Post-Holiday Retail Returns: Fraud Threat Looms

Post-Holiday Retail Returns: Fraud Threat Looms

Returns By the Numbers

Addressing Rising Retail Return Rates and Fraud: Enhancing E-commerce Performance

The retail industry has witnessed a concerning rise in return rates, resulting in significant financial losses for US-based retailers. In 2022, the costs surged to $816 billion from the previous year’s $761 billion. Online shopping is booming and subsequently brings with it risk factors such as ill-fitting or misrepresentation of items that have a major effect on retail return rates.

Online shopping has made impulse buying easier which resulted in customers to perceive products as having less value. Therefore, customers are more likely to return items they wouldn’t have considered buying in a physical store.

Convenience of Free Returns

Return rates peak during the holiday season. On average, 17.9% of merchandise sold is returned. This amounts to an estimated $171 billion loss for retailers. Many retailers are adopting new return policies to address the growing return rates and their impact on their bottom line. This change comes after years of subsidising returns.

Returns are no longer free. Retailers now charge customers a fee for return shipping. Some retailers don’t even cover any shipping costs and moreover, retailers such as Amazon, Target, and Walmart have adopted a “just keep it” policy. This is because the costs of processing and storing returned inventory have become too high.

Combatting return fraud

Another significant challenge with the growing return rate is return fraud. This occurs when customers return stolen items or items purchased with the intention of obtaining a refund.

Return fraud not only costs retailers billions of dollars annually but also drives up prices for honest customers. The National Retail Federation estimated in 2021 that return fraud accounted for 10% of the $761 billion in returned merchandise. This $10.30 loss for every $100.00 in returned inventory was a significant contributor.

Lenient return policies contribute to the deceptive behavior in returns.

Many retailers have implemented the “no questions asked” return policies, allowing customers to return items for any reason without requiring proof of purchase. Consequently, “wardrobing” has become more prevalent, where customers purchase items with the intent to wear them once and then return them.

A report by marketing firm Navar revealed that nearly two-thirds of consumers engage in deceptive behavior in returns, with only 35% strictly adhering to return policy rules, while 60% are identified as “rule benders.” The report recommended enhancing convenience for consumers, establishing additional checkpoints throughout the return process, personalizing the customer experience, and offering suitable loyalty incentives.

Enhancing Retail Performance with Entrupy Fingerprinting Technology

Retailers are taking proactive measures to combat return fraud, including implementing stricter return policies and leveraging technology to track returns. Some retailers employ supply chain tracing technology to monitor individual items, enabling the identification of suspicious activity. Retailers use data analytics to identify suspicious behavior. Examples of such behaviour include frequent returns without receipts, or returns of worn or used items.

To mitigate losses from return fraud, retailers can turn to Entrupy Fingerprinting. Entrupy’s computer vision and microscopy-based technology provide retailers with a powerful and non-intrusive way to identify particular products.This solution is effective and efficient. Entrupy Fingerprinting quickly identifies if a returned item is the same as the purchased item. This speeds up return processing and enhances customer satisfaction. Furthermore, it strengthens the security of the supply chain. Implementing this solution is simple, requiring only a handheld scanner.

Entrupy Fingerprinting provides a 100% accurate way for retailers to manage their return policies. It reduces their need to rely on human expertise, static knowledge, and traditional tagging solutions. These solutions are often exploited by malicious actors. Retailers can use this innovative technology to improve their e-commerce performance. It helps to stop return fraud and ensures a safe and smooth return process for their customers.

Returns By the Numbers
Increasing return rates with online shopping
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