The Rise of Summer Closet Fraud: Impact and Management Strategies.

The phenomenon of “wardrobing”—buying an expensive item, using it, and returning it while it still looks new—seems to increase significantly during the summer months. This trend is especially pronounced as consumers prepare for the holidays, according to analysis from returns management firm Optoro.

Optoro CEO Amena Ali notes that between July and September, which coincides with the summer and cruise seasons, there is a significant spike in return rates, sometimes tripling. Swimwear alone accounts for 5% to 15% of these returns, demonstrating the blurry line between repeat buyers and outright scammers.

Optoro’s analysis indicates that a substantial portion of wardrobes, especially among consumers aged 18-29, contain items subject to such return abuse. A survey conducted by Optoro in November 2023 revealed that 30% of consumers admitted to purchasing clothes specifically for a single event, only to return them later.

The real challenge for retailers is managing these returns efficiently. Ali stresses the importance of a quick and thorough inspection process for seasonal items like swimwear to maintain their value throughout the season. Catching fraud early, ideally at the time of return, is key.

Ali also highlighted the consequences of delays in the returns process, which can result in significant markdowns or require the transfer of goods to secondary markets such as retailers or liquidators.

When discussing the fate of returned items, Ali emphasized that the value and condition of the item determines the next steps. Low-value items in poor condition may not be worth the cost of restoration and are best suited for resale, donation, or recycling.

Scot Case, executive director of the Center for Retail Sustainability at the National Retail Federation, added that wardrobing not only increases costs for retailers, but also contributes to waste if returned products can’t be resold. In response, some retailers are shortening return periods, eliminating free returns or requiring in-store returns where items can be inspected immediately.

Optoro uses AI-powered logistics software to help customers like Best Buy, American Eagle and other retailers manage returns more effectively, quickly identifying fraud and restocking items to prevent losses due to markdowns.

Stephen Lamar, CEO of the American Apparel and Footwear Association, spoke, highlighting the challenge of returns in the age of digital shopping. He discussed how artificial intelligence and supply chain innovations are increasingly important in helping consumers efficiently access the fashion they want, thereby supporting sustainable practices such as take-back programs for resale and reuse.

Optoro data highlights the significant cost of transportation in returns, with approximately 30% of the total cost of a return attributed to logistics. Innovative strategies such as third-party drop-off points and simplified, label-free returns processes are being adopted to mitigate these expenses.

Ali highlights the potential of AI to streamline the returns process, reducing handling and ensuring that products eligible for full-price resale are quickly identified and restocked.

In terms of economic impact, Optoro data reveals that while a significant portion of unresellable goods end up in secondary channels, a targeted improvement strategy in returns management can lead to substantial financial recovery, especially for high-volume retailers.

The issues surrounding returns are complex and vary greatly across categories and retailers. Apparel remains a leading category in return rates, followed by categories such as handbags, accessories, and consumer electronics.

This detailed analysis of retail returns and wardrobing fraud dynamics highlights ongoing challenges and strategies essential to modern retail operations.