Today’s consumers expect a seamless customer experience when shopping online – from browsing to checkout to the post-purchase experience. Flexible returns policies are no longer just an important aspect of a customer’s shopping experience, but rather a requirement when consumers choose where to shop. 97% of shoppers say that a company’s returns policy impacts their likelihood to actually purchase with a retailer.
Yet as merchants work to make returns easier and more seamless for their customers, their policies also become larger targets for abuse. Returns abuse is a growing issue for almost all retailers. In fact, this type of abuse costs US retailers an estimated $24B annually.
What is Return Abuse?
Return abuse is the act of returning items to a retailer, whether online or in-person when the items aren’t eligible for a return. The fraudster is essentially stealing from the retailer by getting a refund on merchandise that either wasn’t theirs or is being passed off as an eligible item for return.
Return abuse can be the result of a mistake by an honest customer. If the customer didn’t properly read the return policy and the mistake wasn’t caught by an employee, for example.
However, in most cases, there is malicious intent behind return abuse.
Types of Returns Abuse
- Receipt fraud: The fraudster is attempting to return items using a fraudulent receipt. For example, a stolen receipt or an older receipt long past the return policy date.
- Wardrobing / Renting: Abusers purchase items, wear or use them, and then return the items back to the store for a refund.
- Returns Fraud: Abusers return a different (and less valuable) item while collecting the value of the original item.
- Repeat Offenders: Sophisticated abusers set up multiple accounts and use different payment methods to hide their identities and avoid detection.
- High Returns Rates: Consumers return a high percentage of their orders back to the merchant. In many cases, this is because abusers add items to their cart to qualify for free shipping or a “free gift with purchase” offering, and then return their order.
- Shoplisting: Where a customer will use a found or stolen receipt as a “shopping list”. With this list, they will gather the items listed on the receipt and attempt to return them as if they bought them.
- Returning shoplifted items: After stealing merchandise, the fraudster will then return the items as if they were bought, collecting money for them.
The Business Impact of Returns Abuse
Because this issue only continues to grow, merchants need to be aware of the challenges presented by this type of abuse. Business can expect the following impacts:
- Lost Revenue: Abusive returns remove inventory from stock that could be sold to legitimate customers. In a survey, 54% of merchants indicated lost revenues of above $5 million annually due to returns abuse.
- Operational Overhead: Costs associated with managing abusive returns – processing, shipping, restocking, and more – all cut into a merchant’s bottom-line.
- Poor Customer Experience: Costs associated with returns abuse can prevent merchants from building out or supporting a best-in-class returns program, resulting in a poor customer experience.
Signs of Return Abuse
Although return abuse can be difficult to spot, there are a few tell-tale signs. Some of which include:
- An increase in markdowns
- An increase in inventory shrink rate
- Sudden increases in return rates
- Out-of-town returns
- High-ticket items returned without a receipt
If your business is experiencing one or more of these signs, it’s best to analyze whether you’ve become the target of return abuse tactics.
Best Practices for Reducing Return Abuse
Taking action against return abuse means using some best practices to ensure that you don’t become a target of return abuse.
Here are a few of those best practices:
- Maintain a clear and easily accessible return policy
- Place a stricter timeline on eligible returns
- Implement restocking fees, especially on bigger ticket merchandise
- Only issue cash returns when a receipt is presented
- Consider using store credit for returns instead of cashback
Be careful with implementing too many changes to your return policy, though. A convoluted or overly strict return policy can chase away potential or current customers. There’s a balancing act between managing potential return abuse and maintaining a customer-friendly return policy and procedure.
On top of these best practices, implementing return abuse protection services can help you manage return abuse.
Forter Abuse Prevention
Identify and stop abuse at the source to protect revenue while maintaining a quality brand experience for your genuine customers. Forter’s Abuse Prevention solution protects businesses from returns abuse and fraud by providing merchants with the ability to accurately approve legitimate returns, detect abusive users, and enforce your returns policies in real-time. With Forter, your business can now deliver a best-in-class returns program without risk, so you can protect your profits and enhance your overall customer experience.