Balancing Act: Retail Return Fraud

Buy it, use it for its purpose, and then ask for your money back—a rite of passage for most teenagers’ prom outfits. Americans have become numb to the unethical and fraudulent behavior of returning well-used stuff.

But, several retailers are now cracking down on return fraud.

According to the National Retail Federation, roughly 14.5% of goods, or $743 billion, were returned last year from more than $5 trillion of U.S. retail sales. Merchants bear an additional cost of 40% of the original retail price for the reverse logistics required to put that item back on the shelf. There is no guarantee that this item will sell again, further cutting their store margins.

Retailers are responding to rising return rates: 

• Last year, 81% of U.S. merchants added return fees to offset increasing returns

• Many retailers are now using third-party loss-prevention services like The Retail Equation to track return behavior and give the software the ability to block refunds on high-risk return scores for specific customers

While retailers adapt to slow down rising return rates, they walk a fine line. In a survey, 73% of shoppers agree that a poor return experience impacts their decision to shop with a retailer in the future. Therefore, retailers must be mindful of their efforts to crack down on fraudulent returns if it comes at the expense of the overall return experience, in which many customers return items in good faith.

It’s a balancing act. Happy returns drive customer satisfaction and more revenue.

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