E-Receipts Contribute to Return Fraud Rates

As retailers race to provide a seamless multichannel experience for consumers, there is one are for concern - e-receipt return fraud.


The term mutlichannel (or omnichannel) is more than a buzzword. Today's consumers are accessing retailers via a variety of channels - in-store, mobile, tablets, online and through social media - and they expect to be able to have the same customer service interactions (including questions and returns) via all of the brand's properties. This is why retailers are allowing consumers to purchase an item online and return it in-store. Criminals, however, are finding ways to beat the system. 


For the first time, NRF's Return Fraud Survey asked loss prevention executives about return fraud with the use of e-receipts, and nearly two in 10 (19.3 percent) reported they have dealt with e-receipt return fraud. As online sales continue to grow, 86.0 percent said they allow customers to return merchandise purchased online in their stores, and retailers estimate 3.9 percent of those returns are fraudulent.  


"Many shoppers love the convenience and flexibility that digital receipts offer them, and unfortunately criminals are finding ways to manipulate them," said NRF Vice President of Loss Prevention Rich Mellor. "Return fraud in any form is a serious threat, and we know that retailers have made significant strides in their fight against retail crime, and are continuing their efforts working with law enforcement to address this multi-billion dollar problem."   


With the holidays in full swing, there will undoubtedly be more returns to handle. However, most survey respondents (83.1 percent) said their return policies will remain unchanged compared to last holiday season, and 10.2 percent reported they will actually loosen their policies to help ease the process for gift givers and recipients.  


Even so, return fraud is a big problem, one that costs retailers billions of dollars every year in the form of criminals who return stolen merchandise, use counterfeit receipts, or even return items already worn and/or used that are not defective.  


According to the aforementioned survey, completed by loss prevention executives at 60 retail companies, the industry will lose an estimated $8.9 billion to return fraud this year, and $2.9 billion during the holiday season alone. Overall, retailers estimate 4.6 percent of holiday returns are fraudulent.  


This problem forces many retailers to adopt policies that require customers returning merchandise to show identification (73.2 percent of respondents said they require ID when no receipt is present). Additionally, retailers estimate that 13.4 percent of the returns made throughout the year without a receipt are fraudulent. 


There are plenty of ways to reduce the sting of returns, but they typically apply to those consumers who play by the rules. 



1. Set a Return Policy


According to Brian Horakh, the founder and CEO of ecommerce software provider Zoovy, return management can make or break a midsize retailer who is trying to grow their business. Yet, many retailers have not seriously evaluated their return policies. It's imperative to have a clear returns plan in place. And this can be as part of an overall shipping strategy, too. 



2. Integrate a Virtual Fitting Room


In the brick-and-mortar world, it is common to take 10 garments into a fitting room and only come out with one that fits. For the Web, this means that when consumers don't physically try on clothes, the likelihood of them returning the item (whether in-store or through shipping), is sky high. There are new technologies, however, that attempt to remedy this problem by providing ecommerce retailers with "virtual" fitting rooms. These technologies can lower return rates by nearly 30 percent. Read about three of these virtual fitting room platforms



3. Take the Path to Least Resistance


White-hat consumers pay the price for the return fraud detailed above. It's not uncommon to feel like a criminal when trying to return something online or in-store. While it's important to set a clear return policy, it's also equally imperative to treat customers fairly. In 12 months, they may not remember what they tried to return, but they'll remember how your associates made them feel. Try to make returns and customer service as easy as possible, and your consumers will remember the experience and return to your business. Here are more tips for the ecommerce holiday season