Clarity Systems has raised $4.4 million in seed funding to scale its AI-powered fraud detection technology, which can inspect returned and received products in three seconds without requiring retailers to open the packaging. The round was led by LMnT Ventures, with participation from Regeneration VC, Humba Ventures, and Massive Technology Ventures.
Clarity is targeting returns fraud, a growing problem the company says cost retailers an estimated $103 billion in 2024 and accounted for more than 15% of all returned merchandise, based on data from Appriss Retail and Deloitte.
The company’s technology combines diagnostic-grade X-ray intelligence, computer vision, and proprietary AI models to analyze packaged product contents.
Similar to an airport X-ray scanner that examines luggage without unpacking it, Clarity’s system looks inside a returned or received item and compares what it sees against the original manufacturer’s product profile.
The platform can flag anomalies including counterfeit goods, product swaps, missing components, and other forms of product manipulation that may be difficult to identify through traditional visual inspection.
Clarity said the process can be completed in approximately three seconds, potentially allowing retailers to detect suspicious returns without adding substantial delays to their returns counters or receiving operations.
The company’s approach is designed to address a challenge created by increasingly sophisticated and organized retail fraud.
Many existing loss-prevention systems were built primarily around shoplifting and point-of-sale theft rather than fraud involving merchandise that is returned after purchase or shipped back through e-commerce channels.
Fraudsters can potentially exploit those systems by replacing valuable products with lower-cost items, removing individual components, inserting counterfeit products, or otherwise manipulating merchandise before returning it.
Retailers frequently respond to increasing return losses by tightening return policies across their entire customer base.
Clarity argues that broad restrictions can create unnecessary friction for legitimate customers while failing to precisely identify fraudulent merchandise.
Its platform instead attempts to evaluate individual items so retailers can separate potentially fraudulent returns from legitimate ones more quickly.
The system is intended to support human decision-making rather than automatically determine whether a customer has committed fraud. Clarity’s machines identify and flag anomalies, while the retailer’s employees make the final decision about how the return or received product should be handled.
Clarity was founded by Andy Ruben, Darrell Whitelaw, and Sender Shamiss, who have experience across the retail and returns industries.
The founders created the company after identifying what they saw as a need for new technology specifically designed around returns and receiving fraud.
Clarity said it has already signed major national retailers for deployments within their returns and receiving operations during its first year.
The early customer adoption gives the company an opportunity to develop its AI models around real-world retail environments while demonstrating whether automated product inspection can work at the scale required by large merchants.
The new funding is expected to support further development and deployment of Clarity’s imaging hardware and AI technology as the company expands relationships with large retailers.
KEY QUOTES:
“Retail fraud has become a professional industry, run at scale against the returns counter and the receiving dock, and most defenses were built for a shoplifting era. We built Clarity to catch it the moment it enters the building.”
Andy Ruben, Co-Founder and CEO of Clarity Systems
“Return fraud is a stubborn, massive problem hiding in plain sight, costing the world’s largest brands billions and ultimately leaving everyday consumers to foot the bill. And it’s a problem that the founders, each with extensive experience in the retail and returns world, have had to endure for decades.”
“With Clarity’s advanced imaging hardware and proprietary AI models, this chronic problem is finally tractable. Importantly, this isn’t AI theory, it’s already happening on Clarity systems. This is a problem whose time has come and this is the team to crack it.”
Jeff Miller, Founder and Managing Partner of LMnT Ventures
