Retail reality check: Fraudulent returns peak during the holidays


Here are three ways to keep dishonest returns from spoiling your holiday season sales.

Imagine opening a returned package and finding a piñata where a PC should be, or dealing with customers who want a full refund on their newly purchased 60-inch flat screen TV – the day after their Super Bowl party.  

According to the most recent National Retail Federation data, holiday season return fraud alone is estimated at $3.8 billion.

Those are two real-world examples of fraudulent returns from that help to highlight a troubling trend: Fraud in retail is on the rise.

What's more concerning, cases of fraud naturally peak during and after the holiday season. According to the most recent National Retail Federation data, holiday season return fraud alone is estimated at $3.8 billion.  

While new, chip-based credit cards are making it harder for thieves to make counterfeit cards, the new technology doesn't provide much help in terms of online transactions. Even worse: after Oct. 1, 2015, retailers that haven't upgraded their point-of-sale terminals will be liable for fraud at their stores.  

But the real issue, according to the NRF study, is the criminals who take advantage of relaxed return policies. Some 95.6 percent of retailers surveyed have experienced from some form of fraud. Nearly three-quarters (72 percent) of retailers have been victims of "wardrobing," or the return of used, nondefective special occasion apparel and electronics.  

"You need to strike a balance between an approach to returns that is customer-centric and still protects the company," says Jim Brill, UPS reverse logistics marketing manager. He shares these tips that will help guard against returns scammers:

1) Tighten your returns policy.  

"Retailers need to make it clear to customers (in easy-to-understand language) what merchandise they will, and will not, take back," Brill says. "If clothing has been worn or the package has been opened, it can't just be put back on the shelf, and reworking it costs money." Some retailers take back anything, anytime, for any reason, he says. "That's noble, but it affects the bottom line, and exposes them to customer abuses."

2) Consider adding "speed bumps."  

With high-value merchandise, such as computers or other high-tech gear, it may be best to require customers to call in for a return merchandise authorization (RMA).  "The customer service people can ask questions aimed at determining the real reason for the return, and possibly salvage the sale with specific troubleshooting," Brill says. "Human intervention can act as a deterrent."

3) Promote return-to-store.  

"Omnichannel retailers should remind online buyers that returning purchases to a nearby store is more convenient and a faster way to get a refund or store credit," Brill says. Having to make a return in person will help to deter fraud, while in-store returns present an opportunity for additional sales. According to a recent UPS survey, 70 percent of online shoppers said they had purchased something else during an in-store visit to return merchandise.

Click here to learn more about the ways you can maximize your return policies and procedures this holiday season. And to browse some of UPS's essential retail returns resources, click here

Learn more about how returns affect customer loyalty in this UPS white paper.


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