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The latest area to be hit by fraud is returns, and retailers, B2B sellers and others are vexed in how to fix the problem, according to new data from Loop Returns.

Fraud is on the rise across the full range of ecommerce — and that includes both business-to-consumer (B2C) and business-to-business (B2B).

The latest area to be hit by fraud is returns, and retailers and other sellers are vexed in how to fix the problem, according to new data from Loop Returns, a returns management platform provider.

Loop recently surveyed 600 retailers and sellers across Australia, the United Kingdom, and the United States.
The survey finds that all retailers, globally, have experienced some type of returns fraud or policy abuse in the past 12 months.

Retailers believe the primary reason consumers engage in returns fraud is because the current economic climate is leading shoppers to try to exploit return policies to improve their financial situation (43%). Other factors include dissatisfaction with product quality (41%) and an intent to use items only temporarily (35%).

Loop findings about B2C and B2B fraud

Quality disputes (53%) were the most common type of fraud/policy abuse companies experienced in the past 12 months. That was followed by customers attempting to return items that weren’t eligible for a return (44%) and wardrobing (38%). Wardrobing is a type of retail fraud where a customer buys an item, uses it for a short time, and then returns it for a refund. It’s also known as “wear and return” or “free renting.”

94% of respondents agree their company is taking this rise in returns fraud and policy abuse seriously. However, less than half of respondents (46%) rate their company’s detection and prevention measures as very effective.

A majority (55%) of respondents say their company prioritizes customer experience over fraud and abuse prevention. And 52% indicated that “maintaining a good customer experience” was the top challenge their company faces when addressing returns fraud or policy abuse.

The most common actions taken in response to returns fraud or policy abuse:

  • Tightened return policies (47%)
  • Permanently banning repeat offenders from making future purchases (41%)
  • Implementing return fees (37%)

“The challenge is enormous,” says Loop CEO Jonathan Poma. “For every $100 in returned merchandise, retailers lose $10.40 to returns fraud.”

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