Online sales were up 32.4% in 2020 over the previous year.
This shouldn’t come as a surprise, considering the pandemic situation we found ourselves in.
However, even as the pandemic began to subside and restrictions were loosened, it’s likely that online shopping will continue to remain a staple in our society. Businesses continue to overhaul their processes to adapt to the changing retail environment.
One thing that they’ll need to watch out for is return fraud.
Before we dive into the specifics of how e-commerce businesses are equally at risk of return fraud, let’s quickly take a look at what return fraud entails.
What is Return Fraud?
Return fraud has been covered more in-depth in one of our previous articles. However, to provide a short and sweet definition, return fraud involves fraudsters returning merchandise that isn’t eligible for a return. Return fraud is occasionally an accident, committed by an honest customer who likely wasn’t aware of your return policy terms.
In most cases though, this is done as a deliberate attempt to steal from a company.
There are many different types of return fraud used by fraudsters. However, let’s dive deeper into how return fraud targets e-commerce businesses specifically.
Types of E-commerce Return Fraud
The unfortunate truth about e-commerce return fraud is that many of the strategies used in brick-and-mortar businesses are used here as well. Some of these tactics are even easier for fraudsters to pull off since e-commerce businesses can often be overwhelmed with returns, making it difficult to be more thorough on following return processes.
Here are some of the e-commerce return fraud tactics to watch out for:
Common in the fashion space, wardrobing is the act of buying an item with the intention of wearing it once or twice before returning it and passing it off as brand new.
While this is a common tactic used on brick and mortar businesses, there isn’t anything stopping fraudsters from using this tactic on e-commerce sites as well. Staff will still need to pay close attention to any noticeable wear on items as they come in for a return.
Returns after purchasing with a stolen credit card
This is a tactic more commonly used in the e-commerce space. The fraudster purchases items on your website using a stolen credit card before attempting to return them on their own credit card.
Using fabricated receipts
Fraudsters create fake receipts to return otherwise ineligible goods. This is another tactic commonly used in both the e-commerce space and in person.
With this tactic, the fraudster purchases a brand new product that they already own then attempts to return their existing used product for a full refund, essentially “exchanging” the item.
Preventing E-commerce Return Fraud
Similar to in-person purchases, e-commerce return fraud prevention begins with your return policy. It needs to be clear and easily accessible for customers.
If you haven’t gone over your return policy in a long time, there are certain limitations you can place on returns to help with e-commerce return fraud, such as:
- Placing a time limit on returns (15-30 day maximum)
- Offer store credits instead of cash returns, depending on the case
- Restocking fees for higher-ticket items
Be careful with some of these. Although they can be helpful with preventing e-commerce return fraud, they could also alienate some of your best customers. It’s a balancing act.
Following up online returns with a phone call can also help gather more information. While this likely won’t be possible in every case, before processing a suspicious return, placing a phone call to the returnee can shine some light on the situation one way or the other.
Lastly, there are policy abuse services. These can help automate your e-commerce return fraud protection and ensure that you’re safe from fraudsters at all times.
Forter’s Police Abuse Protection service, for example, tailors fraud prevention to your unique business strategy and return policies. This is perfect for businesses of all types, including e-commerce businesses. The high level of automation provides worry-free protection so you can focus on other aspects of your business.
E-commerce Return Fraud Isn’t Going Anywhere, Unfortunately
If the past year has shown us anything, it’s that people are more than willing to take both their shopping and their businesses online.
However, as shoppers and business owners continue to adapt, so do fraudsters, using new and old tactics to seek ineligible refunds from e-commerce businesses.
Using this information on e-commerce return fraud tactics and prevention, it’s time for you to take a stand and protect your business’s bottom line.
The Hidden Costs of Return Fraud
To learn more about how return fraud affects your e-commerce business and how to reduce the damage, we’ve created a report detailing some of the specifics. Download Forter’s “Return to Sender” report here.