The current state of retail returns
If consumer returns were depicted as an emoji, they’d be a rocket ship. With retailers making the consumer returns experience more frictionless, it’s no wonder that in 2023, total merchandise returns peaked at $743 billion. But it doesn’t stop there. New research from 2024 points to 39% of consumers claiming that they return an online purchase at least once a month.
While this rapid increase in overall consumer returns is causing a media flurry, it’s also causing retailers to look inside their own walls and make meaningful operational changes. The sad fact is that every return isn’t always truthful. For every $100 in returned merchandise, retailers on average lose $13.70 to return fraud; that’s $101 billion in overall losses just generated from return fraud. Retailers are now having to pivot away from legacy return policies, to policies that account for the rapid rise in retail return fraud and abuse. In fact, according to new research from Appriss Retail and Retail Dive, more than two-thirds of retailers have made changes to their return policies to decrease return fraud. This shift is strongly highlighted in the latest retail returns survey.
The rise of return policy abuse is driving stricter return policies
A seamless returns experience is a must for today’s retail consumer, but unfortunately, with these easier returns come new gray areas that attract more disingenuous shoppers. Today, 49% of retailers claim “wardrobing,” returning used non-defective merchandise—typically clothing—is one of the biggest forms of return policy abuse harming the customer returns experience. Wardrobing sees a massive spike in the summer by two to three times, with swimwear alone making up between 5% and 15% of returns, according to retail returns statistics.
30% of shoppers admit to buying an item for a specific event only to return it after the event ended.
This form of return abuse has retailers changing their policies because wardrobing reduces a retailer’s net revenue and leads to a loss in viable products. However, this tightening of retail returns experience due to a few greedy consumers has a lasting impact. New research from Appriss Retail and Retail Dive reveals that more than one out of three consumers (36%) report having at least one in-person or mail-in return experience that they would characterize as a negative experience.
Return fraud prevention and the customer return experience
The problem with return fraud prevention is that the c-suite within many retail organizations often goes for the immediate reactive and harsher path of building walls between the consumer and the return. Placing restrictions on returns (while fiscally prudent) can lead to customers losing a positive connection to a retail brand; retailers are now tasked with finding a better balance between access and denial regarding returns. Recent research from Appriss Retail and Retail Dive points out that restricting customers when it comes to returns can have negative consequences: Over half of consumers (55%) have decided not to buy from retailers or ecommerce stores due to the restrictions of their return policies.
With varying degrees of success, there are four common approaches to return fraud prevention being employed by retailers:
- Requiring receipts/proof of purchase from the customer to initiate a return
- Limiting return windows to 30 days or less
- Authorizing merchandise returns by requiring a reason from the customer
- Monitoring transaction data for signs of fraudulent customer behavior
Data shows that 67% of retailers require receipts and 59% limit return windows, but both of these top two methods place restrictions on consumers regardless of an individual’s shopping history. With 97% of retail executives claiming they want a smooth customer returns experience, it’s worth exploring avenues that allow a customer’s buying behavior to determine the validity of their return. Retailers are finding success with AI-enabled solutions such as Appriss Engage, which uses artificial intelligence and advanced data models across all of a customer’s transactions to assist them and provide real-time recommendations to approve, warn, or deny returns.
Solutions for retailers to make a positive returns experience
A large part of providing the ideal returns experience is making sure that every consumer return has been individualized to that consumer. Whether a customer making the return is defined as “good” or “bad” must be approached with nuance and tact. Just like the various forms of return fraud and abuse, consumers pose different challenges when making returns in-store, online, or specifically to certain retailers. Adopting AI-driven return authorization is an exceptional solution to help tackle return fraud and abuse while ensuring customer satisfaction. Research has found that high-sales shoppers in the top 20% of a retailer’s customer base have an annual return average of approximately $253. In comparison, the bottom 1% only have about $11 in annual returns. This underscores the importance of AI-driven return authorization to maintain smooth returns for loyal customers instead of just judging them on their sheer number of returns.
Whether loyal or a first-timer, customers love a positive return experience, and they put that affection into action.
Research shows that seven out of ten consumers (70%) have made at least one additional purchase from retailers because of a positive return experience.
Almost nine out of ten consumers (89%) say they would be more likely to make additional purchases from certain retailers or ecommerce stores if they had a positive return experience with those brands; a reassuringly high percentage shows the correlation between easy returns and future sales.
The ideal situation to finding the balance between gate-keeping the returns experience so the best make it in and the problems stay out is with AI-driven return authorization such as Appriss Engage, a platform that provides real-time fraud detection and behavior-based analytics to create a positive return experience.
