When the sales went through the roof due to the covid-19 pandemic, the subsequent delays, lost packages, canceled orders, and stolen packages followed suit. Companies were overwhelmed with these logistics backlogs and tried hard to keep customers happy by solving problems as quickly as possible. That unexpectedly led to an uptick in "return fraud." Merchant Fraud Journal states, "Return fraud is a type of friendly fraud that occurs when consumers defraud merchants through their return policy."
Fraudsters are taking advantage of company return policies and defrauding them in multiple ways, including requesting returns for items purchased for a lower price at another retailer or switching a newly ordered item with damaged or broken items claiming it was delivered that way. Earlier this month, the Wall Street Journal reported that "the practice, known as 'item not received' fraud, took off during the pandemic when warehouses were backed up, and carriers were overwhelmed by a surge in e-commerce orders." This version of a return scam occurs when a purchaser orders items online, then after the order arrives, they file a claim that they never received the package. "Proving a package was delivered to the correct address is difficult, particularly since some carriers stopped requiring customers to sign for deliveries during the pandemic. Even when signatures are used, they often aren’t that helpful."
According to the National Retail Federation, in 2020, consumers returned an estimated $428 billion in merchandise. Of the $428 billion, they believe that $25.3 billion is fraudulent. The e-commerce boom is not slowing down anytime soon, so how do companies juggle keeping customers happy while reducing scam returns?
5 Ways to Avoid Return Scams
Perfect Your Return Policy
According to ChargeBack911, 67% of consumers look at a company's return policy before purchasing items. Having customer service agents reference an open and concrete policy will help keep customers informed and reduce the risk of angering customers. If the delicate balance between customer satisfaction and fraud reduction hangs in the balance, the return policy is the place to start. Have strict guidelines on how consumers get their refund (or if they get one at all), the return window, what happens if a package is stolen or misplaced, and every other way scammers can defraud a company. Contact a professional in fraud prevention to help create an iron-clad return policy perfect for your industry and business.
Track Your Returns
A UPS study reports that 96% of consumers actively track their deliveries. So despite the constant vigilance of customers, companies tend not to track packages past them getting on a delivery truck. If companies can track their packages and watch when they arrive, they won't need to take their customer's word for it. Tracking packages also allow companies to predetermine a problem if there is one in their supply chain.
Small parcel shipping insurance is a great resource to undercut fraud. When packages get lost in the mail or are stolen from customers' doorsteps, parcel insurance can help replace those items. Though not every package requires parcel insurance, it's a perfect opportunity to purchase packages if packages are above a specific value. Insurance may not reduce fraud, but it will reduce the amount of money lost due to fraud.
Tracking customers may sound a little odd because we don't mean to hire special ops and follow customers around; we mean to track your customer's spending habits. If they are an established customer or have an account with your company, you should track their habits. Our customers are constantly returning items but getting stolen items or returning items for cash when they paid in a gift card. Tracking these habits and flagging accounts can hinder them from purchasing in the future and essentially let customer service know that they can only get refunds in a specific way or take further action if things get sticky.
Amazon recently started taking pictures of the delivered packages on doorsteps to essentially prove that the package was delivered safely at the correct house. Though we don't know the effects of this change on Amazon's fraud, we can almost ensure that this reduces their number of fraud attempts. Amazon still keeps its A+ rating for customer service while lowering its fraud overhead. Though most e-commerce companies don't have their own logistics network, other creative ways ensure customers get their packages. Signature required, or emails that follow delivery to make sure the customer received the order is a great way to stop fraud in the future and show your company's vigilance.
There will always be customers that try to take advantage of the system. It's important to be alert and know that it's happening while also trying your best to reduce fraud. If things aren't getting any better, try speaking with your carriers to see how they can help! They're in this with you.