Sign In
Request Demo
Menu
Sign In
REQUEST A DEMO

Ecommerce Returns Fraud: How to Prevent Wardrobing & Product or Tag Switches

Chelsea Duhs
Updated 11/11/20 6:07 PM

Returns are an inevitable part of ecommerce, and allowing easy returns is extremely important to consumers. But when returns are fraudulent, it is vital to employ loss prevention measures adapted to the needs of ecommerce.

The anonymity of online shopping has emboldened deceitful consumers with the faceless nature of online returns. Some feel that their behavior is a just a type of friendly, harmless fraud.

These customers take advantage of the returns process by deceiving businesses, causing loss of profits and inventory devaluation.

Despite this being dismissed by some as merely the cost of doing business online, you can take preventative measures by identifying types of returns fraud and implementing proactive solutions to deter these behaviors.

Types of Returns Fraud

  1. Wardrobing / Wear & Return
  2. Snap and Send Back
  3. Counterfeit Product Switches
  4. Cross-Retailer Returns
  5. Tag Switching

1. Wardrobing / Wear & Return

Fraudulent returns in the category of wardrobing, or wear and return, occur when a consumer buys merchandise, uses it briefly, and returns it for a full refund. Consumers are committing online shoplifting by purposely returning the non-defective item, effectively having used it at no cost.

Parties, family photos, and special occasion events like proms are prime targets for wardrobing returns fraud.

Some clothing manufacturers make this practice even easier for customers by using tags attached with petite safety pins or cord neatly tied in a double knot that can easily be removed and reattached to an item without any evidence of tampering.

An often-overlooked category is preowned items, sold on a variety of online marketplaces, which have no tags and show existing wear. Assuming a flexible 30 or 60 day return policy, preowned items are highly susceptible to wardrobing because there is no evidence of returns fraud to cover up and the buyer has ample time to wear and return.

2. Snap and Send Back

Driving the phenomenon of snap and send back is social media and the desire to post new and on-trend outfits of the day, #OOTD. Influencers, looking for engagement from their followers, feel the pressure to maintain their status and defraud businesses by only wearing items for a photo op and then returning them.

This false reality leads to broad social pressures to keep up with fashion bloggers and the hesitancy to be seen in the same outfit twice. But without access to an unlimited budget, clothing, shoes and accessories are fraudulently “borrowed" from retailers when purchased only to be photographed and returned for a full refund.

Snap and send back has become so prevalent that ASOS announced tracking social media accounts of serial returners and blocking those abusing their return policy.

3. Counterfeit Product Switches

The rise of ecommerce has contributed to the proliferation of counterfeits circulating the market. While counterfeiting is certainly not new, shoppers can more easily purchase fake items from third-party sellers.

The concern for ecommerce businesses is that a scammer may buy a counterfeit item for a fraction of the authentic item's value, purchase the real thing from an authorized seller, and then return the fake to that seller for a full refund.

Adding to this issue is recently confiscated counterfeit merchandise by customs and border officials, as it appears extremely genuine and more challenging to detect.

With return rates hitting 30% in some categories, even the most conscientious ecommerce retailer could miss the counterfeit switch. As a result, they might inadvertently place the product in the reverse logistics channel, and put their reputation on the line by reselling it to an unsuspecting consumer.

4. Cross-Retailer Returns

Another example of fraudsters exploiting loopholes happens with cross-retail returns. In this scenario, the consumer takes an item that has either been stolen or purchased elsewhere for a lower price and initiates an in-store, non-receipted return refunded to a gift card or as cash.

This practice is most prevalent during the holidays, when stores are busy and price promotions are commonplace.

5. Tag Switching

Items tagged with a traditional plastic barb are most at risk from being fraudulently returned. Abusing the returns honesty system can be done with a 1000-barb tagging gun kit purchased on Amazon for $4.69.

Tag switching allows the dishonest buyer to return less expensive but similar-looking items at higher prices easily and repeatedly.

New Returns Fraud Solution

Ecommerce businesses are increasingly walking a fine line between consumers' demands for more flexible and lenient returns policies while also alleviating the risk of returns abuse.

Achieving balance is possible with a new single-use return tag that deters returns fraud without penalizing honest shoppers with harsher policies.

360 ID Tag: a Single-Use, Tamper-Evident Return Tag

Invented by an eBay seller looking to protect designer merchandise from unscrupulous buyers, the 360 ID Tag is a win-win for both consumers and businesses fighting against returns abuse. The patent-pending return tag gives ecommerce retailers a low-cost, practical, and easy-to-use loss prevention tool, strengthening their existing return policies.

The 360 ID Tag is fraud-proof and designed to stop wear and return, wardrobing, price tag, and counterfeit product switching outlined above. Ecommerce businesses can still offer great returns experiences to their valuable, honest shoppers while detecting and deterring returns policy abuse by scammers.

How the Return Tag Works

A 360 ID Tag pack includes a 164' roll of tag material, dispensable to the required length, and uniquely numbered tamper-evident security seals. Even in the unlikely instance where a consumer has a supply of 360 ID Tags, the return tag is non-transferable due to the serial numbers.

The tag material is malleable and easily loops through merchandise without risk of damage, and the tamper-evident security seal reveals an obvious VOID pattern when altered or removed. Customers who receive merchandise with a 360 ID Tag attached can freely try on and assess the item while at home.

Once they have committed to keeping and wearing or using the merchandise, the tag is removed with scissors or by peeling back the seal. Customers who wish to return their purchase leave the 360 ID Tag intact, making for a predictable, faster, and less labor-intensive return process.

Benefits to Ecommerce Merchants

The measurable payback to businesses using the 360 ID Tag comes from handling fewer fraudulent returns. While adding a 360 ID Tag to items takes a minute or two at the front end of the sales cycle, businesses can take this proactive step and minimize their exposure to those looking to abuse flexible returns policies.

The benefits of receiving returned merchandise in sellable condition and not devalued by wear or use are substantial. Businesses can recoup the small upfront cost of adding the return tag by lessening the labor burden of handling returns and inspection of merchandise for authentication or signs of use.

Ecommerce businesses also reduce their exposure to fees, particularly with PayPal. As of October 2019, PayPal is no longer returning the original payment processing fees to merchants when they issue a customer a refund.

Additionally, a reduced volume of returns aligns with the latest consumer-demanded market trend towards sustainability, with lower environmental impact due to fewer carbon emissions and fewer products ending up in landfills.

The anti-return fraud tag starts at just 22 cents per use and is available in 2 widths – 10mm or 22mm. The 360 ID Tag can also be customized for larger orders with a business' logo and return policy.

About 360 ID Tag

Returns fraud prevention and creating a fair-trading environment for sellers and buyers were the driving force behind the tamper-evident 360 ID Tag. The anti-returns fraud tag is a loss prevention tool for businesses fighting against brazen consumer behaviors like use or wear and return, wardrobing, online shoplifting, and counterfeit product switching.

Request more information about the visible on purpose 360 ID Tag, including customization options.

10-simple-steps-for-smarter-returns-management-cta