Ecommerce Return Fraud: When Is A Conversion Not A Conversion?

Online returns eh? Free and easy for the consumer. Not so much for brands and retailers. And they're weighing on our mind this week. Firstly as we spotted a famous online influencer returning a MASSIVE haul of clothes she admitted buying to try on in the comfort of her own home because she was too lazy to visit the store. And she's not the first we know of to engage in such behavior and she certainly won't be the last. Secondly they're on our mind because holiday shopping season is here which means lots of extra conversions.

On the downside this also means lots of extra returns (inversions?). Hence we have National Returns Day on January 3rd. Which in terms of excitement is up there with National Clean Your Desk Day and National Tooth Decay Day. But we digress! The figures for holiday returns are not the stuff of warm 'n' fuzzy festive feels. Around 13% of sales close to US$95 billion worth of product will be returned to US retailers this holiday season which is an increase of 35% since 2016. For online shopping the CBRE estimated that last year holiday returns in the US topped $32 billion. Quite apart from the massive carbon footprints all these returns must surely be unnecessarily trampling all over our poor planet this also comes at a cost to your eCommerce store.

Time and resources are wasted processing all of them and dealing with the returned products which often need treatment such as dry-cleaning and repackaging for resale for example. And then there's the sums which aren't very nice at all. Allow us to do some rudimentary math. The average return represents 30% of the purchase price. The average margin for an online order is 10 percent and the average cost of one return is $15.00. Let's apply these figures to a fictional return of say a novelty Christmas sweater worth US$50. 10% margin = US$5. Cost of return = US$15. Net loss = US$10. This means three of these Rudolph sweaters would need to be sold to cover the cost of just one return. If that wouldn't tarnish your tinsel we don't know what would. Of greater concern however is the fact that much like a dog online returns are for life not just for Christmas.

As online shopping grows 12 months a year so too do returns. Think about it what's one of the best features of online shopping? Cheap/free easy returns of course! What's not to love? But while these increasingly ubiquitous liberal returns policies are key drivers of online shopping (consider how central they are to Amazon's success) the associated costs are simultaneously driving down the bottom line. More and more brands and retailers are struggling with this. It's a cash-hole that's not going anywhere. And failing to address it now could be storing up major trouble for the future.

So bar going draconian with your returns policy which would be counter-productive what's to be done about this eCommerce monster? Well the bad news is you can't slay it outright. Unfortunately when it comes to online shopping many consumers return items simply because they can. Again just think about it not sure whether to buy that dress in size 10 or size 12? Hell just buy one of each and return whichever ones don't work no harm no foul. Well not to the consumer anyway.  And while we'd love clothing brands the world over to come together on a universal size guide (because we all know sizes differ between brands. What's size 8 for brand X is size 10 for brand Y and the lack of confidence this creates in consumers must be contributing to these sort of returns) we can't see that happening any time soon. But it's not all bad. The good news is that while the eCommerce returns monster can't be slayed it can be tamed!

And here are 9 ways to do so:

1) A Little Subtlety Can Go A Long Way

More and more retailers are quietly increasing their average minimum order size to qualify for free shipping. Such subtle restrictions lessen the temptation among consumers to click and be damned rebalancing the scales in your favour.

2) Get Even More Liberal With Your Returns Policy

Bear with us on this counter-intuitive concept please. A short window on returns creates a sense of urgency pushing consumers to act. Lengthening this however leads to what boffins call the 'endowment effect'. This means that the longer someone has a product the more attached to it they become and the less likely they are to return it. Furthermore the longer they have it the more likely they are to forget about returning it. Cunning.

3) Encourage In-Store Returns

eCommerce is fluid. Within reason you can use this to your advantage and make the rules up as you go. So just because a customer bought your product online doesn't mean they can't return it in-store. Not only are in-store returns cheaper they also carry an added bonus in that customers may pick up other goods when they come in. Consider incentivizing in-store returns to get feet through the door.

4) Create A Returns App

Walmart launched its Mobile Express Returns app last year which requires just two steps and reduces return times from five minutes to 30 seconds. Walmart also offers immediate 'return-free returns' on beauty and healthcare items because this makes sense margin-wise for low ticket items.

5) Segment Your Database For Return Offenders

Customer segmentation to prevent returns is not much different to segmenting for marketing reasons. It's all about identifying trends traits behaviors likes dislikes etc. to allow for data-driven future planning. In this scenario you can identify those customers more likely to return items and handle them accordingly. For example don't send serial returners special promotions or anything that will increase the likelihood of them returning product.

6) Make Like Amazon and Ban Serial Returners

According to Brightpearl 42% of US retailers saw an increase in serial returners in the past year with those aged 18-34 the guiltiest. It also reports that 61% of US retailers are planning to ban these customers. They're even giving the almighty Amazon a headache. Last May Wall Street Journal reported that the retailer is banning customers they feel abuse our services over an extended period of time which may embolden other retailers to follow suit.

7) Fight Fraudsters

According to the NRF 11% of sales are returned and 11% of those are fraudulent. And fraudsters are tenacious and creative creatures constantly and keenly identifying and exploiting any loopholes they identify in returns policies. For example exceeding a free delivery minimum order value by adding lots of stuff to their basket they don't want or need and have every intention of returning. While brands and retailers can do their best to stay one step ahead of such behavior they can't always outsmart the fraudsters. They can however retaliate in other ways as more and more of them are proving. Nordstrom for example requires personal ID for a return without receipt while L.L. Bean once famous for its lifetime guarantee policy recently reduced this to a year.

8) Look Within

While serial returners and fraud are indeed problematic ReturnLogic points the finger of blame for 65% of returns at the retailer. Specifically it found 23% are a result of the wrong product received 22% are a result of inaccurate depiction and 20% are a result of the product being damaged. While some incidents of damage are unavoidable the other two factors are highly preventable. Regarding wrong product depiction this is where good content comes in to play particularly on imagery. The clearer the picture you paint of your product the more informed the purchase decision and the less likely the return. User generated content such as ratings and reviews is particularly useful PetCo reported that products with customer reviews have a 20.3% lower return rate. Consider using Instagram galleries of people using your product. Or employ the likes of VR to allow customers to virtually experience your product. All these measures help set realistic expectations and so reduce returns.

9) Collect Customer Feedback On Returns

This isn't always easy especially if you've a disgruntled customer on your hands. But knowledge is power. The more you know about what caused the return the more you can prevent future ones. Guest contributor: Initial observations on the negative impact of returns on retailer conversions by Bernadette Mahon were the catalyst for this post. Now you're ready to minimize returns this holiday season prepare to maximise sales with ChannelSight 'Where to Buy' technology. Download our eBook's 8 Clever Ways To Win In The Amazon Marketplace and Selling On Ebay Marketplace: 9 Surefire Steps For Success to learn more about how to accelerate your marketplace strategy and drive up conversions in 2019 and beyond.

Complementing your Direct-to-Consumer strategy with a Where to Buy Solution
Download the free report now.
ChannelSight Products
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.