How Australian brands are combatting returns fraud and abuse
Carly Greenberg
·September 3, 2024
Returns fraud and abuse is a growing issue worldwide, and it’s taking its toll on retailers in the form of reduced profit margins and high operational and logistics costs.
Earlier this year, we surveyed shoppers, and discovered that 40% said that they or someone they know had participated in at least one form of return fraud or abuse in the past year. And on the merchant side, 90% of retailers who’d experienced return fraud or abuse said that the numbers had been growing in the past year.
To build a thriving and sustainable business, it’s crucial to build the right strategy for combating returns fraud and abuse. We took a look at the data around this trend in three countries—the U.S., the U.K., and Australia—to assess how merchants are responding.
Here are some key insights on how Australian merchants are taking action, and how their metrics compare to global trends.
High operational costs are the biggest concern
- When asked to rank their biggest concern with running a retail business, Australian retailers deviated from the rest of our countries, naming high operational costs as the biggest issue (42%). Following that, 39% named policy abuse as a concern, and 33% named supply chain disruptions. Returns fraud didn’t make it into the top three. We’ve found that Australian trends tend to lag a year behind U.S. trends, and predict an uptick in the future.
- Globally, of the trends having a serious impact on business, 44% named returns fraud, 43% named policy abuse, and 38% named high operational costs.
Quality disputes are the most common form of returns fraud or abuse
- In ranking how frequently different types of returns fraud or abuse occurred in Australia, quality disputes topped the list (66%), followed by a tie between situations where a customer bought an item with the intention of returning it, and wardrobing (47%). Following that, retailers saw returns on non-eligible items (42%), empty box fraud (28%), and chargeback fraud (14%).
- Globally, quality disputes were also 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 Australian merchants are responding
As returns fraud and abuse cases continue to escalate, how are merchants handling these situations? It takes a delicate touch: Retailers recognise the risk of alienating loyal customers if they make the return process too difficult for them. Here’s how they’re approaching the situation.
Customers always come first
- Overwhelmingly, Australian retailers say that they prioritise delivering a great customer experience over fraud or abuse prevention. Twenty-two percent said they prioritise fraud or abuse prevention over the customer experience, and just 5% said they treated the two priorities equally.
- Globally, customer experience also won out over abuse prevention, with 55% merchants prioritising the customer experience. Twenty-five percent treated the two equally, and 20% said that preventing fraud and abuse were more important than the customer experience.
Australian retailers update return policies regularly
In order to combat rising returns fraud and abuse, some retailers are taking a closer look at their return policies and making updates that will help them put a stop to policy abuse and protect their margins. As the data shows, Australian merchants are leading the way with this strategy.
- Fifty-three percent of Australian merchants update their return policies monthly—a higher rate than any other country surveyed. An additional 35% review and update their policies on a quarterly basis.
- Globally, just 33% update their policies on a monthly basis, with an additional 44% making updates quarterly.
Australian merchants’ top tactics for fighting returns fraud and abuse
Beyond regularly reviewing their return policies, what other steps are Australian merchants taking to fight back against policy abuse and fraud? Here’s what they told us about their top actions:
- Australian brands’ number-one tactic was to permanently ban repeat offenders from making future purchases (46%), followed by highlighting the negative environmental impact of returns (41%), implementing return fees (36%), tightening return policies (32%), and requiring photo uploads before approving returns (30%).
- This approach differs from global merchants, who were more likely to tighten return policies (47%), followed by banning repeat offenders (41%), 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%).
As the rate of returns fraud and abuse continues to increase, Australian retailers will need to step up their game to ensure that they can continue to deliver a great experience for their well-intentioned customers—while putting precautions in place that will mitigate the impact of return fraud and abuse.
By using a best-in-class returns management solution like Loop, brands can have the best of both worlds. You’ll have the tools and workflows in place to easily customise your return policies on a category, sales event, or product level—or even change your policies based on the customer’s purchase and return history. (For example, if a certain customer has previously made multiple returns, you might block them from returning products in the future.)
You’ll also have access to features that help you optimise the return process for exchanges and store credit, helping your brand retain revenue from the transaction and protect your profit margins. And by using our new feature, Offset, you can encourage your customers to pay for return shipping protection, giving them access to cheaper return shipping if needed, while helping you grow your capital reserves.
To learn more about how international brands are handling returns fraud and abuse, and how Loop can help, get the full report here.
Stay in the loop
Subscribe for product updates and Loop's biweekly newsletter.
Retain more revenue with Loop today
With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.