Returns fraud is a major issue
A new survey reveals returns fraud is a widespread problem having a significant impact on retailers.
According to "The Rise in Returns Fraud," a survey of more than 600 full-time retail employees in the U.S. U.K. and Australia from return management platform Loop, virtually all (99%) respondents said their company has experienced some type of returns fraud or policy abuse in the past 12 months.
The survey also indicates that respondents identify returns fraud (44%) and policy abuse (43%) as the top trends having the most significant impact on their companies today, outranking factors like operational costs and supply chain challenges.
The reason consumers engage in returns fraud most commonly cited by respondents is because the current economic climate is leading shoppers to try to exploit return policies to improve their financial situation (43%). Other factors mentioned by respondents include dissatisfaction with product quality (41%) and an intent to use items only temporarily (35%).
Additional key findings from the report include:
- Quality disputes (53%) was the most common type of fraud/policy abuse respondent companies experienced in the past 12 months, followed by customers attempting to return items that weren’t eligible for a return (44%) and wardrobing (purchase of apparel with intent of returning after single or short-term use - 38%).
- Almost all respondents (94%) agree their company is taking the rise in returns fraud and policy abuse seriously. However, less than half of respondents (46%) rate their company’s detection and prevention measures as “very effective.”
- More than half (55%) of respondents say their company prioritizes customer experience over fraud and abuse prevention, and 52% indicated that “maintaining a good customer experience” was the top challenge their company faces when addressing returns fraud or policy abuse.
- Tightened return policies (47%), permanently banning repeat offenders from making future purchases (41%) and implementing return fees (37%) are the most common actions taken in response to returns fraud or policy abuse.
A consumer survey previously conducted by Loop revealed 39% of respondents admitted to having either engaged in return policy abuse or fraudulent behaviors themselves in the past 12 months or knowing of someone who had.
Loop advises retailers seeking to reduce return fraud to take steps including examining consumer behavior, improving education for consumers about what constitutes fraud, establishing clear consequences for customers and reviewing all returns data, including at the warehouse level.
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"The challenge is enormous," said Loop CEO Jonathan Poma. "For every $100 in returned merchandise, retailers lose $10.40 to returns fraud. Retailers are implementing sweeping changes to address this drain on their bottom line, and our insights show that a data-driven, customized approach is key to reducing fraud while delighting genuine customers."
Loop conducted the survey between June 5-11, 2024.
