Visual control can strengthen anti-fraud strategies in global retail

Shining a light on fraudulent return claims in global retail requires the application of lean management principles and the strategic use of visual aids. The author provides a practical, customer-centric framework for balancing anti-fraud policies with sales and marketing goals.

The Wall Street Journal reported last year that 250 returned orders worth $24,000 — originating from one customer — inundated California-based apparel retailer PacSun. The casual beachwear purveyor experienced a drastic spike in returns of online purchases and promptly issued refunds to customers. PacSun either never received the merchandise or found used or counterfeit items in returned boxes. Some boxes were empty or contained items that didn’t match the products customers promised to return.

PacSun’s internal investigation revealed that many of the fraudulent returns came following tips passed through websites and groups on messaging app Telegram that are dedicated to stealing money through retail return scams. The retailer didn’t disclose the total amount it lost, but it began charging a $10 fee for mail-in returns to deter abuse of returns and working with a technology company to detect fraudulent returns.

PacSun was the victim of a popular scheme in which fraudsters sell step-by-step instructions for manipulating retailers’ return systems to obtain full refunds without returning merchandise. The scheme exploits visual and digital control gaps and relies on superficial return confirmation — tracking scans and labels — without item verification. Worldwide retail sales are projected to reach $31 trillion by the end of 2025, according to CapitalOne Shopping. In the U.S. alone, fraudulent returns and claims cost the retail industry $103 billion last year; some of that cost is passed on to consumers. According to the National Retail Federation (NRF), in 2024 64% of small business owners increased the price of their goods to offset losses from theft and fraud.

Another common return scheme is wardrobing, which involves buying an item of clothing, wearing it and returning it to the store. A survey conducted by returns management company Optoro shows that 40% of 18- to 29-year-olds participate in this type of fraud. In price switching, fraudsters alter universal product code (UPC) stickers or product packaging to mislead retailers. They apply a lower-priced label to a more expensive item to pay less at checkout, then return it for a refund at the original, higher price. Claims fraud (refund fraud) occurs when customers falsely report that an item wasn’t delivered, even though they received it. Common tactics include “did not arrive” (DNA) and “item not received” (INR) claims. In more advanced schemes, fraudsters exploit lost order claims to get a replacement, then return the duplicate to the store without a receipt to obtain store credit.

All these schemes result in major financial losses for retailers by triggering unnecessary refunds or reshipments. The NRF estimated that for every $100 in returned merchandise to retailers in 2022, $13.70 was fraudulent. Retailers may offset these losses through price adjustments, policy tightening, and reduced operational investment such as staff cuts or training reductions. For example, Target and Best Buy shortened return windows and introduced receipt verification after identifying high-volume refund scams, noting that policy tightening helped curb losses but also slightly reduced customer satisfaction.

In lean retail environments operating on small margins, every control must be justified for compliance reasons and for customer experience and profitability. Lean operations typically involve removing inefficiencies, trimming costs and accelerating decision-making.

In my research on fraudulent refund claims in a multinational retailer practicing lean management, I found an underappreciated tool for balancing these tensions: visual control. Visual control in retail is the strategic use of visual aids — signs, charts and displays — to communicate processes, inventory and standards, enabling quick recognition and immediate action from employees and management. My findings are based on empirical data gathered through pilot walk-throughs, in-store observations and semistructured interviews with staff across four U.K. locations of a global retail group made up of more than 1,000 stores.

The simple act of making a “no receipt, no refund” policy highly visible in retail shops helps combat return fraud. Implementation of this policy helped reduce refund fraud schemes, such as customers falsely claiming to have lost receipts, by increasing in-store visibility through enhanced visual deterrents. As one retailer reported, investing an additional 20 million pounds to hire security guards made it more difficult for offenders to return shoplifted items. This heightened visibility, alongside strategic product placement and more prominent monitoring through CCTV, played a key role in discouraging would-be offenders and reinforcing a visible culture of oversight. This finding isn’t an isolated operational fix. It reflects a broader principle drawn from lean management and Toyota Production System (TPS) thinking: Problems must be seen to be solved.

In this column, I explain how visual control can transform anti-fraud efforts in global retail. Furthermore, I show how visual control can complement, rather than clash with, customer-centric sales strategies in lean environments.

Visual control: A tool for fraud risk management

Visual control, as conceptualized in TPS, focuses on making abnormalities visible in real time. Andon lights that signal machine shutdowns, shadow boards for tool management and color-coded floor markers ensure that anyone, regardless of role or experience, can identify when something is wrong. Operators use Andon signals to alert supervisors and managers to problems on the production line. Shadow boards display an outline that indicates the proper placement of tools and equipment, allowing users to identify missing items.

In fraud prevention, visual control can:

• Display clear refund policies at eye level across multiple store touchpoints.
• Highlight exceptions and approvals in digital point-of-sale systems (color-coded flags for transactions without receipts), based on management-by-exception (MBE), a control principle that requires managerial oversight for significant deviations, particularly if they signal risk, fraud or performance failure.
• Use incident dashboards to track fraud cases and reinforce training across teams, consolidating fraud event data, such as refund abuse, policy violations, internal theft or unusual transaction patterns, into a single, interactive interface.
• Visibly differentiate among staff roles (loss prevention personnel wearing distinct badges or uniforms).

In the no receipt, no refund example, the increased visibility of the policy disrupted a specific type of fraud based on plausible deniability: “I lost my receipt, but I swear I bought this here.” By removing ambiguity, visual control transforms return policies from hidden rules into visible deterrents.

Similar visual control initiatives have been effective in military and policing efforts to manage risks and counter fraud and other crimes. [See “7 S’s of tactical awareness: A sensory-based model for fraud detection in retail” at the end of this article.] For instance, the British Transport Police’s “See it. Say it. Sorted.” campaign is visual control in action. Launched to counter terrorism risks in mass transit systems, the campaign deploys clear, consistent high-visibility messaging across stations, trains and public media platforms. Posters, signage, public announcements and reporting hotlines encourage passengers to spot and report suspicious behavior.

A 2020 evaluation of the campaign found that it increased public awareness of terrorist threats, improved feelings of safety and altered behavior on public transport — all without generating excessive fear or negative consequences. The campaign also led to a 90% increase in public reporting of suspicious activity in its first year, demonstrating the power of visual reminders to change behavior and enhance vigilance. In one study, visual campaigns overcame key barriers to reporting, such as uncertainty, fear of retaliation or concerns about “bothering” the authorities.

This evidence aligns with lean management’s visual control philosophy, making risks and standards visible, understandable and actionable by everyone in the organization. No receipt, no refund fraud risk management policies, when prominently displayed and embedded in processes, can:

• Deter opportunistic fraud by removing ambiguity and exploiting visual cues to signal accountability.
• Empower employees and customers to report anomalies.
• Reinforce a culture of transparency and compliance where fraud is less likely to thrive.

Combining lean management’s visual control philosophy with the TPS principle of jidoka (“automation with a human touch”) empowers employees to stop and fix problems as they arise. For example, Amazon’s A-to-z Guarantee policy uses automation to flag high-risk refund requests and requires manual confirmation before implementing a permanent ban.

Applying visual control to digital retailing

The lean principle of visual control — making problems visible and standards explicit — can be effectively applied to online retail sites. A practical example is the inclusion of a refund status tracker in a return portal that displays key stages, such as item received, processing, approval and refund issued. Tracking helps reduce inefficiencies with customer inquiries and ensures transparency in resolving problems that arise.

Retailers like Asos, Apple and Walmart use visual control through status updates delivered via email or user accounts. Such practices should be made more explicit and extended across digital retail platforms. For instance, refund eligibility could be embedded directly into digital receipts using color-coded flags (green for eligible, yellow for partial, red for expired). Retailers might deploy pop-up disclaimers for high-risk categories (electronics and apparel) to visually remind customers of receipt requirements — an example of digital “Andon” signaling.

When applied across physical and digital retail spaces, visual controls support lean management goals of waste reduction and continuous improvement. They clarify expectations, reduce ambiguity, empower staff and systems to enforce policies consistently, and maintain transparency — preserving customer trust while deterring opportunistic behavior.

Balancing fraud controls with sales and marketing objectives

A 2016 study found that lenient return policies, such as free returns, no-questions-asked refunds and extended return windows, lead to significant increases in initial purchase volumes, especially in apparel and online retail. Retailers adopted such policies to reduce buyer hesitation, improve conversion rates and boost short-term sales. However, these policies may encourage refund fraud and abuse, such as wardrobing, fake defect claims and price arbitrage (returning discounted items for full-price refunds). Zara and Asos have implemented stricter return policies, including fees and account closures. Neither explicitly names fraudulent returns as the sole reason, but company statements and media reports suggest these changes are a response to unsustainable and unusual return activity under previous return policies.

To meet the sales and marketing objective of making purchases as effortless as possible, retailers may simplify online checkouts by requiring minimal customer information and enabling one-click purchases. A 2023 Liminal news release indicates that 62% of merchants prioritized a positive user-experience and minimized false transaction declines, even if it meant allowing some fraudulent transactions to occur. A 2022 McKinsey & Company article reported that nearly two-thirds of fraud-related transaction declines were legitimate, suggesting that overly rigid fraud controls can harm customer experience and damage the merchant-customer relationship.

A common argument against no receipt, no refund anti-fraud policies is that they alienate customers and undermine sales. However, lean retail environments can balance these objectives by using visual control as a transparency tool instead of a barrier. Real-world evidence shows that fraud controls can be implemented without the side effect of alienating customers or harming sales performance. For example, Nordstrom integrates digital receipts and account-based purchase histories, allowing it to enforce strict return validation internally while maintaining a reputation for flexibility and service. Zara and H&M apply visual control by prominently displaying return deadlines at checkout and online, reducing refund disputes and improving process flow without discouraging purchasing.

Research supports this balance, showing that moderately strict return policies, such as allowing exchanges or store credit instead of cash refunds, maintain customer trust while limiting wardrobing and other types of refund abuse. Academic research also supports the importance of messaging. For instance, policies framed as protecting fairness, rather than policing customers, significantly reduce negative reactions and dishonest refund attempts. Together, these cases show that when refund policies are visible, consistent and fair, retailers deter fraud while preserving sales, loyalty and customer experience.

Seeing fraud to stop it

When policies are clear and visible, customers understand expectations, and staff can apply rules consistently without appearing adversarial. Visual standards reduce transaction delays while deterring opportunistic fraud. Policies can be displayed in customer-friendly language, such as, “For your protection and to ensure a fair service for all customers, refunds require a valid receipt.” Visual control bridges the gap between security and service, supporting fraud prevention without alienating customers.

Fraud thrives in ambiguity, but visual control creates clarity, accountability and deterrence. Learning from examples of lean systems and police visual control campaigns, as well as anti-fraud teams can build environments where risk is visible, recognized and solved before it escalates into losses. Fraud loves the dark. Visual control shines a light. Though it may be cunning, fraud can’t hide where transparency shines.

Dr. Princely Dibia, Ph.D., CFE, FHEA, is a forensic accountant and senior lecturer in accountancy and finance at University of Lincoln in the U.K. Contact him at PDibia@lincoln.ac.uk.

7 S’s of tactical awareness: A sensory-based model for fraud detection in retail

Retail frontline staff should understand “why things are seen” to identify how fraudsters perpetrate their schemes or exploit how the human brain detects anomalies in its environment. For instance, in military operations, tactical concealment is about manipulating perception and disrupting what the human brain expects to see, hear or sense. Similarly, fraud detection in lean retail environments isn’t just about identifying policy violations or anomalies in numbers; it’s about training staff to become perceptually alert to behavioral deviations and turning frontline awareness into the first line of defense.

Borrowing from the military’s 7 S’s of tactical concealment  — shape, shine, shadow, silhouette, sound, speed and sudden movement, and spacing — we can create a framework for how retail employees may identify fraud risk in the moment. These principles offer a model for how the human brain detects anomalies. Applying them to retail settings may help detect and prevent return fraud.

1. Shape: Just as soldiers are trained to look for unnatural patterns (the curve of a helmet), retail employees can be trained to notice when a customer’s behavior or claim doesn’t fit the norm. For instance, a customer claiming a faulty item but refusing to produce or allow inspection of the product breaks the expected behavioral pattern, raising suspicion.
2. Shine: Reflective surfaces catch the eye in the field. In stores, shine can be translated as emotional intensity or performative exaggeration, such as loud, dramatic appeals for refunds. These practices often mask deception and can draw attention when compared to calm, routine behavior when returning an item.
3. Shadow: In concealment, shadows can either help hide or betray a position. In fraud detection, shadows may be inconsistencies, such as missing receipts, altered packaging or vague explanations that, when traced, lead to deception. Frontline staff must be aware of the subtle, often silent contradictions in a story or documentation.
4. Silhouette: Customers may imitate confident or disruptive behaviors they’ve seen succeed — demanding to speak to a manager or using phrases such as, “I know my rights” — to pressure staff into giving refunds. These actions are often performative and can signal an attempt to trigger a policy override.
5. Sound: Tone, urgency and phrasing may betray inconsistency. The fraudster may overexplain or raise their voice when challenged. The honest customer may be calm, cooperative or even apologetic. Training staff to tune into these sound cues helps isolate the genuine from the deceptive.
6. Speed and sudden movement: Like when the eye catches motion in the periphery, retail staff can be trained to pick up on erratic or unusually fast behavior, such as customers who rush through refund procedures, want to avoid inspection or repeatedly visit at closing time when staff is fatigued.
7. Spacing: Just as tightly spaced soldiers are easily detected, so too are patterns in refund activity. For example, multiple refunds clustered across stores, or an individual using various payment cards under slightly different names, create an unnatural formation, flagging organized fraud.

Together, these sensory-based cues empower staff to see what might otherwise remain invisible. Fraud detection isn’t just about technical systems; it’s also about sharpening perception and combining visual control with lived, human experience. Much like in tactical concealment, the goal isn’t simply to catch fraud in hindsight, but to recognize it before it happens, using trained awareness to disrupt it in real time.