THE TAG BLOG
Return Policy Abuse: 5 ways consumers are taking advantage
FEBRUARY 28 2022
SPOTLIGHT ON RETURN POLICY ABUSE
Returns are notorious for being a logistical nightmare and cost burden for e-commerce businesses, with consumers insisting on free return shipping and no questions asked refund policies. What began as well-intentioned, consumer-friendly policies opened the door to bad actors exploiting the rules and behaving in ways not typically seen in brick-and-mortar stores where face-to-face returns are required.
Dishonest consumers feel emboldened by the anonymity of online returns, justifying their behavior as "friendly fraud." However, by taking advantage of the returns process, consumers are deceiving e-commerce businesses, eating into already slim profit margins, straining resources, and devaluing inventory for their gain. When did this become an acceptable cost of doing business?
Perhaps underestimated are the environmental impacts of returns from CO2 emissions and packaging and the misconception that merchants resell the goods. Estimates of 5.8 billion pounds of returned merchandise ending up in landfills during 2020 should be a sobering thought.
With receipted return policy abuse on the National Retail Federation's radar, it is time to establish how $23.2 billion in online returns were deemed fraudulent in 2021 and what new loss prevention measures can curtail this trend.
TYPES OF RETURN POLICY ABUSE
- 1. Wardrobing / wear and return
- 2. Snap-and-send-back
- 3. Counterfeit product switches
- 4. Cross retailer returns
- 5. Tag switching
Wardrobing, or wear and return fraud, is the most recognized type of receipted return policy abuse. In this scenario, a consumer buys merchandise with the intent of using it for a short period of time and then returns the item for a full refund by misrepresenting the reason for the return. With free shipping, free returns, and extended return windows, consumers exploit the returns honor system when they fraudulently use and send back non-defective merchandise at no cost.
Social norms dictate that people won't attend their special event with a visible tag showing! Shown here is the 360 ID Tag Classic Loop Pack - 22mm.
Special occasion events like proms, weddings, interviews, parties, date nights, and family photos are classic targets for wardrobing return fraud.
The social pressures of not wearing the same outfit twice or always wanting to be seen in the latest trends trump people’s moral conscience.
What is most concerning is that this type of fraud is not undertaken by seasoned criminals but by consumers who knowingly defraud the system. In a 2020 survey by Secure Authentication Brands LLC, 37% of respondents admitted to wardrobing. Worryingly, most respondents would not be considered likely return fraud perpetrators; 63% were college graduates, 58% make over $50K/year, and 61% were Skilled, Professional, or Managerial employees.
The prevalence of designer hangtags attached with petite safety pins or colored cords neatly tied in a double knot makes this deceptive practice straightforward. Any tag that can be hidden or removed and reattached to an item without evidence of tampering creates an opportunity for return policy abuse.
Another e-commerce category rising in prominence is the resale of preowned items. Merchandise with existing signs of use or wear is susceptible to wardrobing. The consumer has no wear evidence to cover up and no original tags to hamper their fraudulent actions. No longer just limited to online marketplaces like eBay, fashion brands and dedicated e-commerce businesses, driven by the push for sustainability in the fashion world, are embarking on new ventures in the resale market. It's a dream scenario for wardrobers.
Do you agree with this statement?
Influencers and fashion bloggers should be allowed to buy the latest fashion, take photos of themselves wearing the items, blog about their on-trend outfits, and return them to the e-commerce business for a full refund.
Recently, a blogger did precisely that when she returned 85% of the items she purchased from a retailer within the return window. This is a gross exploitation of merchants' return policies but is becoming more common as social pressures and the desire for consistent engagement of followers forms the backbone of the fashion influencer world. Imagine if all consumers engaged in this practice!
Snap-and-send-back has become so prevalent that ASOS, a UK-based online retailer, announced tracking social media accounts of serial returners, blocking those abusing their return policy.
3. Counterfeit product switches
The rise of e-commerce has aided the proliferation of counterfeits circulating globally. While not a new concept, consumers can now acquire counterfeit items from difficult to police third-party sellers, which presents opportunities for product switching.
Imagine this scenario: a scammer buys a counterfeit item for a fraction of the actual item's price, purchases the genuine article from an authorized seller, and returns the fake to that seller for a full refund. Yes, e-commerce businesses need to be concerned. This problem is exacerbated by the increasing quality of counterfeit items, sometimes produced in the same factory as the genuine article.
With returns reaching 30%, even the most vigilant e-commerce business may miss spotting the counterfeit switch, proceed to place the product in the reverse logistics channel, and unknowingly put their reputation at risk by reselling the fake to a legitimate consumer.
Products with the anti-return fraud 360 ID Tag can still be tried on for fit and suitability. Shown here is the Compact Loop Pack for accessories - 10mm.
4. Cross-retailer return switches
Cross-retail returns are another example of bad actors exploiting generous return policies for their gain. In this situation, the consumer takes an item; stolen or purchased elsewhere for a lower price; initiates an in-store, non-receipted return, and receives a refund in the form of a gift card or cash.
This practice is most widespread when stores are busy during the holidays, and price discounts are typical.
5. Tag switches or retagging
Items most at risk from being fraudulently returned are those tagged with a standard plastic barb. For under $10, consumers can purchase a 1000 barb tagging gun kit from Amazon and retag or switch tags effortlessly and cheaply.
Tag switching and retagging is a method used by dishonest buyers to return less expensive but similar-looking items at higher prices and profit from the price differential.
NEW E-COMMERCE RETURN FRAUD SOLUTION
360 ID Tag - a single-use, tamper-evident return tag
Achieving balance with returns comes with recognizing the two sides of the equation. On the one hand, consumers' expectations of generous return policies are deemed essential for customer loyalty and satisfaction. On the other hand, businesses face harsh economic realities handling their reverse logistics operations.
A blanket, one-size-fits-all approach that penalizes honest shoppers with stricter return policies to quell instances of return policy abuse is not a tenable solution.
Instead, preventing the bad actors from carrying out their return fraud tricks is the ultimate move e-commerce businesses, and marketplace sellers can make to protect their merchandise. A new home-removal, secure return tag that deters return fraud strikes the perfect balance by eliminating opportunities for deception without alienating honest buyers.
Invented by an eBay seller who needed to protect designer dresses from being worn and returned, the patent-pending 360 ID Tag is a win-win for honest consumers and businesses pushing back against return policy abuse. By strengthening existing return policies, the tamper-proof tag gives e-commerce businesses a low-cost and practical loss prevention solution to deter return fraud and eliminate losses attributed to this growing problem.
The 360 ID Tag prevents the types of return fraud previously mentioned: wardrobing, wear and return, snap-and-send-back, price tag switching, and counterfeit product swapping. While recognizing and discouraging returns policy abuse by scammers, e-tailers can continue to provide excellent returns experiences to their valued customers.
How the secure return tag works
A 360 ID Tag pack includes a 164' / 50m roll of return tag material, that is dispensed and cut to the required length, and uniquely numbered tamper-evident security seals. In the unlikely case where a consumer has their own 360 ID Tags, the serial numbers prevent the secure return tag from being switched.
The return tag material is flexible and easily threads through merchandise without risk of damage, and the tamper-evident security seal reveals a permanent VOID pattern when altered or removed. Customers who receive goods with a 360 ID Tag attached can try on and evaluate their purchase at their leisure while at home. When they decide to keep and wear or use the item, the return tag is removed with scissors or by peeling back the seal. Customers who choose to return their item do so with the 360 ID Tag still attached, resulting in a more predictable, quicker, and less labor-intensive return process.
Clothing with the anti-return fraud 360 ID Tag can still be tried on for fit. Shown here is the Extended Loop Pack for dresses - 22mm.
BENEFITS TO E-COMMERCE MERCHANTS
Businesses who use the 360 ID Tag see a measurable payback in the form of fewer fraudulent returns. 360 ID Tag users have also been able to identify serial returners, blocking those abusing their policies.
While attaching a 360 ID Tag to merchandise at the front end of the sales cycle takes a minute or two, businesses taking this proactive action reduce exposure to dishonest customers and the flow-on effects of processing fraudulently returned items.
The advantages of accepting returned merchandise in saleable condition and not depreciated by wear or use are significant. Businesses can recover the minimal upfront cost of attaching the return tag by reducing the staffing load associated with handling returns and inspecting products for authenticity or signs of use.
The anti-return fraud tag starts at only 22 cents per use and comes in two widths: 10mm and 22mm. The 360 ID Tag can also be customized with a company logo and return policy.
Want to talk about return tags, have questions, or need some advice? Add a comment below or send me a message at firstname.lastname@example.org, and I will be happy to assist.
CHELSEA DUHS - FOUNDER 360 ID TAG
Choose a 360 ID Tag Pack to suit your business
We offer 4 different 360 ID Tag packs with varying combinations of return tag material and tamper-evident security seals, or you can build your own combination. Have a look at the 360 ID Tag products and choose the return fraud solution that suits the types of products you sell online.
When did wardrobing, or wear and return fraud, snap-and-send-back, price tag switching, cross retailer returns and counterfeit product swapping become an accepted cost of doing business for e-commerce merchants and marketplace sellers?View Details
Holiday return policy abuse can become crippling for e-commerce businesses without measures to curtail it. Fortunately, it can be stopped with a secure return tag.View Details