How U.S. retailers are responding to returns fraud and abuse
Carly Greenberg
·September 3, 2024
Returns fraud and abuse is on the rise all over the globe. Our research discovered that nearly 40% of shoppers said that they or someone they know had engaged in abusive or fraudulent return practices over the past year, and 90% of retailers who’ve experienced fraud and abuse say that the rate has increased over the last 12 months.
We reached out to retail specialists who deal with returns throughout the U.S., U.K., and Australia to get a closer look at how return fraud and abuse impacts their brands, and what they’re doing about it. Here, we’ll summarize key takeaways of our findings from the U.S.-based merchants, and reveal how their responses compare to the global average.
How returns fraud and abuse impact retailers
Returns fraud and policy abuse are growing problems for brands, both in the U.S. market and worldwide. These situations involve both cases where a customer or scam artist is attempting to intentionally defraud a merchant, as well as cases where a customer is taking advantage of a retailer’s returns policy. But both situations have similar outcomes, resulting in net losses that impact the merchant’s bottom line.
Here are some of our key findings for the U.S. market, compared to global benchmarks:
Returns fraud has the highest impact on brands
- For U.S. merchants, returns fraud was the most significant problem out of three options. We found that 53% of merchants said that returns fraud was the biggest challenge to their business, followed by policy abuse (impacting 42% of merchants) and high operational costs (36%).
- This aligns with global priorities, with 44% choosing returns fraud, followed by 43% for policy abuse, and 38% for high operational costs.
Quality disputes are the most common type of returns fraud or abuse
- U.S. merchants cited quality disputes as the most common form of returns fraud or abuse, with 47% saying it topped the list for their brand. Chargeback fraud was the next most common issue (45%), followed by empty box fraud (41%), customers returning ineligible items (38%), and wardrobing (33%).
- Globally, quality disputes also topped the list, with 53% of respondents saying it was the most common issue. From there, the list deviates, with 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 are merchants responding?
It’s crucial for retailers to strike the right balance between preventing returns fraud and abuse without alienating their loyal customers with a negative customer experience. Here’s what U.S.-based merchants are addressing the issue.
The customer experience comes first
- While merchants agree that reducing incidents of fraud and return abuse is important, they’re wary of building stringent policies that will hurt their customer experience. Forty percent of respondents say they prioritize providing a great customer experience over fraud or abuse prevention. Following that, 38% prioritize the two tasks equally, while just 22% say they prioritize fraud or abuse prevention over the customer experience.
- Globally, merchants were even more committed to prioritizing the customer experience: 55% said the customer experience comes first; 25% said the two were treated equally; and 20% say they prioritize fraud and abuse prevention over the customer experience.
American retailers don’t update their returns policies frequentlyBuilding customized returns policies can be a good way to reduce return abuse and fraud without impacting the customer experience for the majority of your customers. In doing so, you can identify the products that are most frequently subject to abuse or fraud, and develop more stringent return policies for these items.
However, just 18% of U.S. merchants say they review and update their return policies monthly, compared to 33% globally. Retailers were more likely to update policies quarterly (53%), compared to 44% of merchants globally.
U.S. retailers focus on tighter return policies to stop returns abuse and fraud
- When it comes to tactics for fighting returns fraud and abuse, U.S. retailers prioritized tightening their return policies as their number one tactic (56%). Following that, 46% had required more detailed customer information for the return process; 40% highlighted the negative environmental impact of returns; 37% had permanently banned repeat offenders; and 35% had implemented return fees.
- Internationally, tighter return policies also took the number one spot (47%). However, globally, retailers were more likely to ban repeat offenders (41%), followed by implementing return fees (37%), showcase the environmental waste of returns (35%), and in last place, modify the return process to require more customer data (34%).
As we can see from the data, U.S. retailers are trying a variety of tactics to put a stop to returns fraud and abuse, but they’re cautious about impacting the customer experience in ways that might encourage shoppers to turn elsewhere.
By using a best-in-class returns management solution like Loop, they’ll be able to more easily customize their return policies and workflows to detect potential fraud, and to stop serial abusers in their tracks—without diminishing the returns experience for the rest of their customer base.
Learn more about the study, and see how Loop can help you protect your brand from abuse while delivering a superior customer experience.
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