Retailers face USD $796bn in losses from returns, shrink

Appriss Retail has published a new benchmark study estimating total retail loss at USD $796 billion in 2025, combining returns-related losses and shrink into a single measure.

The report links returns, fraud, returns abuse, and operational leakage to present a broader view of profit leakage across retail. It draws on a consumer survey of more than 1,000 respondents and an analysis of in-store and online returns tied to 250 million unique customer identifiers.

Appriss Retail says the findings apply across retail verticals, although the underlying data focuses on the US market. The report builds on the company's earlier work on consumer returns and frames loss as a cross-department issue spanning loss prevention, finance, operations, and customer experience.

Returns and shrink

Returns were the largest component of the total loss estimate. The study put total returned merchandise at USD $706 billion in 2025 and described 14.2% of that amount-about USD $100 billion-as preventable loss linked to fraud and abuse.

The report split preventable returns loss into returns abuse (12%) and returns fraud (2%), indicating abuse accounts for a larger share than fraud.

Shrink made up a smaller share of the total estimate but remained substantial in absolute terms. The report estimated shrink losses at USD $90 billion and said 73% was preventable. It broke this down as employee theft (USD $26 billion), inventory errors (USD $19 billion), operational errors (USD $12 billion), and organised retail crime (USD $9 billion).

Michael Osborne, Chief Executive Officer of Appriss Retail, said returns have become a central profit risk for many retailers.

"Returns overwhelmingly power the majority of financial loss that retailers endure," said Michael Osborne, CEO, Appriss Retail.

Channel visibility

The report focuses on omnichannel retail and the flow of goods across physical stores and eCommerce. It identifies gaps in cross-channel visibility as a key driver of losses in returns processes.

One example is cross-channel fraud linked to BORIS, where consumers buy online and return in-store. The study estimated USD $4 billion in losses tied to BORIS-related cross-channel fraud.

It also broke down the USD $706 billion in returns by channel. BISRIS-buy in-store, return in-store-accounted for USD $367 billion (52%), making it the dominant returns channel by value.

BORIS accounted for USD $208 billion (29%) and was described as the fastest-growing vector for fraud and abuse. BORO-buy online, return online-represented USD $131 billion (19%).

The channel mix matters because retailers often run separate policies, data, and approval processes across store and online operations. This can make it harder to spot repeat behaviour across channels and to apply consistent decisions at the point of return.

Consumer attitudes

The report includes survey results on consumer reactions to warnings, transparency, and the use of AI in returns decisions. It suggests consumers will continue to return goods at scale, while expecting clear policies and consistent treatment.

According to the study, 90% of consumers would buy again after receiving a warning related to returns behaviour. Appriss Retail estimated this could translate into USD $75 billion in retained revenue.

The survey also flagged concerns about automated decision-making. It found 80% of consumers want transparency in how AI makes return decisions. It also reported that 71% trust human associates more than AI for return approvals, while 10% trust AI outright.

The findings suggest retailers must balance tighter controls with customer goodwill. The report argued that retailers with unified omnichannel data and clearer internal communication can apply more targeted checks on returns behaviour while continuing to approve legitimate returns.

Osborne said retailers should treat returns, fraud, and shrink as parts of a single loss picture rather than separate operational problems.

"Every dollar lost to returns is a dollar straight off the bottom line. To stop the bleeding, leaders must look at returns, fraud, and shrink through the lens of Total Retail Loss, build a system of collaboration, and implement cross-functional muscle. Retailers that continue to work in silos will continue to erode profits," said Osborne.