The Dangers of Returns Scams and How Retailers Can Guard Against This Online Fraud

The growth of e-commerce has led to an inevitable increase in returns – but also in fraudulent returns. These scams can make the already-expensive process of returns into a huge revenue drain, while eroding brand integrity. In order to protect against these fraudulent activities, brands need to re-evaluate their policies and implement safeguards.

“The growth of e-commerce as has been a key contributor to returns related fraud during 2020 and into this year,” said David Malka, chief sales officer at returns solution goTRG. “Some prevalent fraud practices related to online returns include bait and switch, gift card fraud, and chargebacks. Additionally, retailers are recognizing that sometimes it’s more costly to process a return for a lower value item, and have begun to let consumers keep or donate these un-economical products.”

Returns are already a very costly area for most retailers; footwear is particularly vulnerable, due to the wear and tear that occurs more easily than with other apparel items. If an item is returned, even within all policy guidelines, it may be difficult or even impossible to remerchandise if there are visible signs of prior use. Items that can be resold must still be processed, which is both time consuming and expensive.

But return scams abuse those policies, in various ways. A consumer may return a different item than the one they purchased or an incomplete item; some consumers may send an empty package or falsely claim they have filed a return at all.

Processing incorrect items does not just create a loss of merchandise, but can also delay warehouse operations while staff resolve the issue. And retailers are particularly vulnerable at this time of year, when returns are at peak volume. Savvy fraudsters will know to take advantage of overburdened employees and try to sneak past the safeguards.

Woman using credit card and laptop computer for shopping online at home
Flexible returns policies can improve the customer experience, but these can be abused if retailers aren’t careful.
CREDIT: Natee Meepian - Adobe Stock

“Retailers are trying to process product as fast as possible to maintain a stable flow and prevent their warehouses from getting clogged up with items, and therefore it’s inevitable that mistakes will happen,” said Malka. “Additionally, staff that worked around the clock to process these orders as they were going out the door might be fatigued.”

Fortunately, retailers can take steps to reduce their vulnerabilities. By investing in their returns process and streamlining operations, businesses can make their system as lean as possible and reduce the likelihood of internal error. This will also make it easier to identify suspicious activity and intervene.

Shopper data can also be analyzed, in order to detect who the serial returners are within the customer base. Once a retailer knows who are the high risk consumers, they can decide whether to introduce restrictions or limit the number of returns allowed – or simply keep a closer eye on that customer.

Lastly, Malka recommends that retailers communicate with their customers about the impacts of returns. With greater visibility into the economical and operational drain of reverse logistics, consumers may think twice about sending back product. Additionally, there is an environmental component; brands with a strong sustainability mission may want to highlight the carbon footprint associated with excess shipping.

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