HONEST shoppers are being punished by a surge in retail fraud and abuse, as retailers move to tighten return and refund policies in a bid to combat a $30 billion problem each year.
New research from e-commerce technology company Riskified found global retailers are grappling with a huge uptick in returns policy abuse, in which customers knowingly exploit or manipulate a merchant’s terms and conditions for personal gain.
Riskified’s Chief Marketing Officer Jeff Otto said retailers were cracking down on generous returns policies[/caption]
Target is winding back its lenient in-store returns policy (stock image)[/caption]
Walmart ended its pandemic-era returns policy in response to fraud (stock image)[/caption]
Following high level interviews with over 500 senior directors and large e-commerce businesses, Riskified compiled data which estimates returns, refunds and exchanges are costing retailers a whopping $394 billion with at least $28 billion due to fraud and abuse.
Some examples of this behavior by customers include ordering multiple sizes and colors with an intent to return most items, claiming an item was not received or returning an item that has been worn for a full refund.
In response to this surge in losses, retailers are winding back generous returns policies – first introduced during the pandemic – which experts say is harming shoppers who are doing the right thing.
Riskified Chief Marketing Officer Jeff Otto said the “generous policies at all costs” era was over.
MAJOR BRANDS CRACKING DOWN
Target recently announced a significant change to its in-store returns policy which has caught many loyal customers off-guard.
While shoppers can still return unopened items in excellent condition within 90 days, the store has now reserved the right to refuse returns, refunds and exchanges if they are suspicious of fraud.
This includes cases where customers present a valid receipt, but still may be flagged if the store believes the shopper is gaming the system.
The departure away from a lenient returns system comes as the major brand cracks down on rising fraud.
Walmart has also reverted back to pre-pandemic returns policy, after the major brand extended its returns rules granting shoppers four months to return items they purchased.
Online clothing retailer ASOS has also introduced a returns fee for people who frequently send items back.
The retailer blamed the levels of returns as “unsustainable” with online shopping generating 4.8 times more packaging than brick and mortar shopping.
While there has been a rise in mom and dad shoppers doing the wrong thing, the new research found refunds abuse and fraud had become much more prolific driven by forums like the Dark Web and availability of malicious generative AI tools.
Riskified partnered with Opinium Research who spoke to executives in seven major ecommerce markets including the US, UK, France, Mexico, Brazil and Australia and New Zealand.
Riskified’s research found middle-aged, middle-class shoppers were the most likely to participate in “white lie” fraud driven by a sense that “everyone else was doing it.”
According to the research, 84% of merchants said it was harder to identify fraudulent activity today while 76% agreed policy abuse was becoming more sophisticated.
GOOD SHOPPERS PUNISHED
Otto said good shoppers were being unfairly punished, as stores retract generous returns policies.
What has happened is these merchants are realizing the financial impact they have absorbed, and now they are changing their policies back
Jeff Otto
“We are seeing a retraction, and these retailers are not offering the generous refunds or returns policies that they used to.
“They’re doing it in a blanket way, and that hurts good consumers along with unethical and bad consumers. It is a blunt instrument, punishing everyone for the crimes of a few.”’
Otto said there was a different way to handle this abuse, rather than seeing good shoppers punished by a few bad eggs.
Retailers can use Riskified, which protects shoppers and retailers by using AI to detect whether fraud is at play.
Many companies are already using Riskified, including Wayfair, Booking.com, Shein, GoPro, Macy’s, Uniqlo and Capital One.
