54% of merchants surveyed for Forter commissioned primary research indicated that they lost more than $5 million in revenue each year due to returns abuse. For example, in 2018, one fashion e-tailer spent $531 million on returns but had $499 million in sales, after taking into consideration processing costs and lost sales. And the total does not include the shipping costs the e-tailer covers as part of its “free returns shipping” policy.
Returns Abuse is Bad for Business
Returns abuse is a form of policy abuse wherein instead of being committed by fraudsters or criminals, good customers (or those who might look like “good” customers) take advantage of a business’ policies for their benefit. This is an ongoing problem for merchants, and they must take steps to mitigate it. Otherwise, they will see:
- Higher operational costs and overhead – Abusive returns means merchants must spend more on labor due to the additional time spent on inspection and re-stocking. Retail teams must also spend time reviewing the reasons for returns, figuring out which returns are legitimate and which are from abusers. Because teams are forced to spend more time on returns, they spend less time on valuable customer service and sales tasks.
- Lost profits – Excessive returns take stock from inventory that could be sold to good customers. In many cases, returned items due to wear and tear or seasonality cannot be resold, not even at a discount.
- Increased shipping costs – Many merchants offer free shipping for returns. When customers abuse a returns policy that includes free shipping, associated costs for the merchant increase and contribute to overall revenue loss.
- Poorer customer experience – The cost associated with returns often prevents merchants from building a best-in-class returns program, resulting in poorer experiences for customers and a less competitive offering.
Offer Returns Without Hurting Your Bottom Line
Returns abuse is a problem for every retailer, but returns can be used to improve customer experience and boost revenue. Here are a few examples of how:
Buy Online, Return In Store (BORIS)
Offering customers the option to buy online and then return items in store benefits merchants and customers alike. For the shopper, it provides them with an omnichannel experience that allows them the flexibility and ease of shopping and returning items as is most comfortable for them. For merchants, BORIS offers them the opportunity to entice online-only shoppers to come to their physical store locations and blend their shopping experience and product options.
Cross-selling and up-selling
Returns are a lost sale, but an in-store return provides an opportunity for that sale to be recovered. When known customers return items in person, customer service can cross-sell or upsell relevant items. Customer service can turn many returns into an exchange or the purchase of more items.
Merchants should gather feedback from customers during the return process. Merchants can then review feedback to discover why items are returned and what customers expect when it comes to the returns policy. Reviewing feedback enables merchants to better understand customers and take steps to improve customer experience.
Identify & Stop Abusers Before They Buy
The best way to prevent returns from hurting the bottom line is to identify and stop abusers before they buy. Identifying and stopping abusers requires an intelligent, automated system that can make decisions about customers in real time. The system must draw from a wide network of data, beyond the merchant’s business ecosystem, so that it can accurately identify abusive behaviors from legitimate consumer returns activity.
An automated system should also enforce returns policies in real time – from registration and checkout to returns initiation. It should automatically serve a restrictive return policy to serial abusers and a flexible return policy to good customers. Good customers are happy with the flexible return policy, and serial abusers are stopped in their tracks.
Our real-time fraud prevention platform prevents abuse so merchants can offer best-in-class returns programs without putting themselves at risk.