Combating Returns Fraud: Addressing a Growing Challenge for Retailers and Vendors

A recent survey conducted by Loop between June 5-11, 2024 highlights that returns fraud is a pervasive issue significantly affecting retailers. According to findings from a survey conducted by the return management platform Loop, which included over 600 full-time retail employees from the U.S., U.K., and Australia, nearly all respondents (99%) reported that their company experienced some form of returns fraud or policy abuse in the past year.

The survey reveals that returns fraud (44%) and policy abuse (43%) are currently viewed by respondents as the most impactful challenges facing their companies, surpassing other concerns such as operational costs and supply chain issues.

Respondents believe that the primary reason consumers engage in returns fraud is economic pressures, which lead shoppers to exploit return policies to improve their financial situation (43%). Additional reasons include dissatisfaction with product quality (41%) and the intent to use items temporarily before returning them (35%).

Key insights from the report include:

• Quality disputes (53%) are the most commonly reported type of fraud/policy abuse, followed by attempts to return ineligible items (44%) and wardrobing (38%), where customers purchase apparel with the intent to return it after short-term use.
• A significant majority (94%) of respondents agree that their company is taking the rise in returns fraud and policy abuse seriously. However, fewer than half (46%) rate their company’s prevention and detection measures as “very effective.”
• Over half (55%) of respondents state that their company prioritizes customer experience over fraud and abuse prevention, with 52% identifying “maintaining a good customer experience” as the top challenge when addressing returns fraud or policy abuse. The most common responses to these challenges include tightening return policies (47%), banning repeat offenders (41%), and implementing return fees (37%).

A previous consumer survey conducted by Loop revealed that 39% of respondents admitted to either engaging in fraudulent return behaviors themselves or knowing someone who had within the last year.

Loop suggests that retailers combat returns fraud by analyzing consumer behavior, educating customers on what constitutes fraud, setting clear consequences for policy violations, and thoroughly reviewing all returns data, including at the warehouse level. Jonathan Poma, CEO of Loop, emphasized the financial impact, stating, “For every $100 in returned merchandise, retailers lose $10.40 to returns fraud. Retailers are adopting comprehensive strategies to mitigate this issue, with a data-driven, tailored approach proving essential in reducing fraud while still delighting legitimate customers.”

Contact me today to discuss how we can tailor a solution that meets your specific needs and helps your business thrive. Let’s turn returns into a growth opportunity together. Reach out now, and let’s start transforming your returns process for the better.

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