It seems that fraudsters are more prevalent than ever these days, with tons of different types of fraud that exist.
From broad types such as credit card fraud to more specific types such as worker’s compensation fraud, businesses need to be vigilant in their fraud prevention efforts.
One type of fraud that can easily fly under the radar is return fraud.
Return fraud can be difficult to detect and prevent since it’s often a challenge to identify how return fraud actually affects your business.
Thankfully, we’re here to explain exactly how return fraud negatively impacts your business. Here are three of the biggest offenders.
The most obvious effect that return fraud has on a business is lost revenue.
We aren’t talking about a small number here, either. Research indicates that return fraud can cost retailers up to 15 billion per year.
When fraudsters purchase items with the intent of returning them illegally, the retailer makes no money off the item.
All types of return fraud end up costing retailers big in the end. Some tactics, such as shoplisting, are worse than others, considering the fraudster has an entire list of products that they intend to get a refund for which were never purchased in the first place.
Increased Operational Costs
Return fraud doesn’t only affect revenue pertaining to physical products. There are also operational costs to consider.
An increase in fraudulent returns will often lead to more consideration being put into checking every return for signs of return fraud, from missing tags to damage or wear on the product. This process can be time-consuming, meaning more manpower might be necessary to continue operating in an efficient manner.
A Poor Customer Experience
As return fraud cases continue to increase, many retailers will feel pressure to tighten up their return policies. This could mean anything from reducing the allotted time for eligible returns to only issuing store credit instead of cashback. In some cases, more extreme measures such as requiring a restocking fee for more expensive merchandise will be taken.
While these are all effective ways to help diminish the effect of return fraud on a retailer, they can also have an adverse effect on your customer experience. If loyal customers have become accustomed to a looser and more forgiving return policy, they could be taken by surprise when it’s more difficult for them to return their items.
In the end, it can be tricky to balance the two. Return fraud negatively affects your revenue and your business overall, but so does a poor customer experience.
Return Fraud’s Negative Impact on Business Cannot Be Understated
Return fraud is an often overlooked type of fraud in the grand scheme of business. It can be difficult to detect, as it impacts revenue and operations.
Because loyal customers might get caught up in stricter return policies, the reputation of your business can be affected. Poor customer experiences can lead to bad reviews and a loss of current and potential customers.
Because of this, return fraud prevention should be a top priority. There are many strategies you can use, from return policy modifications to using policy abuse services, such as Forter’s Policy Abuse Protection.
Hopefully, with this information in hand, you can get a better understanding of how return fraud affects your business and why you need to put a return fraud prevention plan in place.
Forter’s New Report Can Help Shine Light on Return Fraud
To better understand the detrimental effects of return fraud and how to protect your business, download Forter’s “Return to Sender” report. This report can help you shine a light on how return fraud affects you and can help you avoid certain return fraud pitfalls.