Retailers Deploy AI to Curb Rising Tide of Return Fraud

The scale of the problem has forced a shift in reverse logistics. Industry experts note that merchants handling high volumes—particularly in apparel, beauty, and footwear—are no longer able to rely on human review alone. Tools such as Happy Returns’ "Return Vision" now scan for physical discrepancies like altered tags or product swaps, while behavioral risk scoring flags suspicious return patterns based on frequency and history.

Despite the technological push, skepticism remains. According to the 2025 Retail Returns Landscape report, only 45% of surveyed companies believe AI is fully effective on its own. For firms like Bully Max, the technology serves as a powerful assistant for generating evidence in chargeback disputes, yet human oversight remains a critical component of the process. Beyond fraud detection, retailers are also using predictive AI to reduce return rates entirely by suggesting better-fitting sizes or refining product descriptions before the initial sale. This dual approach aims to balance loss prevention with the need for a seamless, loyalty-building customer experience.