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5 Steps to Combat Return Fraud

Peter Sobotta
Updated 01/06/20 8:25 PM

5 Steps To Stop Return Fraud

Everyone loves a good product returns policy.

Consumers feel much more confident when purchasing a product knowing they can return it. Having a solid returns policy allows your customers to gain a sense of security and flexibility, which in turn shows your brand to be one of quality and commitment.

But be careful, there are some people who love a good returns policy a little too much.

Retail Return Fraud Online

While most people return a product for bona fide reasons, there are those with much more sinister goals.

  • 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.
  • Although it may seem like retail fraud is a problem plaguing only large scale brick and mortar retail stores, online retailers are also suffering. In fact, the NRF also reports that retailers estimate a  5.5% increase in fraudulent PayPal transactions—a major warning sign for online retailers.

So, how do you protect yourself from this plague ? Here are five fraud prevention tips to follow to cut your losses and improve your bottom line.

1. 'Tis The Season (To Modify Your Returns Policy)

As you may have guessed, the holiday season is a retailer's worst nightmare. With such an influx of product returns, it's important to distinguish the legitimate from the fraudulent.

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

Furthermore, you can place restrictions on popular or high volume orders, asking them to be returned within a shorter period of time.

2. Receipts, Receipts, and more Receipts.

Always ask your consumers to return the invoice or receipt they received with their product. 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. 

3. Sharks?

We've all heard the story of the teen who purchased an expensive dress, wore it once, and then returned it— retailers refer to this form of return fraud as "wardrobing.

Products that are returned this way often can't be put back on the market— negatively impacting your bottom line.

Avoid fraudulent product returns by incorporating anti-tampering devices such as the Shark Tag, which is a one-time at home removable tag that will prevent consumers from wearing something and then attempting to return it.

4. Add A Little Bit of Cushioning

How do you stop that sports fan from returning their new 4K display immediately after the Super Bowl?

By incorporating a 'restocking' fee for returns consisting of high end electronics and special occasion clothing, you're adding a major roadblock to a scammer's plan.

Make sure to be selective about which products you attach this fee to. Focus on electronics used for seasonal events and fashion items that are typically worn to higher end functions.

5. Don't make it easy.

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 return label in every package you send out, you're opening your eCommerce business up to wide range of issues. Consider alternate options that may actually be better for the customer in the long term.

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