Today’s modern consumer has come to expect a flexible return policy as part of the online shopping experience. For retailers this means offering fast and easy returns, with little to no questions asked to meet this expectation. However, a survey conducted by the National Retail Federation revealed consumer abuse of generous return policies is costing merchants up to $15.9 billion annually.
Return fraud, or return abuse, occurs every time a shopper misuses a merchant return policy. One example of return fraud is returning an item different from what was purchased, a counterfeit or stolen item, or an item purchased from another retailer at discount. Other examples of return abuse include: purchasing multiple items with the intent to return some or all, returning an item after depleting product life, returning an obsolete item that can no longer be used or sold.
Additionally, merchants are cracking down on serial returners—consumers who habitually return merchandise. According to recent research by Brightpearl, 61% of retailers plan to ban serial returners. These retailers are analyzing individual consumers’ shopping history to flag those whose behaviors indicate potentially problematic shoppers, including: a high number of returns, returns without receipts, or multiple returns in a small window of time.
Impact of Returns on Merchants
The rising cost of returns is a dangerous problem for many retailers. In fact, US consumers returned approximately $351 billion worth of goods in 2017 alone.
When an item is returned or exchanged, it cannot always be resold at the original retail price due to damage, devaluation, or obsolescence because of the passing of time or wear and tear. Returns incur hefty supply chain costs, including return postage, packaging, shipping, and processing. Moreover, returns fraud reduces net sales, which provoke some retailers into raising prices to offset losses.
Design a Policy That Discourages Returns Abuse
The key to dealing with return fraud lies in creating distinct guidelines to separate genuine returns from fraudulent ones. There are a few steps you can take to meet customer expectations for a flexible returns policy, while protecting your business from return abuse.
The majority of online shoppers take the time to understand a company’s returns policy before completing a purchase with a new merchant. Present your return policy clearly, by defining guidelines and restrictions, explaining the returns process, the customer’s responsibilities, costs associated with the return (if any), and a standard timeline. After developing a clear return policy, be sure it can be accessed easily on your site, as well as in the customer’s shipment or receipt.
When creating a flexible policy that discourages misuse, consider the following factors:
- Applicable Accounts: Only issue returns to a payment card that was used when the purchase was made. This will help you avoid falling victim to fraud attacks.
- Condition of Returned Products: State clearly the condition in which products should be returned. (Example: merchandise should be unopened, invoice included, and tags attached)
- Exceptions: You may want to exclude from returns those products that you are unable to resell. (Example: customized products, clearance items, personal care)
It is possible to manage return abuse by implementing the right returns policy that allows flexibility for your customers, while protecting your bottom line. While a “no-questions-asked” returns policy can be attractive to new customers, keep in mind the long-term implications of accepting returns under any and all circumstances. Take into consideration the cost of returns and your particular business model when designing your return policy guidelines.