In the ever-changing world of retail, the surge in returns abuse poses a significant challenge. Retailers often find themselves in a conundrum, striving to curb this trend while preserving a positive customer experience.
The holiday season is a prime example: retailers rejoice at soaring holiday sales, only to face the daunting aftermath of a bloated returns queue, directly impacting the bottom line.
Recent surveys of consumers in the U.S. and U.K. reveal a startling fact: a substantial number of consumers alarmingly admit to exploiting return policies for their own benefit. This underscores retailers’ need to grasp consumer attitudes towards returns and respond adeptly.
Wardrobing and generational trends
Wardrobing, sometimes referred to as “free renting,” is a phenomenon where consumers buy items for temporary use and then return them – a prevalent problem among consumers. Surprisingly, 56% of consumers in both the U.S. and the U.K. admitted to wardrobing somewhat recently. And the trend wasn’t isolated to any specific vertical, spanning everyday items like apparel, footwear and electronics.
Moreover, returns abuse is notably prevalent among younger shoppers. 76% of returns abusers in the U.S. and 81% in the U.K. are Millennials and Gen Z, ages 18-34. Retailers specifically saw a rise in deliberate returns abuse from younger shoppers during the 2023 holiday season, with 52% of U.K. and 47% of U.S. Millennial and Gen Z respondents stating they intended to wardrobe some of their holiday purchases.
Retailers are losing revenue
The fiscal impact is staggering. Retailers saw a whopping $743 billion in merchandise returned in 2023, according to a recent NRF and Appriss Retail report. Over 49% of retailers cited wardrobing as a reason for returns in the past year. In 2023, retailers saw $101 billion in losses due to return fraud. They lose $13.70 to return fraud for every $100 of returned merchandise.
As a result, many companies use a variety of tactics to curb returns abuse, which may include:
- Restrictions: Many companies add limitations to their return policies to curb abuse. For example, a company might offer a short window for return, like 14 days. Most consumers prefer a 30-day return window and want flexibility in the returns process.
- Blacklists: Some companies create a blacklist containing the names of customers no longer allowed to return items to their stores. These lists constantly evolve, and sometimes legitimate customers wind up on a blacklist in error.
- Rules-based systems: Many businesses use a rules-based solution that flags transactions for manual review based on specific criteria. These systems often lead to a tangled mess of overlapping rules, resulting in false positives.
- Charging for returns: An increasing number of companies have started charging customers for certain returns. However, consumers have grown accustomed to free returns, so many won’t take kindly to paying to return items to stores.
These approaches can help prevent people from abusing your return policies but often lead to a negative return experience.
At Shoe Carnival, Jennifer Rodgers, Digital Product Manager (APM) Checkout, Payments & Loyalty, notes that the team is focusing on stopping abuse at order placement by rebuilding checkout, tightening SKU limits, and using Forter in the background to ensure each customer’s identity.
The cost of a negative returns experience
Retailers must balance preventing returns abuse and providing outstanding return experiences. For most modern consumers, the online shopping and return experience is about convenience, ease and speed.
Some of the previously-mentioned methods employed to curb returns abuse often alienate new customers — and cause churn with existing ones. The surveys found that 70% of U.S. and 72% of U.K. consumers will stop shopping at a brand if their returns policy becomes overly complicated. Additionally, more than half of U.S. (57%) and U.K. (58%) consumers will stop buying from a retailer that charges for returns.
Companies that tighten or complicate their return policies risk losing a significant amount of revenue, which includes the potential lifetime value of each lost customer. Once you lose a customer, winning them back is extremely difficult.
For Eddie Alberty, Vice President of Strategic Partnerships at Shop.com, the customer experience is paramount. And although implementing policies is critical, ensuring the customer experience remains smooth is a top priority.
Enhancing experiences without compromise
Understanding each user’s identity is the key to curbing returns abuse – without alienating good customers. When you clearly understand the online identity behind the transaction or identities like it, you can identify policy abusers and stop them before they purchase. You can provide every deserving customer with a top-notch returns experience.
Forter’s Trust Platform automates trust decisions, leveraging a graph of more than one billion online identities and a global network of behavioral data. It identifies fraudsters and policy abusers in a matter of milliseconds. And with Forter Abuse Prevention and Policy Builder, you can unlock complete visibility and control, with the ability to optimize — and ultimately personalize — abuse policies with complete confidence.