In a recent survey, retail employees cited returns fraud and policy abuse as the top trends having the most significant impact on their companies today, outranking factors such as operational costs and supply chain challenges.
Loop, a return management platform operation, surveyed more than 600 full-time employees and analysts in the United States, the United Kingdom, and Australia working in the retail industry and responsible for their brand’s return process.
In the survey, 44% of respondents cited returns fraud, and 43% cited policy abuse as chief issues confronting their companies. The survey also indicated that 99% of companies at which the respondents work have experienced some type of returns fraud or policy abuse in the past 12 months. Respondents expressed the belief the main reason consumers engage in returns fraud is because the current economic climate is prompting shoppers to exploit return policies as a way to improve their financial situation, a view expressed by 43%. Other factors include dissatisfaction with product quality, at 41%, and an intent to use items only temporarily, at 35%.
According to Loop, additional key findings include:
- Quality disputes, at 53%, were the most common type of fraud/policy abuse companies experienced in the past 12 months, followed by customers attempting to return items that weren’t eligible for a return, at 44%, and wardrobing, at 38%.
- As they recognize the challenge, 94% of respondents agreed their companies are taking a rise in returns fraud and policy abuse seriously, and 46% rate their company’s detection and prevention measures as very effective.
- In addressing the circumstances, 55% of respondents said their companies prioritize customer experience over fraud and abuse prevention. Some 52% noted that “maintaining a good customer experience” was the top challenge their company faces when addressing returns fraud or policy abuse.
- Tightened return policies, at 47%, permanently banning repeat offenders from making future purchases, at 41%, and implementing return fees, at 37%, are the most common actions taken in response to returns fraud or policy abuse.
Loop suggests examining consumer behavior as a primary defense mechanism, improving education for consumers about what constitutes fraud, establishing clear consequences for returns fraud and policy abuse and reviewing all returns data are means of response to fraud and return policy abuse. Companies can examine item grade and disposition data from the returns warehouse, which can make it easier to spot problem shoppers.
“Our latest industry data report reveals a notable rise in returns fraud and policy abuse over the past year, highlighting the importance of understanding consumer behavior not just in purchasing but also in returns,” said Loop CEO Jonathan Poma. “The challenge is enormous: for every $100 in returned merchandise, retailers lose $10.40 to returns fraud. Retailers are implementing sweeping changes to address this drain on their bottom line, and our insights show that a data-driven, customized approach is key to reducing fraud while delighting genuine customers. Leveraging tools like advanced fraud detection models and return fees can provide merchants with the resources they need to not only mitigate these issues but also improve their return processes as a whole.”
