You want your retail business to be regarded for exceptional customer service and products. Reputation is important, and retailers will go the extra mile to ensure loyal customers are happy. Sometimes these concessions, such as an overly lenient return policy, can have an adverse impact on a retailer’s business. While relaxed return policies may comfort loyal shoppers, they also welcome serial returners.
Whether the consumer is innocently overbuying products in multiple sizes and then returning the ones which don’t fit or intentionally returning stolen items, return fraud and abuse can be devastating to a retailer’s bottom line. In fact, a National Retail Federation and Appriss Retail survey found that for every $1 billion a retailer made in sales last year, they lost $166 million to returns.
That’s why retailers need to reimagine their return policies and create dynamic systems that identify and stop fraud while creating a flexible model to look after their best customers appropriately.
Reimagine Returns and Adjust Return Policies Fairly
Returns are damaging to the bottom line, even if they’re not fraudulent. This is because a return costs more than just the sales value. The retailer also loses money on return shipping, handling and any repair costs (particularly if the retailer offers free returns).
As a result, some retailers have tried tightening return policies across the board by charging for returns or shortening return windows. This approach threatens the trust established with loyal customers and risks alienating high-value shoppers who deserve a flexible returns experience. The solution to this challenge is to provide a highly flexible return policy which tailors itself to offer an individualized experience to each customer. Not all consumers shop the same and therefore not all consumers should be constrained by a one-size-fits-all policy of when and how they can return goods.
Identify Fraudulent Transactions
According to the same NRF and Appriss Retail survey, 89 percent of returns were due to legitimate reasons while roughly 11 percent were fraudulent. The key to protecting profits is to identify fraudulent returns quickly and across any retail touchpoint and take action in real time, whether it’s in-store or online.
Those intending to commit fraud are becoming increasingly crafty as they develop new methods for organized retail crime. Common return fraud methods include returning shoplifted merchandise, using fraudulent receipts, or using an item and then returning it as if it were new.
The best way to combat fraud is to take an omnichannel, artificial intelligence-driven approach that identifies patterns in behavior and makes real-time recommendations for stopping fraudulent transactions in their tracks.
Modify Your Return Policy to Increase Loyalty
According to Invesp, 67 percent of shoppers consult a retailer’s return policy before making a purchase. With this in mind, retailers should implement return policies that encourage consumers to buy from them, while also protecting themselves from fraud and abuse.
Machine-driven AI techniques can evaluate countless data points in immediate time frames, making nonbiased recommendations which would be impossible for humans to replicate. By implementing a dynamic solution, good customers benefit from relaxed return constraints and retailers benefit by avoiding the losses associated with fraudulent activity. The cost of implementing this technology is more than offset by the savings earned by stopping the losses associated with fraudulent and abusive activity.
A dynamic approach to return policies makes this ideal a reality and gives retailers the control they need to stop return fraud without risking valuable customer relationships.
Nathan Smith is the senior vice president of product at Appriss Retail, a fully integrated omnichannel retail return solutions, providing retailers with a holistic CX view.