How are U.K. merchants fighting back against returns fraud and abuse?

Samir Kamnani

·

September 3, 2024

Retailers everywhere are dealing with the fallout from an increase in returns fraud and policy abuse. Earlier this year, we uncovered the fact that 40% of shoppers said that they or someone they know had engaged in returns fraud or abuse within the last year. Merchants are well aware of the growing trend: 90% of retailers who’ve experienced returns fraud and abuse say that the rate has jumped within the last year.

We surveyed merchants throughout the U.K, U.S., and Australia to understand how returns fraud and abuse is impacting brands, and how they’re responding.

Let’s find out what’s happening in the U.K., and how it compares to global trends.

The impact of returns fraud and abuse

Whether or not customers have the intention to deceive merchants, both acts of intentional fraud and unintentional policy abuse can cut into your brand’s profit margins. We dug into the data to understand the scope of these problems, and how brands are responding.

Here are some of our key findings for the U.K. market, compared to global benchmarks:

Returns fraud has the highest impact on brands

• The majority of U.K. merchants (64%) said that returns fraud was the trend with the most significant impact on their company, followed by policy abuse (49%) and high operational costs (37%).
• Globally, 44% of merchants are struggling with returns fraud, with policy abuse at #2 (49%) and 37% at #3.

Ineligible returns are the most common form of policy abuse

• In the U.K., retailers said that the most common form of fraud or abuse they faced was returns on ineligible items (51%). Following that in frequency, brands experienced quality disputes (45%), wardrobing (35%), cases where a customer requested a refund with the intention to keep the item (33%), and bracketing (31%).
• Globally, quality disputes were the most common form of abuse (53%), followed by non-eligible items (44%), wardrobing (38%), cases where a customer bought an item with the intention of keeping it while requesting a return (37%), and empty box fraud (30%).

How retailers are responding

Merchants must strike a delicate balance between fighting back against returns fraud and abuse, whilst ensuring that they maintain a positive customer experience that won’t alienate loyal shoppers. Here’s how they’re managing that challenge.

The customer experience comes first

• Overwhelmingly, U.K. merchants said that they prioritise the customer experience over fraud or abuse prevention, with 53% responding that way. Thirty-one percent of respondents said they treated the two issues equally, and just 17% said that preventing fraud and abuse was more important than the customer experience.
• The global perspective echoed U.K. merchants’ approach: 55% of merchants prioritise customer experience over fraud or abuse prevention, with 25% saying the two issues were equal, and 20% prioritising fraud and abuse prevention over the customer experience.

U.K. retailers fall behind the average in updating their returns policies

One simple step that merchants can take to combat policy abuse is to revisit their returns policies frequently in light of customer behaviour. With better guardrails in place to reduce the frequency of returns, such as implementing return fees or blocking returns for certain product types, retailers can protect their profit margins.

However, U.K. retailers fall behind the average in how frequently they revisit their returns policies: Just 28% review their policies on a monthly basis, compared to 33% of brands globally.

U.K. merchants get more stringent with returns to prevent abuse

• U.K. retailers prioritised tightening their return policies as their number one tactic (56%) for combatting returns fraud and abuse. Other leading tactics included offering store credit or an exchange instead of a refund (42%), implementing return fees (39%); banning repeat policy abusers from making purchases ( 39%), requiring photo uploads prior to approving returns (33%), and modifying the return process to require more detailed customer input (32%).
• On a global level, nearly half of retailers had tightened their returns policies (47%). However, international merchants were more likely to ban repeat offenders (41%), followed by implementing return fees (37%), showcasing the environmental waste of returns (35%), and in last place, modifying the return process to require more customer data (34%).

By and large, U.K. merchants are taking steps to mitigate the impact of returns fraud and abuse—but they’re hesitant to do too much, at risk of damaging their customer experience and losing good customers as a result.

Implementing the right technologies and processes can help merchants get ahead of returns fraud and abuse without impacting their customer experience. By utilising a best-in-class returns management solution like Loop, U.K. merchants can seamlessly customise the returns experience on a customer- or product-based basis, ensuring that they can determine the right course of action for any return request based on variable conditions. With customised return workflows, merchants can also optimise for exchanges and store credit over returns, helping them retain revenue from returns and protect their margins.

Want to learn more about how merchants are fighting back against returns fraud and abuse? Download the report here.

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