Margin Call: CFOs Can Look to Returns to Lift P&L
By Pedro Ramos
Chief Revenue Officer, Appriss Retail
$706 billion lost on retail returns. That number is not a rounding error. It should stop every CFO in their tracks. By analyzing global retail transactions at more than 100 enterprise retailers, Appriss Retail highlighted $706 billion worth of merchandise returns in 2025, or 12% of total sales.
The financial losses that retail businesses endure from returns, fraud, and abuse are huge. In fact, retail sales have grown 36% in the past five years. Returns have grown 65%. Too often, the impact on net sales and the frictional costs that come from returns, such as paying for reshipping and restocking items, are overlooked at the highest levels of a retailer.
Culturally, organizations want to assume that all shoppers mean well, and returns are simply part of the business. But this doesn’t mean processes can’t be put in place to reduce controllable losses. By focusing on returns, fraud, and abuse as a financial issue, retailers can leverage tools like AI and retail analytics to address the problem and lift the company’s P&L.
Returns Are More Than Customer Service, They’re Business Decisions
CFOs are uniquely positioned to lead the charge in reshaping how a retailer can understand and manage loss. Consider a mid-sized apparel retailer with $5 billion in annual revenue. What if 18% of the company’s sales were being returned, and each return averaged $15 to process? The company is absorbing more than $135 million in direct operational costs before accounting for markdowns, resale losses, or fraud. Multiply that example by hundreds of retailers, and the $706 billion mark becomes very real.
CFOs can ask the hard, strategic questions about returns behavior and pull in high-level returns-management teams to understand avoidable returns losses. This will enable them to institute a more holistic strategy by:
• Unifying data sets — In-store teams work separately from the e-commerce side, but they need access to the same transaction and shopper data. CFOs and customer service teams also benefit from access to this data, so companies need to develop streamlined data flowing to one holistic, centralized place that all teams can access.
• Developing partnerships — The returns process is complicated, and companies can benefit from multiple partners and solutions working together. For example, a CFO can explore bringing in a Card Not Present Provider to focus on preventing credit card chargebacks and a separate partner to manage the reverse logistics process for each return. The key to success is ensuring all parts work together, instead of in silos.
CFOs can help bring disparate parts of the business together to increase visibility of the returns process and loss prevention initiatives, and protect profitability.
Businesses Can Identify Loss in Near Real Time -
AI and retail analytics are tools that help companies identify loss as it’s happening. When retailers have data flowing through one unified system, AI can turn that data into actionable intelligence to detect risk and prevent fraud and returns abuse.
A study from Wolters Kluwer found 86% of finance teams are already adopting AI in some form. When finance brings AI-powered insights to the table, operational leaders listen.
For instance, at the point of each return, AI can analyze transaction data, shopper history insights, loyalty information, and more, to provide a recommendation on whether a return should be accepted. In that case, AI directly prevents fraud and abuse.
Consider an associate working the returns counter at an apparel retailer. AI might analyze a return and see that a shopper consistently buys an item and returns it days later, committing what’s referred to as “wardrobing” or “renting.” In this case, AI directs the POS system to decline a return, removing the associate from any bias and conflict associated with a return.
At the same time, beyond the store level, CFOs and business teams can use AI to analyze data and spot anomalies happening within the overall business. CFOs can push for operational accountability by tying returns to financial outcomes. Metrics such as resell rate, recovery value, and fraud leakage deserve the same attention as sales and labor costs.
How Returns Fraud and Abuse Hide Within Shrink -
Shrink is often thought of as shoplifters ransacking stores or savvy organized retail crime (ORC) groups taking advantage of online loopholes. From this point of view, CFOs and higher levels of a company view shrink as operational gaps, employee theft, inventory errors, and more.
However, returns fraud and abuse make up 20% of shrink, and it frequently goes unnoticed. Instances of “wardrobing” might not be on a CFO’s radar, but it hampers profits. Additionally, receipt fraud, item switching, and serial returners all inflate shrink while masquerading as customer activity.
Imagine a national big-box retailer that notices rising shrink in its electronics category. Incident data shows no spike in shoplifting. AI-driven analytics, linked across channels, can give the retailer a deeper analysis, alerting the store to a pattern of high-value returns made without receipts, clustered around specific store locations and customer profiles. The AI-powered software can immediately flag these returns to be investigated for potential fraud or deny returns at the returns desk to stop shrink.
By connecting returns data at the customer level, equipped with transaction history, risk signals, and overall customer behavior, retailers can identify where the greater shrink is truly originating. More specifically, with AI-powered analytics, Appriss Retail has seen retailers generate an 8.2% reduction in total return dollars and a 14% decrease in discount and promotion abuse. CFOs can champion this deeper analysis into shrink and shift the conversation from reactive loss prevention to proactive margin protection.
Returns fraud and abuse and shrink represent the largest total loss buckets and untapped opportunities to lift the P&L without raising prices or cutting growth investments. By partnering closely with operations, loss prevention, returns management, and technology teams, CFOs can drive meaningful change that benefits the business and the customer.
The retailers that win will be the ones whose CFOs are willing to look deep inside the operation, challenge legacy assumptions, and embrace data-driven strategies to protect margin. This is the margin call. And CFOs are in the best position to answer it.
About the Author
Pedro Ramos is chief revenue officer of Appriss Retail. He has more than 40 years of experience in fraud and loss prevention, extensive knowledge of the retail space, and experience managing revenue-generating organizations. Ramos oversees Appriss Retail’s customer growth and retention departments, including sales, customer success, and marketing.
The financial losses that retail businesses endure from returns, fraud, and abuse are huge. In fact, retail sales have grown 36% in the past five years. Returns have grown 65%. Too often, the impact on net sales and the frictional costs that come from returns, such as paying for reshipping and restocking items, are overlooked at the highest levels of a retailer.
Culturally, organizations want to assume that all shoppers mean well, and returns are simply part of the business. But this doesn’t mean processes can’t be put in place to reduce controllable losses. By focusing on returns, fraud, and abuse as a financial issue, retailers can leverage tools like AI and retail analytics to address the problem and lift the company’s P&L.
Returns Are More Than Customer Service, They’re Business Decisions
CFOs are uniquely positioned to lead the charge in reshaping how a retailer can understand and manage loss. Consider a mid-sized apparel retailer with $5 billion in annual revenue. What if 18% of the company’s sales were being returned, and each return averaged $15 to process? The company is absorbing more than $135 million in direct operational costs before accounting for markdowns, resale losses, or fraud. Multiply that example by hundreds of retailers, and the $706 billion mark becomes very real.
CFOs can ask the hard, strategic questions about returns behavior and pull in high-level returns-management teams to understand avoidable returns losses. This will enable them to institute a more holistic strategy by:
• Unifying data sets — In-store teams work separately from the e-commerce side, but they need access to the same transaction and shopper data. CFOs and customer service teams also benefit from access to this data, so companies need to develop streamlined data flowing to one holistic, centralized place that all teams can access.
• Developing partnerships — The returns process is complicated, and companies can benefit from multiple partners and solutions working together. For example, a CFO can explore bringing in a Card Not Present Provider to focus on preventing credit card chargebacks and a separate partner to manage the reverse logistics process for each return. The key to success is ensuring all parts work together, instead of in silos.
CFOs can help bring disparate parts of the business together to increase visibility of the returns process and loss prevention initiatives, and protect profitability.
Businesses Can Identify Loss in Near Real Time -
AI and retail analytics are tools that help companies identify loss as it’s happening. When retailers have data flowing through one unified system, AI can turn that data into actionable intelligence to detect risk and prevent fraud and returns abuse.
A study from Wolters Kluwer found 86% of finance teams are already adopting AI in some form. When finance brings AI-powered insights to the table, operational leaders listen.
For instance, at the point of each return, AI can analyze transaction data, shopper history insights, loyalty information, and more, to provide a recommendation on whether a return should be accepted. In that case, AI directly prevents fraud and abuse.
Consider an associate working the returns counter at an apparel retailer. AI might analyze a return and see that a shopper consistently buys an item and returns it days later, committing what’s referred to as “wardrobing” or “renting.” In this case, AI directs the POS system to decline a return, removing the associate from any bias and conflict associated with a return.
At the same time, beyond the store level, CFOs and business teams can use AI to analyze data and spot anomalies happening within the overall business. CFOs can push for operational accountability by tying returns to financial outcomes. Metrics such as resell rate, recovery value, and fraud leakage deserve the same attention as sales and labor costs.
How Returns Fraud and Abuse Hide Within Shrink -
Shrink is often thought of as shoplifters ransacking stores or savvy organized retail crime (ORC) groups taking advantage of online loopholes. From this point of view, CFOs and higher levels of a company view shrink as operational gaps, employee theft, inventory errors, and more.
However, returns fraud and abuse make up 20% of shrink, and it frequently goes unnoticed. Instances of “wardrobing” might not be on a CFO’s radar, but it hampers profits. Additionally, receipt fraud, item switching, and serial returners all inflate shrink while masquerading as customer activity.
Imagine a national big-box retailer that notices rising shrink in its electronics category. Incident data shows no spike in shoplifting. AI-driven analytics, linked across channels, can give the retailer a deeper analysis, alerting the store to a pattern of high-value returns made without receipts, clustered around specific store locations and customer profiles. The AI-powered software can immediately flag these returns to be investigated for potential fraud or deny returns at the returns desk to stop shrink.
By connecting returns data at the customer level, equipped with transaction history, risk signals, and overall customer behavior, retailers can identify where the greater shrink is truly originating. More specifically, with AI-powered analytics, Appriss Retail has seen retailers generate an 8.2% reduction in total return dollars and a 14% decrease in discount and promotion abuse. CFOs can champion this deeper analysis into shrink and shift the conversation from reactive loss prevention to proactive margin protection.
Returns fraud and abuse and shrink represent the largest total loss buckets and untapped opportunities to lift the P&L without raising prices or cutting growth investments. By partnering closely with operations, loss prevention, returns management, and technology teams, CFOs can drive meaningful change that benefits the business and the customer.
The retailers that win will be the ones whose CFOs are willing to look deep inside the operation, challenge legacy assumptions, and embrace data-driven strategies to protect margin. This is the margin call. And CFOs are in the best position to answer it.
About the Author
Pedro Ramos is chief revenue officer of Appriss Retail. He has more than 40 years of experience in fraud and loss prevention, extensive knowledge of the retail space, and experience managing revenue-generating organizations. Ramos oversees Appriss Retail’s customer growth and retention departments, including sales, customer success, and marketing.
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