Defusing A Ticking Time-Bomb of E-Commerce Returns
The Ticking Time-Bomb of E-Commerce Returns
In 2018-a Forbes published an article called “The Ticking Time-Bomb of E-Commerce Returns” by Steve Dennis, in that article Mr. Dennis highlighted the growing problem of return abuse and return fraud. Few people realize the full losses a company faces due to these returns, which goes well beyond just losing a sale. This problem has only gotten worse since 2018.
As shown in Mr. Dennis’ article, hassle-free return policies are relatively new, not to mention the notion of free shipping both ways. However, these practices have become so commonplace that the public at large no longer views generous return policies as a privilege, and instead view it as a right. A liberal, generous return policy has become necessary in order to maintain a competitive edge. While trying to remain competitive and offer the best customer service, companies have made the process of returning goods easier and easier for the consumers, while the cost for these returns has become more expensive in addition to opening themselves up for increased return abuse and fraud. Unfortunately, as a business’s expenses rise, the cost of the product must increase as well, if the business is to remain sustainable. This means that these “free” return policies are still costing the consumer a fair amount. Manufacturers are now faced with the decision to either continue facing increased loss from return fraud or reform their return policies and risk losing business. The article wraps up with the following statement:
“But Let’s Be Clear.
While some brands have the financial wherewithal to absorb the greater and greater hit — or will mitigate the costs in a way that does not materially impact the customer experience — most cannot. And when the bomb finally goes off, we should all be prepared for a fair amount of collateral damage.”
A Solution To Help Diffuse This Bomb Is Here…
There is a team of people who have decided to come up with a solution to help diffuse this bomb. We believe that our plan would significantly reduce return fraud over-night. Our philosophy is that we will value the customer’s return experience as much as we value the merchant’s bottom-line. While we were at it, we decided to make it easy and rewarding too. The idea is to create a universal product return scoring system, similar to a credit score. The consumer would need to set up an account online in order to return products to any of the merchants associated with this new system which would track and analyze returns across the associated merchants. The scores range from 200-400, starting out at 300.
Abnormal return behaviors that would be indicative of return abuse would lower the score. This would include characteristics like an abnormally high volume of returns, returns that aren’t able to be sold again, product returns that are missing components, etc. Meanwhile, other behaviors would improve the score such as returning a product in a condition that can be resold, accepting store credit or an exchange, and keeping the number of returns below a particular threshold (please note that this system is still being perfected, so the criteria are subject to change).
Each merchant is able to set their own guidelines regarding the return scores, what range is acceptable, and what privileges might be provided to those that have a higher score. For example, Store A might only allow returns from those with a return score above 275, but also offer free shipping or a discount for anyone with a return score over 350. Store B might allow “hassle-free returns” by mail for those over 300, but also allow in-store only returns for those below 300.
The Biggest Benefits Of This System…
Finally, one of the biggest benefits of this system is that the merchants enrolled will share return data and have a unified system, meaning that some of the fallout predicted by Mr. Dennis can be avoided. If some of the hardest hit merchants are willing to band together under a unified system, it will help reduce the fallout when changing their overly generous return policies. Merchants will be able to reap the benefits of both a more rational return policy without losing business.
In 2018 Forbes published an article called “The Ticking Time-Bomb of E-Commerce Returns” by Steve Dennis, in that article Mr. Dennis highlighted the growing problem of return abuse and return fraud. Few people realize the full losses a company faces due to these returns, which goes well beyond just losing a sale. This problem has only gotten worse since 2018.
As shown in Mr. Dennis’ article, hassle-free return policies are relatively new, not to mention the notion of free shipping both ways. However, these practices have become so commonplace that the public at large no longer views generous return policies as a privilege, and instead view it as a right. A liberal, generous return policy has become necessary in order to maintain a competitive edge. While trying to remain competitive and offer the best customer service, companies have made the process of returning goods easier and easier for the consumers, while the cost for these returns has become more expensive in addition to opening themselves up for increased return abuse and fraud. Unfortunately, as a business’s expenses rise, the cost of the product must increase as well, if the business is to remain sustainable. This means that these “free” return policies are still costing the consumer a fair amount. Manufacturers are now faced with the decision to either continue facing increased loss from return fraud or reform their return policies and risk losing business. The article wraps up with the following statement:
“But let’s be clear. While some brands have the financial wherewithal to absorb the greater and greater hit — or will mitigate the costs in a way that does not materially impact the customer experience — most cannot. And when the bomb finally goes off, we should all be prepared for a fair amount of collateral damage.”
There is a team of people who have decided to come up with a solution to help diffuse this bomb. We believe that our plan would significantly reduce return fraud over-night. Our philosophy is that we will value the customer’s return experience as much as we value the merchant’s bottom-line. While we were at it, we decided to make it easy and rewarding too. The idea is to create a universal product return scoring system, similar to a credit score. The consumer would need to set up an account online in order to return products to any of the merchants associated with this new system which would track and analyze returns across the associated merchants. The scores range from 200-400, starting out at 300.
Abnormal return behaviors that would be indicative of return abuse would lower the score. This would include characteristics like an abnormally high volume of returns, returns that aren’t able to be sold again, product returns that are missing components, etc. Meanwhile, other behaviors would improve the score such as returning a product in a condition that can be resold, accepting store credit or an exchange, and keeping the number of returns below a particular threshold (please note that this system is still being perfected, so the criteria are subject to change).
Each merchant is able to set their own guidelines regarding the return scores, what range is acceptable, and what privileges might be provided to those that have a higher score. For example, Store A might only allow returns from those with a return score above 275, but also offer free shipping or a discount for anyone with a return score over 350. Store B might allow “hassle-free returns” by mail for those over 300, but also allow in-store only returns for those below 300.
Finally, one of the biggest benefits of this system is that the merchants enrolled will share return data and have a unified system, meaning that some of the fallout predicted by Mr. Dennis can be avoided. If some of the hardest hit merchants are willing to band together under a unified system, it will help reduce the fallout when changing their overly generous return policies. Merchants will be able to reap the benefits of both a more rational return policy without losing business.
