# How Returns Abuse Affects Retailers Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-10-28 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Returns Abuse: The Hidden Threat to Retailers Meta Description: Learn how returns abuse affects retailers' revenue and operations, and the balance needed to prevent fraud without compromising customer experience. URL: https://financedigest.com/how-returns-abuse-affects-retailershtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/woman-in-a-shoe-store-sbi-300939643-1736837501430-compressed.jpg) _By_ **_Aaron Begner,_** _EMEA GM at_ [_Forter_](https://www.forter.com/) Accompanying the significant growth in ecommerce over the past 12 months, is the need for retailers to manage the impact of a growing array of fraud and abuse challenges. One type of fraud that can easily fly under the radar is the abuse of a merchant’s returns policies. Returns abuse can be difficult to detect and prevent for retailers, as often it is a challenge to identify fraudulent behaviour vs. a ‘usually-good’ consumer [trying to bend – but not break](https://www.financedigest.com/eu-meets-to-try-to-break-gas-price-cap-impasse.html "EU meets to try to break gas price cap impasse") – return policies. Therefore, it’s often a [challenge to identify](https://www.financedigest.com/new-gleif-challenge-facility-extends-ability-to-trigger-updates-of-legal-entity-identifier-data-to-all-interested-parties.html "New GLEIF Challenge Facility Extends Ability to Trigger Updates of Legal Entity Identifier Data to All Interested Parties") how returns abuse actually affects retailers. Here are three of the biggest [ways that returns abuse negatively impacts business](https://www.financedigest.com/5-simple-ways-in-which-your-business-can-save-water.html "5 simple ways in which your business can save water"). **Lost Revenue** The most obvious effect that [returns abuse has on a business](https://www.financedigest.com/despite-return-to-work-virtual-meetings-will-continue-to-disrupt-business-as-usual-in-finance.html "Despite Return to Work, Virtual Meetings Will Continue to Disrupt Business as Usual in Finance") is lost revenue, which can be significant. Research indicates that returns abuse may be costing retailers [up to $15 billion per year](https://www.forbes.com/sites/forbescommunicationscouncil/2020/02/19/many-unhappy-returns-how-consumer-abuse-leads-to-retail-revenue-leakage/?sh=6561a7f6d259). When fraudsters purchase items with the intent of abusing returns policies, the retailer makes no profit. Furthermore, it stops legitimate [customers from purchasing](https://www.financedigest.com/britains-nationwide-curbs-cryptocurrency-purchases-by-customers.html "Britain’s Nationwide curbs cryptocurrency purchases by customers") the items they want, as fraudsters who don’t want the items are moving them around. Various types of returns abuse can profoundly [damage retailers’ bottom lines](https://www.financedigest.com/shelling-damages-zaporizhzhia-nuclear-plants-backup-power-line-iaea.html "Shelling damages Zaporizhzhia nuclear plant’s backup power line -IAEA"). Some tactics, such as shoplisting, where fraudsters try to obtain a refund for a list of products listed on a perfectly valid receipt, yet that they never purchased to begin with, can significantly [impact retailers’ bottom line](https://www.financedigest.com/the-severe-impact-of-downtime-on-companies-bottom-lines.html "The severe impact of downtime on companies’ bottom lines"). **Increased** [Operational Costs](https://www.financedigest.com/can-cfos-balance-the-books-with-rising-operating-costs.html "Can CFOs balance the books with rising operating costs?") Returns abuse doesn’t only affect [revenue pertaining to the products](https://www.financedigest.com/feminine-hygiene-product-market-2021-global-leading-companies-analysis-revenue-trends-and-forecasts-2024.html "Feminine Hygiene Product Market 2021 Global Leading Companies Analysis, Revenue, Trends and Forecasts 2024") themselves. There are also [operational costs to consider](https://www.financedigest.com/europes-wizz-air-considering-a-saudi-operating-license.html "Europe’s Wizz Air considering a Saudi operating license"). An [increase in returns abuse will often lead to more consideration](https://www.financedigest.com/over-half-of-organisations-would-consider-using-cryptocurrencies-for-business-transactions-though-8-in-10-acknowledge-the-increased-risk-of-associated-ddos-attacks.html "Over half of organisations would consider using cryptocurrencies for business transactions, though 8 in 10 acknowledge the increased risk of associated DDoS attacks") being put into checking every return, for signs of abuse taking place. This can range from missing tags to damage or wear on the product. This process can be time-consuming, meaning more [resources might be necessary to continue](https://www.financedigest.com/uk-to-manage-water-resources-carefully-as-drought-continues.html "UK to manage water resources carefully as drought continues") operating in an efficient manner. Handling and warehousing costs can also begin to increase, with returned [items becoming significantly less valuable](https://www.financedigest.com/the-pull-of-the-past-1-in-5-keep-items-they-think-will-be-valuable-in-the-future.html "The pull of the past! 1 in 5 keep items they think will be valuable in the future"). **A Poor** [Customer Experience](https://www.financedigest.com/the-new-client-adviser-experience-in-the-age-of-the-customer.html "The New Client-Adviser Experience in the Age of the Customer") As [returns abuse continues](https://www.financedigest.com/ils-investment-returns-continue-to-outperform-according-to-aon-insurance-linked-securities-report.html "ILS investment returns continue to outperform, according to Aon insurance-linked securities report") to increase, many retailers will feel pressure to tighten their return policies. This could range from [reducing the allotted time for eligible returns](https://www.financedigest.com/finnair-to-cut-costs-reduce-fleet-to-return-profitable.html "Finnair to cut costs, reduce fleet to return profitable"), to only issuing store credit instead of cashback. In some cases, more extreme measures such as requiring a restocking fee for more expensive merchandise will be taken. While these are all effective ways to help diminish the effect of returns abuse on retailers, they can also have an adverse effect on a retailer’s [customer experience](https://www.financedigest.com/allianz-benelux-taps-into-modern-data-management-to-combat-fraud-and-foster-a-positive-customer-experience.html "Allianz Benelux Taps into Modern Data Management to Combat Fraud and Foster a Positive Customer Experience"). If loyal [customers have become](https://www.financedigest.com/as-banks-become-more-digital-customer-satisfaction-calls-for-a-robust-approach.html "As banks become more digital, customer satisfaction calls for a robust approach") accustomed to a more flexible and forgiving return policy, they could be taken by surprise when it’s more difficult for them to return their items. Ultimately, it can be tricky to balance the two. Returns abuse negatively affects retailer revenue and the overall business, but so does a poor [customer experience](https://www.financedigest.com/why-finance-teams-are-integral-to-the-customer-experience.html "Why finance teams are integral to the customer experience"). **The [Negative Impact](https://www.financedigest.com/how-gdpr-could-negatively-impact-the-careers-of-finance-professionals.html "How GDPR could negatively impact the careers of finance professionals") of Returns Abuse Cannot Be Understated** Returns abuse is often overlooked. It can be difficult to detect, but [significantly impacts revenue](https://www.financedigest.com/acellular-skin-substitutes-market-is-projected-to-garner-significant-revenues-by-2030.html "Acellular Skin Substitutes Market is projected to Garner Significant Revenues by 2030") and operations. Because stricter return policies may restrict [loyal customers](https://www.financedigest.com/does-credit-management-have-a-role-in-retaining-the-loyal-customer.html "Does Credit Management Have a Role in Retaining the Loyal Customer?"), the reputation of a retailer’s business can be affected. Poor customer [experiences](https://www.financedigest.com/financial-services-is-upping-its-customer-experience-game.html "Financial services is upping its customer experience game") can lead to bad reviews and a loss of current and potential customers. Because of this, returns abuse prevention should be a [top priority](https://www.financedigest.com/2017-cfo-outlook-top-priorities-as-new-year-gets-underway.html "2017 CFO Outlook: Top Priorities as New Year Gets Underway") for all retailers. With this information in hand, retailers can get a better understanding of how returns abuse affects their [business and why they need](https://www.financedigest.com/what-is-premises-liability-coverage-and-why-does-your-business-need-it.html "What is Premises Liability Coverage … and Why Does Your Business Need It?") to put a prevention plan in place, as soon as possible. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---