Vaishali Ravi
·December 4, 2024
Return theft, also known as returns fraud, is a serious and growing problem for ecommerce businesses.
It takes many forms, including:
We recently conducted a study on returns fraud and abuse, and found that 40% of respondents had, or knew someone who had, used fraudulent or abusive practices on merchants in the past year. Of the merchants we spoke with, 90% said that such practices have been occurring with greater frequency in the past year.
Similarly, the National Retail Federation found that returns fraud had increased by 20% from 2022 to 2023—resulting in $101.91 billion in losses last year.
As a merchant, how can you proactively manage the impact of return theft on your business, while still delivering a great returns experience for your honest shoppers?
Here are some strategies to put in place:
Pay attention to your returns data to create a returns policy that will give shoppers confidence in your brand, while mitigating the impact of fraud and abuse. For instance, you might offer shoppers a generous 45 day return window—but require that all apparel, intimates, and swimwear are still in new-with-tags condition, to discourage customers from bracketing or wardrobing your items.
Using Loop, you can set up different returns workflows for different product categories, and require shoppers to answer questions about the item condition and reason for return before sending it back. These workflows can make it easy for customers to self-service their returns, while providing a powerful tool to prevent them from sending back items that aren’t eligible for refunds.
Bracketing is one of the most common forms of return theft, but it’s often well-intentioned: Shoppers regularly purchase multiple sizes of an item if they’re not sure which one will be the right fit. By providing detailed measurements and sizing recommendations on all of your products, you’ll be able to help shoppers feel more confident in their purchase, which may stop them from ordering multiples in the future.
Returns data gives a clear signal on sizing issues. Pay close attention to see which items are driving sizing based returns and address these with the manufacturer or on your product listing.
If you’re in an industry that’s notorious for returns theft, such as high-value jewelry, it’s important to put practices in place to verify that a customer is returning the correct item, and that it’s in new condition, before granting a refund. While you might automatically refund customers for low-value items as soon as they are scanned in for shipping, with high-value or fraud-prone items, you can require inspection at your warehouse or 3PL before granting a refund. This will help you ensure the item’s legitimacy, and protect your brand from falling victim to fraud.
At Loop, we’ve been building our own proactive fraud model to detect potential return theft—giving you the power to stop it in its tracks. We’ll identify return requests that don’t pass our sniff test, such as return requests to a new method of payment and other red flags. As a merchant, you can either automatically block such requests, or manually review them to determine whether they’re trustworthy or not. Although the technology is new, we’re already correctly flagging 62% of fraudulent returns and 87% of fraudulent return value, and the model is improving all the time.
Reduce loss to fraud
Learn moreWhen customers are taking advantage of your returns policy, implementing fees on return shipping can provide a healthy disincentive to discourage them from purchasing products that they’re likely to return. Don’t be afraid that return fees will scare off loyal customers: Over 60% of Loop merchants now charge return fees, with no decrease in repeat customer rate.
By using our new product, Offset, you can ask your shoppers up front if they’d like to purchase free returns later, leading to a better customer experience and helping your brand protect your profit margins.
With a best-in-class returns management solution, you don’t need to choose between reducing returns theft and delivering a great customer experience. Loop makes it easy to determine the right course of action for every return request, so that you can delight your loyal shoppers with a great experience while stopping would-be abusers in their tracks.
The end result? Happier customers, reduced return theft, and healthier profit margins.
Ready to learn how Loop can help? Book a demo.
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With Loop, your brand can offer everything from refunds to direct exchanges to shopper incentives and more. Even better? These exchanges build your business.