Get Ready for the Post-Holiday Returns Rush

Written by Doriel Abrahams , Principal Technologist, Forter

Holiday shopping gives retailers plenty of reason for joy. It’s also a time when they must be vigilant. During last year’s holiday season, 25% of U.S. consumers and 27% of U.K. consumers bought an item intending to return it after use. They planned to exploit the returns system before they’d even checked out. 

Retailers must prepare for the returns rush that the early new year brings — and that means taking the proper steps before the holidays end. 

Rampant post-holiday returns can rack up costs.

Every merchant knows that returns might feel free to a customer, but in reality, they’re anything but free for the retailer. It’s been estimated that the average processing cost of returns is 27% of the purchase price, which explains the close scrutiny that returns operations, processes, and policies face in many businesses.

There are plenty of legitimate reasons for a return, but there are also many ways to skirt the system, including:

• Wardrobing: A customer buys an item so that they can wear or use it once for a short time and then return it. Common examples are buying an outfit for a special event or a tool for a DIY job.
• Free Gift Cheating: Sometimes, a particular item or items above a specific price are offered with a free gift. Customers sometimes buy the item and return it, keeping the gift.
• Discount Creep: If a retailer offers free shipping or a discount for purchases above a certain amount, customers may choose to exceed the limit by adding items to their cart, which they then return. 

The rise of refund-as-a-service

Abuse in refunds and returns has ramped up significantly during the last several years. Some consumers even outsource their anticipated return fraud to a specialist. 

In these cases, the customer will pretend not to have received an item or received it damaged. They may pretend to send an item back but, in reality, ship an empty box, a box with dry ice that will weigh the right amount at the start but be empty on arrival, or an envelope with the tracking label.

Sometimes dubbed “refundsters,” these online criminals know all the ins and outs of a retailer’s returns policies and processes, exploiting them to get their client the goods for free. The retailer ultimately foots the cost. Of course, they don’t do it out of the kindness of their hearts; they take a cut, usually anywhere from 5% to 20% of the item's value. 

If it can be received, it can be fraudulently returned.

Apparel is probably the industry most associated with returns abuse, but in reality, any goods can be vulnerable to a problem. 

The 2024 Returns Abuse Consumer Survey found that personal electronics, surprisingly, were a target, with 19% of U.S. and 22% of U.K. consumers snapping up things like cameras, speakers, or microphones to use for a brief time — perhaps for a specific project — before sending them back. 

In short, if your business offers returns, you need to have a policy in place for preventing abuse. 

Still, keep your return policy friendly.

While abuse needs attention, it’s important not to approach it by implementing stringent restrictions across the board. Customers are sensitive to how returns are handled, and keeping good business means keeping return policies attractive so consumers will continue engaging with the brand. 

Return policies are a dominant concern when it comes to shopping. The 2024 Trust Premium Report found that 89% of consumers said that return policies are essential in deciding where to shop, while 22% had abandoned a cart in the last three months due to restrictive return policies.

Part of the beauty of online shopping for many customers is the combination of speed, convenience, and ease. Returns need to reflect that as well. Customers may simply vote with their feet otherwise.

Personalizing return policies

Between the need to prevent returns abuse and the imperative to provide a fantastic customer experience, it can feel like a juggling act for a retailer. Fortunately, an excellent approach is available, and it’s in line with the attitude you likely take in other areas of the business. 

Retailers have become adept at personalizing customer journeys, discount offers, marketing campaigns, and more. Returns are one area that has so far received little personalization attention, and it’s time for that to change. 

Ask the right questions.

Getting returns right has to be grounded in knowing the customer. Rather than focusing on the specific product being returned or where the package is, look at the customer's identity. Ask questions such as:

• Is this their first time shopping with you? 
• If they’re a returning customer, what’s their history of returns? 
• If this is the first time they’re returning something after making purchases over several years, do you really want to put friction in their path? 
• Or perhaps they historically return items only during (or just after) the holiday season, in which case you might want to be more cautious then but relaxed during the rest of the year.

Once you ground returns in customer identity, you have far more flexibility. Customers who repeatedly abuse your system in some way could be told at checkout that returns are not an option. At the other end of the scale, loyal customers with great standing could receive instant refunds and a streamlined service. And there’s everything in between. 

Takeaways

I’ve seen how impactful this approach can be firsthand. For example, an activewear brand was struggling with a returns policy requiring returned items to reach fulfillment before they’d issue a refund. Customers, understandably, were not fans of this policy, but the retailer was worried about abuse if they relaxed their rules. 

When this brand pivoted to a customer-focused and personalized refund approach with Forter, they were able to issue instant refunds for 82% of cases, streamlining their own backend and greatly enhancing the customer experience for loyal customers. Personalization really is the way to go.

Want to learn more about personalizing customer experiences according to customer identities? Check out this episode of the Salesforce Commerce Cloud Innovations Podcast, where I discuss how to build trust through customer experience, shipping, and, of course, returns.

Doriel Abrahams is the Principal Technologist at Forter and host of What the Fraud?, where he monitors emerging trends in the fight against fraudsters, including new fraud rings, attacker MOs, rising technologies, etc. His mission is to provide digital commerce leaders with the latest risk intel so they can adapt and get ahead of what’s to come.