A robust return policy is one of the strongest defenses against return fraud.
Return policies have always been crucial to retail success, but they’ve become especially important as the retail landscape changes and creative criminals find new ways to abuse loopholes. In 2019 alone, the retail industry saw $41 billion in consumer returns – a 35% increase over 2018, 2020 is sure to be worse. With an increase in returns comes an increase in return fraud, and a robust return policy is one of the strongest defenses against it.
A great return policy accomplishes a few critical objectives. It builds trust with good customers, gives employees guidance on how to handle return transactions, deters most bad actors, and protects your business from unnecessary losses.
Additionally, a great return policy is a safeguard against increasingly innovative return fraud schemes, as the savviest criminals dream up new ways to scam retailers out of their hard-earned dollars. Some of the most popular types of return fraud include:
In which a customer uses or wears an item and then returns it with tags attached for a full refund;
2. Receipt Fraud
Where customers use old, fake, or stolen receipts for returns.
3. Shoplifted Merchandise Returns
Where thieves get refunds for merchandise they never purchased to begin with.
4. Price Tag Switching
In which customers place tags from low-cost items on higher price items and later make a return after removing the lower price tag.
5. Auction Swapping
An elaborate scheme in which online shoppers buy damaged items on an auction site, buy new, undamaged versions of those same items, and return the damaged item with the new item’s receipt for a full refund. And these are just a few forms of return fraud to look out for. There will likely be more advanced schemes with each year. The best way to protect your business and your bottom line is with a robust, strictly enforced return policy. At a minimum, it should have the following five components:
A clear timeframe
Some brands have open-ended return timeframes, meaning customers can return items whenever they want, even years later. From a business standpoint, older items will have far less value if they are accepted after years in a customer’s possession. But from a security standpoint, essentially anyone could bring any item back and get a refund without being questioned. Without a clear timeframe, you’re practically encouraging wardrobing. So, make sure your policy denotes a very clear, firm timeframe for returns (e.g. 30 days, 60 days, etc.).
Detailed guidelines for returns and exchanges
These guidelines are the bulk of your return policy. They give customers guidance on which items you’ll take back and whether those items can be returned for a refund or exchanged for other merchandise. Here, you should also specify the condition of the items you take back. If you leave out these details, you’ll create a gray area in which customers will attempt all types of return fraud.
Form of tender
When a customer makes a return, they’ll either get a refund in their original form of tender or they’ll receive a store credit. Be clear about what you offer and in which circumstances these rules apply. For example, if a customer tries to return an item without a receipt, will they only receive store credit? The more specific these details are, the less opportunity you’ll have to be taken advantage of.
Receipt or no receipt
This may seem like a no-brainer, but it’s important. If you only take receipted returns, you’ll eliminate a lot of opportunities for return fraud. If you accept non-receipted returns, you invite suspicious activity, and you’ll increase the likelihood that you’ll end up with a lot of defective or tampered merchandise in your inventory.
Let customers know exactly what they can expect. Which department processes the returns? How long does it take to get a refund? If they ordered their item online, can they return it in-store? Be clear so that you reduce the chances for criminals to sidestep your return protocol.