Types of eCommerce Return Frauds and How to Prevent Them
Updated: Dec 8, 2022
Introduction: What is Return Fraud?
Online stores have to deal with tough competition, angry customers, and fraudulent requests. While these are all problems that business owners need to tackle, at least they can take solace in the fact that there are a lot of ways to prevent return fraud.
88% of shoppers want to be able to return products. Moreover, 95% of them say this is the main thing that would convince them to buy again from the same retailer.
The main reason why you want to accept returns is that it helps establish a connection with your customers. It also makes them more loyal to your brand and boosts your reputation online. This article will review some of the most common return frauds and let you know how to prevent them.
Common Types of Return Fraud
Return fraud can take a variety of forms and falls on a spectrum. At one end you might have someone who, for example, has accidentally bought the wrong item. On the other, you have people running a large-scale scam by intentionally buying products en masse in order to manufacture refunds from them. Here's an example of what that might look like:
Wardrobing or Free renting - Wardrobing is the act of buying an item and wearing it, only to return it later. Consumers may see it as a victimless crime and 20% of UK shoppers admit to this behavior.
Deliberate fraud or empty box fraud - Deliberate scams like this are a problem for many retailers. They order expensive products, ask for a return (but send back an empty box or defective product), and keep the original item.
Returning used or stolen merchandise - Many fraudsters use the same company to commit crimes across a variety of channels. Another growing omnichannel retail fraud trend involves returning stolen merchandise without receipts and claiming the item was a gift or defective. In some cases, fraudsters will receive a full refund without returning anything at all.
Bricking - Typically, people return electronics to retailers for a refund once they've dismantled them for the valuable parts, and re-selling them for profit and pocketing the refund fee.
Chargeback fraud - chargeback fraud is widespread in e-commerce purchases. When a customer places an order online and disputes the charge, they claim that they never received their purchase or didn't authorize the purchase.
How Can Retailers Prevent These Frauds?
Return frauds are a major issue for retailers. It is estimated that retailers lose $10 billion annually to return frauds. Regardless of the reason, it is important for retailers to have clear and fair policies in place when it comes to returns and refunds so they can reduce the amount of money lost due to fraudulent returns. Retailers can reduce the number of return frauds by -
Rethinking return policies. For return policies, consumer protection policies exist, but you can sometimes mitigate threats by following the guidelines. For example, if you are a retailer and someone returns an electronic item, by weighing it upon their return and comparing it to its original weight you can eliminate the possibility that they damaged or stole the item before returning it.
Eliminating cash refunds. You can also minimize fraud by limiting cash refunds as much as possible. To do this, consider offering customers store credits plus some discount when they return products for cash refunds. Alternatively, you can allow them to exchange the product they’re returning with another product of their choice, as long as prices remain the same.
Reading their buyers’ digital footprint. Digital footprint analysis is a relatively new field in fraud prevention. It has been around for a while but industry-grade tools were expensive and complex to integrate. Today, they are much easier and cheaper to access, making them common among most large eCommerce brands.
We Help Your Combat Counterfeits Returns
Counterfeiting is a longstanding problem on major marketplaces. Return Helper has over 13+ overseas warehouses to accommodate your international/local returns. After receiving your returns, we do inspections to make sure these items are not counterfeits, missing any pieces, damaged by misuse, and more. This prevents your business from losing profits, and makes sure your returns won’t be handed to the next customer.