Combatting Returns Fraud

Navigating Retail's Return Policy Dilemma: Balancing Cost Reduction and Customer Satisfaction

"The past year’s macro environment has caused retail brands of all sizes to focus on reducing costs to retain profit margins, which we saw play out in the holiday shopping season. Returns fraud and abuse have become an especially huge challenge. However, customer expectations for exceptional customer experiences remain high. Brands are using all the tools available in their returns policies to dissuade the worst offenders among their customer base while keeping their best customers happy. For example, in a sample of merchants Loop works with, we saw this past holiday season that 14% more merchants charged fees for returns than the year before. And during Black Friday/Cyber Monday in particular, the number of shops charging return fees climbed from 48% in 2021 to 59% in 2023. This return strategy paid off for Loop’s brands, who retained nearly 21% more revenue YoY ($21.82M in total) by getting consumers to make exchanges and accept gift cards rather than cash refunds.

On the other hand, some brands are using more lenient policies to reduce their overall costs of logistics. This past holiday season, 55% more brands offered “Keep Item” — allowing shoppers to keep the low-cost items they intend to return rather than incurring the shipping and logistics costs, all while supporting sustainability.

There is still so much more work to do to reduce the impact of returns fraud and abuse on merchants’ bottom lines while retaining their best customers. Retailers will need partners with deep expertise and customization engines powered by broad data sets and machine learning to address this in the right way for their business."

Tara Daly

Senior Director of Product Marketing
Loop Returns