How Retailers Can Mitigate Return Policy Abuse

It’s no surprise that, due to the recent tumultuous economic backdrop, consumers are shifting their shopping habits to find the best deals, choose brands that have lenient return policies, and make the most of the money they do choose to spend. A recent survey of consumers in the U.S. and U.K. explored the overarching theme of return policy abuse today and found that nearly half of respondents (45 percent in the U.S., 52 percent in the U.K.) admit to abusing retailers’ return policies in the past 12 months. Policy abuse can come in several forms, including:

• Promotions abuse: Abuse of coupons and promotions, including new user offers.
• Returns abuse: Using products before returning, returning the wrong product, or excessively requesting returns.
• Reseller abuse: Unauthorized resellers that purchase products (typically in volume) for resale without approval.
• Item not received (INR) abuse: Consistently claiming items were never received and requesting a new item or refund.

Of course, these are just a few of the types of policy abuse that exist today. As consumers become savvier and technology evolves, it’s likely that new forms of policy abuse will become prevalent in the coming years. Therefore, it’s critical for retailers to get ahead of these patterns now. Let’s explore key trends in the policy abuse landscape today and what retailers need to know in order to keep loyal customers coming back and prevent nefarious customers from wreaking havoc.

Consumers Rely on Perks More Than Before 

Concerns about the recent global tariff war and potential inflation have driven consumers to rely on benefits like promotions and flexible return policies. Nearly half (48 percent) of consumers report that they're buying more from retailers with lenient return policies due to these financial concerns. Furthermore, a majority (63 percent) of respondents say they rely on retailers' promotions and free perks more now than in the past. These consumers may not necessarily view these habits as “cheating the system,” but rather a way to avoid overpaying for items and pinch pennies in a tighter economy.

Are Retailers Making Returns Abuse Easier?

Interestingly, consumers are taking advantage of these flexible policies while also blaming retailers for making it easy to do so. These days, customers don’t just find loopholes; they actually expect them. Sixty-eight percent of consumers say retailers make it easy to abuse flexible return policies, and 58 percent say that it's easy to open multiple online accounts with the same retailer to take advantage of promotions. Ultimately, instead of focusing on building true loyalty, retailers are having to grapple with things like inflated acquisition costs for customers who aren’t actually new, and compromised data that can obscure customer growth.

A Shifting Policy Paradigm

In addition to taking advantage of these perks, consumers are also forging their own paths when shopping to save a bit of money. About one-quarter (21 percent) of consumers admit to deliberately over-purchasing in order to qualify for free shipping, with the intent to return the extra items. Another 18 percent of survey respondents say they create their own unauthorized “try before you buy” service through bulk purchasing and using free returns, and 12 percent of consumers admit to opening multiple accounts with the same retailer to take advantage of promotions and perks. Again, these habits can take crucial attention away from building trust with loyal customers who don’t take advantage of these policies.

Don’t Just Know Your Customer — Know Their Return Preferences

Economic pressures and uncertainty will continue to impact consumer preferences. Retailers need to be able to differentiate genuine shoppers from those who have a history of abuse, whether it’s using products before returning, returning the wrong product, claiming they never received an item and requesting a new item or refund, etc. This will help preserve customer lifetime value when it comes to loyal customers and aid in protecting revenue that would have been lost to shoppers who continually abuse policies. It all comes down to knowing who your customer is.

However, retailers should also go one step further by customizing return policies — whether it’s for returns or promotions — at the right time and to the right customer. This way, retailers are able to block abuse while maintaining a positive experience for those genuine customers. Understanding the reasoning behind shopping habits is a critical first step in differentiating loyal customers from abusers and crafting tailored policy programs, with the ultimate goal of ensuring the brand endures in the face of evolving preferences.

Doriel Abrahams is the principal technologist at Forter, the leader in Identity Intelligence for digital commerce.