the 6:1 ratio of returns abuse to returns fraud.
If the problem were primarily fraud — fake receipts, stolen merchandise, identity-driven schemes — the right response would look like a traditional LP playbook: investigations, case management, prosecution, deterrence.
But $86B of the $100B in preventable returns loss is abuse, not fraud. Abuse means a real customer making a real return that the retailer's own policy permits. The wardrobed prom dress. The serial returner who keeps the original receipt and ships back a substituted item. The post-promo bulk return after a 30% off weekend. These are not crimes. They are policy outcomes.
You cannot prosecute your way out of a policy problem. Investigations work on the 2% that is fraud. The other 12% requires something the LP function has historically been bad at: rewriting the policy that produces the loss in the first place.
Appriss reports that a three-tier "warn and approve" approach — where systems flag pattern-level abuse and trigger a graduated response before refusal — can reduce abusive returns by 90% without measurably hurting customer loyalty. 90% of consumers who receive a warning go on to buy again. That's an estimated $75B in revenue retained.
The bottleneck is not technology. It is whether anyone in the org has the mandate to change the policy.
A perspective from the field
What I've learned watching security teams operate across very different contexts is this: the largest loss category in any organization is almost always the one nobody wants to own.
Returns is that for retail. It's a loss visible on the P&L, with no clear owner, scattered across four functions that pass the hot potato. The LP leaders who understand this in the next 12 months will claim enormous territory — and the ones who keep treating returns as a customer experience problem will end up protecting a smaller and smaller slice of the total retail loss.
Three practical moves for the next 90 days
Put returns loss on your LP scorecard. Even an imperfect number is better than no number. Pull last quarter's returns volume by channel and apply a 14% preventable-loss assumption as your starting baseline. You now have a returns line on your dashboard that didn't exist before.
Audit who actually approves the returns policy. Find the document. Find the meeting where it gets reviewed. Find out whether anyone from LP is in that meeting. If not, that's the meeting you need to be in by next quarter.
Pilot a warn-and-approve workflow on one category. Don't try to rebuild the entire returns operation. Pick the SKU group with the highest abuse rate — apparel and electronics are the usual suspects — and run a 60-day pilot with graduated warnings. Bring the data back to the table that controls policy.
Closing note
Returns is the loss category that was sitting in plain sight while the industry argued about smash-and-grabs.
The retailers who restructure ownership of this number first will look very different in 24 months from the ones who treat returns as somebody else's problem. The data is there. The methodology is there. What's missing in most organizations is the org chart.
If you're an LP leader thinking about whether to make the move into returns, I'd like to hear what's standing in your way. Reply with anything — anonymized if you prefer. The patterns are what make this brief worth reading.
Forward this to one LP or AP leader who should be reading it.
— Gabriel
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