Cracking Down on Retail Fraud: How Ambient IoT Can Secure the Supply Chain

Fraud isn’t new. Counterfeit luxury goods were such a problem in ancient Rome that laws were passed to deter them. By the 13th century, forging a trademark could cost you your life.

Fast-forward to today. Fraud now scales with modern commerce. Tampering, theft and shrinkage are increasingly prevalent across global retail and e-commerce supply chains, particularly in high-value product categories and in the last mile of delivery. Fraud often feels like the cost of convenience, which defines modern retail.

But today’s losses are staggering. In 2023 alone, global e-commerce fraud losses were projected to exceed $48 billion. Merchants now estimate that roughly 3 percent of their total e-commerce revenue is lost to fraud annually, with a similar share of total orders turning out to be fraudulent. These losses hit margins, damage trust, and slow operations.

Two Types of Fraud — and Why Both Are Hard to Detect

Retail fraud generally falls into two broad categories. Both take advantage of supply chain blind spots:

1. Opportunistic consumer fraud: Some consumers engage in deception — e.g., using products before returning them or falsely claiming an item never arrived. They justify it, seeing it as harmless to large retailers. But the costs add up. In 2024 alone, U.S. retailers lost $103 billion to fraudulent returns and claims, representing 15 percent of the projected $685 billion in total returns. “Wardrobing” — when shoppers buy, use and return items — was reported by 60 percent of retailers surveyed.
2. Organized theft from internal and external threats: At the other end of the spectrum is organized retail crime. Criminal groups target high-value goods in transit, marking boxes or working with insiders. A RILA survey found that two-thirds of retailers experienced increased cargo theft over the past two years, amounting to billions in losses. Insiders have also driven theft rates higher. In the U.K. alone, staff theft now accounts for £3.3 billion annually — 40 percent of all retail theft.

A Shared Challenge: Poor Product Traceability

Fraud thrives when items lack traceability. Most products in the retail ecosystem aren’t serialized, meaning there’s no way to verify their authenticity or link them to a specific transaction. A shopper can buy on one platform and return to another at a higher price — no questions asked. Returned items pass through multiple hands with little tracking. Barcodes, QR codes and traditional RFID systems depend on manual scans and fixed infrastructure. These tools don’t scale in today’s logistics networks.

Ambient IoT: Lighting Up the Dark Corners of the Supply Chain

A new solution is emerging: ambient Internet of Things (IoT). It’s a class of battery-free, wireless sensors that provide real-time visibility throughout the supply chain.

These tags, about the size of a postage stamp, track location and conditions. They detect when and where items are opened or disappear. They connect through existing Bluetooth infrastructure, so they scale without major costs.

Next-Gen Light Sensors for Tamper Detection

The latest generation of ambient IoT includes light-sensitive sensors on the packaging. If a box is opened during transit, the sensor detects the change in light, triggers a tamper alert and logs the precise time and location of the event. This gives retailers and law enforcement strong traceability.

Retailers can quickly challenge false claims about empty deliveries. They can track insider theft. Organized crime groups know they’re being watched and think twice.

Rebuilding Trust Across the Retail Supply Chain

Fraud may never be fully eliminated, but ambient IoT shifts the power back to retailers. With item-level visibility, real-time alerts and scalable tracking, retailers can respond fast to incidents of theft or fraud. This builds accountability, protects goods and rebuilds trust — without sacrificing convenience.

Matan Epstein is vice president, strategic accounts at Wiliot, an Internet of Things platform.