Almost all (99%) retailers globally have experienced some type of returns fraud or policy abuse in the past 12 months, compared to 60% in Australia, according to a new survey from leading return management platform, Loop.
The results provide insights into how retailers feel about the escalation of returns fraud and policy abuse, as well as the preventive measures they’ve already taken or would be willing to take moving forward to combat the issue.
Retailers believe the primary reason consumers engage in returns fraud is because the current economic climate is leading shoppers to try to exploit return policies to improve their financial situation (43%). Other factors include dissatisfaction with product quality (41%) and an intent to use items only temporarily (35%).
In Australia, quality disputes (66%) was the most common type of fraud/policy abuse companies experienced in the past 12 months, followed by wardrobing and returning an item with the intention of keeping it (both 47%).
Almost two-thirds (65%) of Australian retailers agree their company is taking this rise in returns fraud and policy abuse seriously. However, only half of retailers (53%) rate their company’s detection and prevention measures as very effective.
Nearly three in four (74%) Australian retailers say their company prioritises customer experience over fraud and abuse prevention, and 51% indicated that ‘maintaining a good customer experience’ was the top challenge their company faces when addressing returns fraud or policy abuse.
Permanently banning repeat offenders from making future purchases (46%) and highlighting the negative environmental impact of returns (40%) are the top actions Australian retailers are taking to combat returns abuse.
The report also offers actionable insights for retailers and details the steps they can take to better cope with the issue of returns fraud and policy abuse. These include examining consumer behaviour as a primary defense mechanism, improving education for consumers about what constitutes fraud, establishing clear consequences for returns fraud versus policy abuse and reviewing all returns data.
“Our latest industry data report reveals a notable rise in returns fraud and policy abuse over the past year, highlighting the importance of understanding consumer behaviour not just in purchasing, but also in returns,” Loop CEO, Jonathan Poma said.
“The challenge is enormous – 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, customised approach is key to reducing fraud while delighting genuine customers. “Leveraging tools like advanced fraud detection models and return fees can provide merchants with the resources they need to not only mitigate these issues, but also improve their return processes as a whole.”