Risk Rundown:
Fast fashion

Current fraud landscape

Fast fashion is poised for a new era of opportunity. Even as the industry navigates tariff turmoil and the end of the de minimis loophole, these trade changes present purveyors of instant fashion a chance to innovate and elevate the customer experience, ensuring loyal customers are valued more than ever.

Fashion, as a whole, is a risky segment within e-commerce. While it is less vulnerable to fraud than digital industries, it still presents significantly higher risks compared to most other retail sectors. Within the fashion segment, fast fashion stands out, grappling with its own unique set of fraud challenges and tactics.

For example, offering flexible, competitive return policies is essential because brand loyalty in fast fashion is low, but abuse of those policies is operationally very costly for merchants. Related, new customers are a crucial growth segment in the fast fashion industry, yet they also pose higher-than-average fraud risk.

Conundrums like these are omnipresent in fast fashion. As the market further expands and diversifies, increasingly diverse purchasing behaviors make it challenging for merchants to detect abnormal patterns. And in regions like Asia-Pacific, fast fashion fraud is becoming more sophisticated, especially compared to other sub-industries.

Key challenges:

In addition to more ubiquitous fraud methods such as chargeback abuse or disputes, Riskified’s research team has identified increases and received reports of new fraud tactics targeting fast fashion merchants, including:

• Seasonal spikes: Seasonal trends and holidays drive spikes in demand that fraudsters exploit, creating operational challenges and losses for merchants.
• Returns abuse and wardrobing: Buying, using, and returning items for a full refund leads to inventory losses, lower margins, and operational strain as fast fashion merchants struggle to process excessive returns.
• Blending digital and physical purchases: Sophisticated fraudsters exploit measures that categorize physical orders and older accounts as safer. To bypass fraud detection systems, they deliberately add low-value physical products to their orders of high-risk digital goods (such as gift cards). This combination exploits the perception that physical orders and older accounts are inherently safer, helping them avoid suspicion and complete their attacks.
• Commercial shipping addresses: Fraudsters use old emails and match billing addresses to credit cards while shipping orders to nearby hotels. This tactic likely aims to justify geographic mismatches between billing and shipping addresses, mimicking legitimate behavior by delivering to commercial locations where pickup appears easier.
• Accessible fraud know-how: Even amateur fraudsters now have unprecedented access to self-service online resources, guides, and refund services, amplifying the problem for merchants beyond professional fraud rings.

Top trend to monitor: Wardrobing

Buying, wearing, and returning items for a full refund is known as wardrobing. The abuse may also involve purchasing items to show off on social media like TikTok or YouTube before returning them (a trend referred to as “hauls“). For retailers, these types of policy abuse can lead to inventory losses, decreased margins, and the costly operational strain of managing excessive returns. 

These quantities of returned and refunded merchandise compound the already high cost of returns (two-thirds of retailers recoup less than half the total value of a returned item) and complicate fast fashion merchants’ efforts to acquire and retain favorable customers by offering generous return policies. 

It’s a cruel irony that what makes a great customer experience also makes a great fraudster experience: instant refunds make it easier to get away with sending back an empty box. (What’s more, merchants offering instant refunds are especially attractive to fraudsters, who actively share this insight within their fraud networks.) A long grace period creates more opportunities for wardrobing. Lenient thresholds for exchanges and refunds invite INR (item not received) claims and reseller schemes.

Risk trends

This section examines the common yet distinct fraud tactics Riskified sees within fast fashion orders, offering insights into how bad actors target this high-value ecosystem.

YoY RISK LEVELS BY FASHION SUB-INDUSTRIES

Highs and lows of seasonal risk

Riskified’s research team identified that the average perceived risk in fast fashion actually decreased by 10% in 2024 compared to the previous year but that risk remained dynamic. The research showed that risk is heavily front-loaded in the peak pre-holiday season, with a year-over-year fraud increase. 

Clutching the top spot

Within fast fashion, which includes both apparel and accessories, the bags (purses, clutches, totes, etc.) product category is the riskiest, with roughly five times the average risk of other products. Clothing is both the least risky and most popular category.

PRODUCT CATEGORIES RISK LEVELS COMPARISON

High stakes in high-speed shipping

The premium shipping category consistently had the highest risk over the past year, showing nearly three times the risk of regular shipping and 2.5 times that of international shipping. While premium shipping risk remains steady throughout the year, the other categories are more volatile. For example, international shipping is riskier than usual from September to February, and regular shipping ticks up in risk starting in March.

Expedited shipping for fast fashion items is typically not the standard choice and comes at an additional cost to the customer. Riskified has noted that these orders often experience higher levels of fraud attempts. This is likely because fraudsters, using stolen credit cards, are unfazed by the extra expense. Expedited shipping also reduces the time available for merchants to cancel an order in the event of a chargeback or customer complaint, increasing the odds of the fraudster receiving the item. Faster delivery not only ensures they get the product sooner, but it also allows for a quicker resale and faster turnaround to profit.

SHIPPING CATEGORIES RISK LEVELS

Blending digital and physical purchases with ATOs

Fast fashion merchants often focus on new customer accounts as the highest risk, but account takeovers (ATOs) of older accounts deserve equal attention. Interestingly, Riskified has found that accounts that are a week old have proven to be riskier than those created on the day of the transaction. This trend has been noticeable in the industry over the past two years. 

Rather than relying solely on brand-new accounts that may raise red flags, fraudsters strategically “warm up” accounts by mimicking legitimate customer behavior over time. Once a fraudster has taken over a mature account, they often pair small physical items with more valuable digital purchases, such as gift cards, knowing physical orders are deemed safer. 

This dual and calculated approach helps them evade detection during fraud prevention checks. By integrating themselves into what appears to be normal customer activity, they aim to slip under the radar while bypassing safeguards designed to protect businesses and their customers. This evolving tactic highlights the importance of staying vigilant, even with accounts that may seem less suspicious due to their age or order history. Furthermore, it showcases how sophisticated fraudsters have become in understanding and exploiting prevention tactics.

Proven strategies

Fast fashion merchants need precise and intelligent fraud prevention strategies that preserve customer-friendly policies and keep operational strain to a minimum.

Automate fraud prevention

Fast fashion merchants can reduce the financial and operational toll of returns abuse and wardrobing by using AI to more accurately differentiate between fraudulent and legitimate customers at the point of purchase. With greater automation and accuracy, merchants can focus on providing great customer experiences and flexible returns without worrying about a deluge of returns abuse.

Adopt identity-based solutions

Sophisticated fraudsters are able to mimic typical buyer behavior to blend seamlessly with legitimate transactions, making detection difficult. Technology that examines patterns at a network-wide scale across numerous fast fashion retailers and other sectors can disambiguate these patterns and better assess the identity behind suspicious behaviors, including ATOs.

Partner with Riskified

Learn how one fast fashion merchant cut operational costs by automating its order review with Riskified’s AI-powered fraud management and risk intelligence platform.

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