Combatting retail returns abuse with better policies
Vaishali Ravi
·January 14, 2025
Have you ever purchased products you had no intention of keeping? Retailers have their ways to suss that out—and in some cases, they’re cracking down on access to generous returns policies to stop shoppers from taking advantage of their brand.
Recently, major retailers including Target, REI, and Amazon have all introduced customer-based policy exclusions around their returns policies, preventing returns and exchanges from shoppers who’ve taken advantage of such policies in the past.
Such exclusions will only impact a small number of shoppers: In REI’s case, the brand said that the exemption applies to less than 0.02% of customers, who have an average return rate of 79% and $1400 in returns annually. These brands hope that by identifying customers who’ve abused their policies in the past, they’ll be able to prevent further abuse while maintaining a generous returns policy for the rest of their customer base.
If you’re gearing up for a big sales event—and the subsequent rise in returns—take a good look at your customers’ returns behavior to see whether it’s worth following these retail giants’ lead. After all, returns policy abuse and fraud cost retailers over $101 billion last year. If you don’t put steps in place to tackle the problem at its source, it’s only likely to grow.
Here are some steps you can put in place to crack down on returns policy abuse.
Build a comprehensive returns policy
- Start by reviewing your current returns policy, and ensuring that your terms are crystal-clear to prevent customers from taking advantage of your brand. For instance, if a shopper wants to return an item for a full refund, should it be in its original packaging with tags intact? Spell that out, so there’s no misinterpretation. Failing to define conditions for returns can lead customers to send back used and worn merchandise that you won’t be able to resell, so it pays to be clear from the get-go.
Quiz your customers
- When a shopper requests a return, you can set up workflows through Loop to ask them a series of questions about their return. For instance, why are they returning the item, and is it in new condition or has it been worn or used? Their answers can help you automatically determine the outcome of the case with no need for live customer support, and can head off potential abuse. For example, if a shopper says that they’ve removed the tags from a dress, and that’s against your returns policy, you can simply refuse return authorization, rather than accept an item you’ll have to write off.
Offer exchanges, but not refunds, for items that don’t meet all of your criteria
- Want to deliver a great customer experience, but not let shoppers walk all over you? Consider setting up different criteria for refunds and exchanges. For instance, you might allow refunds for new-in-box items, but only allow exchanges for items that have been removed from their original packaging. This ensures that you’re only refunding items that you’ll be able to resell—and by encouraging exchanges, you’ll be able to retain shoppers that you might otherwise lose for good, helping you lower your customer acquisition costs and boost your customer lifetime value.
Set up different returns processes for different item categories.
- When it comes to your high-end merchandise, any acts of returns abuse or fraud can lead to major losses—so it’s worth treading more carefully when it comes to high-value items, even if the customer’s experience isn’t quite as seamless. For instance, you might automatically grant a refund when a $100 sweater is scanned in for shipping, but wait until the item has been inspected and approved to grant a refund on a $500 area rug.
Set up precautions against transactions you’ve flagged for potential abuse or fraud
- Loop’s new Fraud Model uses machine learning to identify “high risk” transactions that could lead to a fraudulent or abusive return. With our technology, you can prevent these sales from going through, stopping potential abusers in their tracks. And, when you’ve identified frequent policy abusers in your system, you can segment them and set up restrictions that limit their actions: Following REI’s example, you can allow them to make purchases, but prevent them from returning or exchanging any items in the future, ensuring that they won’t be able to take advantage of your generous policies any longer.
Reduce loss with Loop's proactive fraud model
Learn moreHalting returns fraud with Loop
By using a best-in-class returns operations platform to manage your returns, you’ll be able to deliver a streamlined experience to your shoppers, delighting them with a self-service platform that enables them to instantly set up and track their returns.
But the added value of Loop is the safeguards and personalization that you can put in place with conditional workflows to prevent policy abuse—for instance, requiring a manual inspection for items that are frequently subject to returns abuse; or denying refund eligibility to customers who have a history of taking advantage of your returns policy. Loop’s workflows remove the burden from your customer support team, automatically detecting and stopping abusive returns behavior so that your CX team can focus their time on delivering high-quality personal service to shoppers who need additional help.
That makes it easy to deliver a superior customer experience to your customers, while setting up guardrails to prevent abuse from hurting your profit margins. You can even offset your returns costs by encouraging shoppers to pay for return shipping at the time of purchase, helping you build a cash buffer to cover your reverse logistics expenses.
Don’t let the looming threat of returns fraud and abuse impact your customer experience. With Loop’s support, you can set up returns policies that are designed to detect and eliminate fraud and abuse—so you can deliver a seamless and generous returns experience that will help you drive customer loyalty and retention.
Ready to learn how Loop can help you stop returns abuse? Book a demo.
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