Jane Jung, who runs an online store selling Korean-made clothing, says she lost up to 20% of her sales this year due to return fraud involving worn apparel. She now plans to analyze customer return patterns to flag suspicious activity.
Ryan Kim, a recent customer at Home Depot, faced a different kind of fraud. After buying a portable vacuum cleaner, he opened the box to find an older model inside. It took a 30-minute argument before he received a refund—with his receipt.
Retailers across the United States are reporting massive losses from increasingly sophisticated return fraud schemes. Korean American businesses are among those struggling to respond, facing returns of used goods, repeated bulk returns, and credit card disputes from customers who keep the products.
Korean Businesses Face Unique Challenges
Industry insiders say some consumers justify return abuse by pointing to flexible return policies at major retailers like Costco and Amazon. However, small Korean American businesses often don’t have the same ability to send returned merchandise back to suppliers.
“Big box stores like Costco can return used products to manufacturers, but small businesses can’t,” said Young Kyu Choi, manager at Kim’s Electronics. “When we deny a return, some customers dispute the charge with their credit card issuer, freeze the payment, and keep the product. We’re forced to blacklist these individuals.”
According to the National Retail Federation (NRF), total merchandise returns in the U.S. reached $743 billion in 2023, of which $101 billion were classified as fraudulent. These scams not only hurt profits—they also disrupt inventory planning and drive up operating costs.
Common tactics include “wardrobing”—buying clothes, wearing them once, then returning them—as well as returning empty boxes, altering receipts, and “bricking” electronics by removing internal parts. In many cases, fraud goes undetected until it’s too late.
Experts warn that the rapid growth of online shopping and extended return windows have made these scams easier to execute.
“With the growth of e-commerce and more flexible return policies, scams are rising,” said Arun Sundaram, vice president and senior equity analyst at CFRA Research. “It’s a real challenge to strike a balance between preventing fraud and preserving the customer experience.”
BY EUNYOUNG LEE [lee.eunyoung6@koreadaily.com]
