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5 Ways you can combat return fraud today

No one wants to deter a good shopper, but at some point if a person’s returns overwhelm the value of their purchases, that retailer can risk slipping into a negative margin situation – far from ideal.

- Karen Reay, UK Marketing Manager Checkpoint Systems-06/02/2019

Everyone loves a flexible product returns policy.

Consumers feel much more confident when purchasing a product knowing they can return it. Having a robust returns policy gives your customers peace of mind so that they can confidently return items without quibble. This demonstrates that your brand is one of quality and customer commitment.

But be careful, there are some people who love a good returns policy just a little too much. While most people return a product for bona fide reasons, there are those with much more sinister goals, and this amounts to returns fraud, otherwise known as ‘wardrobing’ or ‘free renting’ - a retailer’s scourge.

 

The hard facts

According to a 2015 report published by the National Retail Federation, a company earning 1 billion dollars in annual revenue could be losing anywhere from 2.8 to 4.8 million dollars to fraudulent product returns. At brick-and-mortar stores, shoplifting accounted for 68.3 percent of return fraud in 2017, according to the National Retail Federation.

Today an increasing number of online purchases are also being returned to physical stores. This is known as BORIS — buy online return in store — this method accounted for 10.7 percent of returns in 2017 according to the National Retail Federation survey. The NRF also reports that retailers estimate a 5.5% increase in fraudulent PayPal transaction - a major warning sign to all retailers.

 

Who is affected most?

No retailer is immune, even global online retailers are reported to be closing the accounts of some shoppers for returning too many items. Although it may seem like retail fraud is a problem plaguing only large scale brick and mortar retail stores, who also have an online presence, online only retailers are also suffering they have to cover the the cost of postage while customers avoid dealing face-to-face with store staff. Recent evidence suggests the problem is spreading into other high-value product areas such as electronics and computing. New technology can also play a key role here.

Is resistance futile? Here are five fraud prevention tips to follow to cut your losses and protect your bottom line.

 

1. Rethink your returns policy

At specific points in the year, such as wedding seasons and Christmas the practice of wardrobing is at its most prolific. Making these times a retailer's worst nightmare, but what can you do? At this point it's crucial to distinguish the legitimate return from the fraudulent.

Start with temporarily, or permanently modifying your returns policy to include a holiday returns cutoff date or shortening the main returns by date. This change will encourage honest consumers to act fast, and deter any plans to use the product fraudulently before returning it.

 

2. Evidence is key

Insist your consumers present the invoice, receipt, original packaging and even the delivery note a point of return. This simple strategy will allow you to cross reference the sale with your systems, and help you avoid accepting a return for a sale your business never made, or even worse, one that may have been stolen.

 

3. The power of a photo

Social media can be a retailer’s best friend for sales and worst enemy when it comes to wardrobing. People want to be seen in the latest fashions on social media. However, the ‘wear-once’ ethos plays directly into the behavior of wardrobing. Products that are returned after a single wear often can't easily be put back on the shop floor - negatively impacting your bottom line.

Avoid fraudulent product returns by incorporating anti-tampering devices such as Checkpoint’s R-Turn Tag, which is a single-use at home removable tag that will prevent consumers from wearing something and then attempting to return it. Because nobody wants a security tag hijacking their perfect selfie.

4. Technology ‘rentals’

How do you stop the footie fan from returning their new 4K television immediately after the world cup ends, and they no longer want to ‘rent’ it?

By implementing a 'restocking' fee for returns of high end electronics and special occasion clothing, you're adding a major roadblock to a fraudster’s plan. Make sure to be selective about which products you attach this fee to so as to preserve customer good will. Focus on electronics typically purchased for seasonal events.

 

5. Check, cheque and double check

Return labels are a great way to make product returns easy for your consumers, but they're also a great way to increase fraudulent product returns. By including a free returns label in every package you send out, then providing a coupon code or voucher for a replacement product by way of a refund, you may as well give them a cheque. Instead, merge your returns database with your customer Database. Why? Because if you can’t reconcile a return claim with a customer’s history, then there’s no way you can hope to identify potential fraudsters in time to stop suspicious transactions. Instead you're opening your e-commerce business up to wide range of issues.

 

  1. ECR Community Shrinkage and On-shelf Availability Group report: ‘Buy Online, Return in Store, The Challenges and Opportunities of Product Returns in a Multichannel Environment’.

  2. https://www.forbes.com/sites/tompopomaronis/2017/12/18/how-retail-brands-are-curbing-some-sneaky-fraud-this-holiday-season/#64f680ac4791

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Som en division av CCL Industries, är Checkpoint Systems den enda vertikalt integrerade leverantören av RF / RFID-lösningar för detaljhandel. Med starkt accelererande konsumentkrav pådrivet av teknologi levererar Checkpoint intelligenta lösningar - vilket ger tydlighet och effektivitet i detaljhandeln när som helst, var som helst. Genom ett unikt utbud av mjukvara, hårdvara, etiketter, taggar och molnbaserade lösningar optimerar Checkpoint detaljhandel och effektivitet. Detta genom intuitiv realtidsdata som levereras genom försörjningskedjan och i butikerna vilket resulterar i förbättrad lönsamhet och en berikad konsumentupplevelse. Checkpoints intelligenta detaljhandelslösningar bygger på 50 år av radiofrekvensexpertis, innovativa snatteri- och svinnlösningar, marknadsledande mjukvara, RFID hårdvara, och omfattande märkningskapacitet för att märka, säkra och spåra varor från källa till hylla.