The pressure is on for Australian retailers. As they strive to deliver outstanding customer experiences, the insidious problem of fraud and abuse is eroding profits and tarnishing brand reputation.
A recent survey underscores the challenge, with over half of retailers identifying customer experience as the top hurdle in tackling returns fraud and policy abuse.
Australian retailers are grappling with a complex challenge: balancing the imperative of delivering exceptional customer experiences with the growing threat of returns fraud and policy abuse. While 74% prioritize customer satisfaction, 51% cite it as the primary obstacle to addressing fraud.
New research from Loop, surveying over 600 retail professionals globally, sheds light on the issue. Despite a lower incidence of returns fraud in Australia (60%) compared to the global average (99%), the impact is significant. The survey suggests economic pressures are driving consumers to exploit return policies, with 43% of retailers attributing fraud to financial hardship. Dissatisfaction with product quality and temporary use also contribute to the problem.
These findings underscore the need for Australian retailers to develop sophisticated strategies that safeguard their bottom line without compromising customer loyalty.
Top tactics against returns abuse
Australian retailers are taking a tough stance against returns abuse. In an effort to curb this growing problem, nearly half (46%) of retailers are implementing permanent bans for repeat offenders. Additionally, a significant number (40%) are raising awareness about the environmental impact of excessive returns, hoping to deter customers from unnecessary purchases and returns.
Australian retailers are disproportionately affected by quality disputes, with two-thirds of companies experiencing this type of fraud or policy abuse in the past year, compared to the global average of 53%. Wardrobing and returning items with the intention of keeping them are also significant issues, affecting 47% of Australian retailers.
Despite the clear recognition of the problem, with 65% of Australian retailers acknowledging the seriousness of the rising returns fraud and policy abuse, only slightly more than half (53%) believe their company’s detection and prevention measures are highly effective. This discrepancy highlights a gap between awareness of the issue and the implementation of robust countermeasures.
The challenge of balancing customer satisfaction with fraud prevention is particularly acute in Australia. A vast majority of retailers (74%) prioritize customer experience over fraud and abuse prevention. However, over half (51%) identify maintaining a positive customer experience as the primary obstacle when addressing returns fraud and policy abuse. This indicates a complex interplay between customer expectations and the need to protect the bottom line.
The report also offers actionable insights for retailers and details the steps they can take to better cope with the issue of returns fraud and policy abuse. These include examining consumer behaviour as a primary defence mechanism, improving education for consumers about what constitutes fraud, establishing clear consequences for returns fraud versus policy abuse and reviewing all returns data. This includes item grade and disposition data from the returns warehouse, which can make it easier to spot deceitful shoppers.
“Our latest industry data report reveals a notable rise in returns fraud and policy abuse over the past year, highlighting the importance of understanding consumer behaviour not just in purchasing, but also in returns,” said Loop CEO, Jonathan Poma.
“The challenge is enormous: for every $100 in returned merchandise, retailers lose $10.40 to returns fraud. Retailers are implementing sweeping changes to address this drain on their bottom line, and our insights show that a data-driven, customised approach is key to reducing fraud while delighting genuine customers. Leveraging tools like advanced fraud detection models and return fees can provide merchants with the resources they need to not only mitigate these issues, but also improve their return processes as a whole.”
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
