Amal Ahmed at ecommerce fraud protection platform, Signifyd, highlights the steps that merchants can take to avoid ecommerce return fraud.

While returns have always presented a customer experience and a profit margin challenge for online retailers, returns have taken on a new urgency as fraudsters and malevolent consumers have intensified their efforts to take advantage of retail return policies for financial gain.

As ecommerce has grown in the pandemic — currently up 54% in Europe year-over-year, according to Signifyd data — so have returns. Naturally, some returns are justified —the wrong size, an unexpected colour, a texture that’s not quite right.

But a portion are the result of criminal actors and malicious customers. Their goal: to both keep the product they ordered and receive a refund for it. They repeatedly return packages that contain broken, old or cheap imitations of products. Some retailers, who offer instant returns, even report receiving boxes filled with sand, rocks or other useless items meant to mimic the weight of the item supposedly being returned.

A Solution to the Return Fraud Problem

When retailers are being confronted with new threats, they need new ways to protect themselves. Protecting the enterprise from return fraud is particularly challenging, given the importance that legitimate —and valuable — customers place on the ease of returns when making a buying decision.

Retailers don’t want to add friction to the return process and risk turning legitimate customers away. And retailers especially don’t want to refuse to accept a return from a legitimate customer and risk losing that customer for good.

Just how important are returns and the policies around them when it comes to consumers? In a survey conducted for Signifyd by market research firm Upwave, 57.3%of consumers said a retailer’s return policies have a major or moderate bearing on where they shop. Moreover, 75% said they would stop shopping with a retailer based on a bad return experience.

Your Return Fraud Strategy

So, given the high stakes, what can retailers do to protect themselves? Here are a few basic steps that will get retailers moving in the right direction when it comes to providing a friction-free experience while protecting the business.

  1. What’s your definition of return fraud?

    Be sure you understand your comfort level with risk and the potential for loss to return fraud. Creating a “one-size-fits-all” return policy is not recommended. Why? Not all returns come with the same level of risk. You don’t want to treat loyal customers and criminal actors the same when it comes to returns. Try to ensure your level of caution aligns with the level of risk.
  1. Where do you find that returns are costing your store the most? Monitor your SKUs to see if there are any patterns in your returns. Are certain products frequently returned? Is there something about the product that makes it especially attractive to return fraudsters? Is it easy to replace with a counterfeit substitute, for instance?

  2. Are career criminals attacking your retail business? Are your fraudulent returns coming from “customers” who you can identify as engaged in similar behaviour on other retailers’ sites? This insight requires cooperation from other retailers — perhaps other brands under a common corporate parent or other non-competitive and cooperative retailers.

  3. Watch for common signs of return fraud.
  • Return history: Do you notice a pattern of returns during a short span of time right after the original purchase? Note how often this occurs.
  • The returned item is returned from an address different from the delivery address. Signifyd has recently seen cases where merchandise that was supposed to be delivered to the north western United States was being returned from the southwestern United States, for example. This is a red flag that raises two key questions:  (1) Why is this merchandise being shipped from somewhere other than its delivery address? (2) What merchandise is actually being returned to you?
  • Return package weight: Is the returned package the same weight as the original? Signifyd has data that shows patterns of returns where the return package does not match the original stated weight. If the weight isn’t right, there is a high risk that your retail outlet is receiving an empty package, a knock-off product or a package weighted down with sand to approximate the original product’s weight.
Signifyd Checkpoint Return

Staying on top of return fraud is not easy. The threat of return fraud varies by retail vertical, product and price. Knowing whether a return is coming from a new customer, a known customer or a loyal customer says a lot about the relative risk you should assign to a particular return. Again, retailers don’t necessarily want to rely on a one-size-fits-all approach to returns.

As ecommerce and the technology that supports it evolves, retailers don’t have to rely on gut instinct and case-by-case reviews to assess the risk of any given return. Signifyd customers, for instance, are turning to its intelligent and automated solution, which will do the work of detecting return fraud. Signifyd has expanded its machine-learning technology to assess the risk involved with return requests.

It’s a distinct advantage in the competitive world of ecommerce to have the right tools that use data to help you measure your risk for return fraud and guide your decisions to help you avoid the problem from the start. Creating a long-term, flexible strategy will allow you to avoid losses while building goodwill with some of your best return customers.

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