Strict Return Policies

The return of stolen merchandise and used non-defective merchandise, including special occasion apparel and certain electronics, continues to pose a huge problem for online retailers and brick and mortars alike. These all too common types of return fraud cost American retailers $14.4 billion in 2011, according to the National Retail Federation, up from $9.4 billion in 2009. The holiday season alone cost retailers an estimated $3.48 billion in return fraud. While both the online and offline communities suffer, online stores are particularly vulnerable, as few people risk buying something without trying it out first, requiring many ecommerce businesses to provide a flexible and generous returns policy.

Retailers need to be aware that while most de-shoppers (return fraud culprits) think they are doing nothing wrong, their crime is in fact more organized and deceptive than ever. They create diversions, ugly scenes, or spread their returns across branches to keep from being recognized as serial offenders. The NRF reports, “When asked if their company has ever changed its return policy to specifically address return fraud, nearly two-thirds (64 percent) said it had.” However, as The Economist reports, “Many return policies far exceed the minimum legal requirements, so there is room to be more strict.” For instance, in 2009, Marks & Spencer, a British retailer famed for its no-questions-asked refund policy, reduced the window for returns from 90 to 35 days. It also introduced dedicated returns desks, usually away from the shop floor. This makes shouters and screamers less likely to succeed, and helps with keeping a consistent policy across all its outlets.

In the U.S., some of the stricter return policy features retailers are adopting include specific windows of time in which the return can be made, detailed reshipping rules, store credit returns, and the need for identification and a receipt. A recent survey found that 2.89 percent of returns with a receipt are fraudulent, but those without a receipt have a higher chance of fraud, estimated around 14.2 percent. According to the NRF, “As a result, six in 10 retailers now require customers returning items without a receipt to show identification. Slightly more than 10 percent of retailers require customers making returns with a receipt to also show ID,” proving stores can protect themselves.

This article is adapted from an original piece by The Economist.