Breaking the Returns Loop: New Fraud Risks in Recommerce

Circular eCommerce refers to business models where products are reused, resold, rented, refurbished, or recycled rather than discarded. This sector is growing rapidly, driven by eco-conscious consumers, changing regulatory demands, and a cultural move towards sustainability.

A key area within this space is ‘Recommerce’—the trade-in, and resale of pre-owned goods. In the UK, the recommerce market was valued at £6.5 billion in 2024, and projections show continued double-digit growth into 2025 and beyond. This surge is largely fuelled by Gen Z consumers, who are both sustainability-minded and digitally fluent.

UK and global brands such as Dyson Refurbished, Apple Trade-In, Curry’s, and Back Market are leading the shift by offering refurbishment, trade-in programmes and brand-certified resale. In turn, this brings with it growing legislative pressure, most importantly the Extended Producer Responsibility (EPR) policy, which requires retailers and manufacturers to take accountability for a product’s entire lifecycle. Unlike peer-to-peer marketplaces like Vinted and eBay (where authenticity and quality control are limited) these brand-owned platforms offer warranty protections, certified inspections, and a consistent customer experience. But these advantages come with operational challenges including managing returns, refund abuse, and chargebacks which are becoming increasingly difficult to address under traditional fraud prevention strategies.

How Return Abuse Is Evolving in Recommerce

Return abuse isn’t new, but recommerce has increased its scale and complexity. Brand-owned platforms usually offer generous return windows and streamlined processes to remain competitive, but these features are now being used by fraudsters.

Wardrobing is one such example. A customer may purchase a refurbished item, for example a high-end handbag or designer outfit, use it briefly for an event or trip, and then claim it’s faulty or misrepresented to trigger a return and refund. While this behaviour is often associated with rental schemes, its spillover into resale channels is a growing concern.

Fraud tactics are also becoming more coordinated. Online forums and social media groups are known to now openly share ways to exploit merchants’ return policies. Some fraudsters submit multiple return requests across different store locations or digital accounts, making detection even harder. To combat this, merchants should consider the following:

• Digital product tagging –  to track item history and usage
• Shortened return windows –  for high-risk categories
• Behavioural analytics – to flag serial returners
• Enhanced ID verification – for suspicious return patterns

Without these safeguards, abuse of returns leads to inventory loss, increased shipping costs, and a devaluation of refurbished stock. All of these issues then threaten the profitability of recommerce initiatives.

What Role Does Identity Spoofing Play in Recommerce Fraud?

Another key fraud tactic in recommerce is identity spoofing, where fraudsters use synthetic, stolen, or manipulated identities to bypass detection. With limited in-person verification in most recommerce models, criminals use tools like AI-generated passports, deepfake selfies, and disposable email addresses to create convincing buyer profiles. These identities are used to rent or purchase high-value goods, claim non-delivery, or exploit refund systems. Even enterprise retailers with in-house fraud teams are feeling the pressure. Spoofed accounts can trigger multiple return requests across various channels, ultimately destroying revenue and operational trust. According to a 2025 UK Finance report, over 30% of merchants have reported an increase in identity fraud and account takeovers linked to recommerce. This is a 12% rise year-on-year.

In a bid to combat this, a merchant’s toolbox should include:

• Real-time risk analytics – to identify unusual return behaviour
• Layered identity verification–  including biometric checks
• AI-driven profiling – to flag fraudulent patterns across accounts

Retailers that don’t invest in modern identity tools risk having their recommerce programmes undermined not by demand, but rather by escalating losses.

Are Rental, Trade-In, and Refurbishment Models Equally Vulnerable?

Each recommerce model comes with distinct fraud risks:

• Rental schemes (especially for electronics and fashion) are prone to non-returns, excessive wear, or item switching — e.g. a customer returns a fake or damaged version of the product.
• Trade-in programmes are exploited via false condition claims, where items listed as ‘excellent’ arrive damaged or modified. Many merchants lack the resources to inspect returns in detail.
• Certified refurbished sales are vulnerable to refund fraud — a buyer can falsely claim that an item was never delivered or arrived faulty, leading to a chargeback.

The digital nature of these programmes, designed for speed and convenience, makes it difficult to vet returns in real time. Without in-person checks, merchants are often forced to make quick refund decisions, which are easily manipulated. Importantly, brand-owned recommerce platforms are held to a higher standard than peer-to-peer platforms. That means the liability (both financial and reputational) sits solely with the merchant.

How Can Retailers Stay Ahead of Recommerce Fraud?

To remain competitive while minimising losses, retailers should adopt a multi-layered fraud strategy that matches the sophistication of modern fraudulent abuse tactics.

Recommended actions include:

• Device fingerprinting and behavioural analytics to identify anomalies
• Biometric/facial recognition for high-risk transactions
• AI-powered return risk scoring, based on historical customer behaviour
• Detailed item condition logs and digital product IDs for traceability

Crucially, fraud prevention isn’t just about blocking bad transactions. It’s about preserving margin and trust without compromising the customer experience.

This is where specialist chargeback solution providers can play a pivotal role. By helping merchants dispute fraudulent refund claims, recover lost revenue, and optimise internal return processes, these partners help retailers manage fraud more strategically, without alienating genuine customers.

Is the Future of Recommerce at Risk Without Better Fraud Protection?

Recommerce isn’t just a trend. It’s a structural shift in how products are consumed and resold. But its success hinges on one thing: trust. If consumers begin to doubt the authenticity of refurbished items, or if merchants absorb increasing losses due to fraud, the entire model risks collapsing – not because of demand, but because of vulnerability.

The good news is, solutions already exist. Retailers that invest in both product lifecycle innovation and fraud protection will be best placed to lead in this new era of retail. With regulatory changes like EPR on the horizon and £billions at stake, robust fraud defences are no longer optional…they’re a competitive advantage. Therefore, for merchants, the message is clear: recommerce success depends on agility, foresight, and the right partners, and now is the time to act.