Betsy Stewart

Most articles on return fraud mention a minimum of 10 types, including “bricking” and “wardrobing.” (Are these words allowed in Scrabble?) Someone at some point started stripping electronics of valuable parts before sending them back; Others decided to wear a tags-on item with the intent to return it. Modern cons certainly run the gamut.

While the ecommerce era reimagined purchasing, digital advancements also supported the proliferation of return ruses. Keeping pace with technology, these ever-evolving fraudulent schemes are more sophisticated and more creative than ever before. How can brands combat determined illicit networks while ensuring legitimate purchases and returns are accepted?

It can be a tough topic to address. From professional fraud circles to everyday consumers, gaming the system is a lucrative realm. “This is an entire industry,” according to Megan Blissick, Head of Global Agency Partnerships at Signifyd. “U.S. retailers’ annual losses from merchandise return fraud are estimated at $18.4 billion.” Add in return policy abuse and the number goes up to $24 billion. Hard to imagine, but also easy to believe. A simple Google search for resources related to this topic resulted in as many articles on how-to commit fraud as on how-to-prevent it. 

Lawful or not, returns are a big deal. Purchasing an item you cannot see/touch in-person or try on of course impacts the likelihood of wanting to keep it; a lot of legitimate items will necessarily be returned (order 3 different sizes/colors, return 2). The average return rate for online orders (20%) is double that of orders purchased in a physical store (10%). More specifically, says Blissick: “43% of people return one-quarter of the items they order online; 23% return one-half.” That’s a lot of stuff. How do merchants support the entire cycle of virtual shopping while keeping fraudsters at bay?

A lot of things have gone right if someone is at the payment section of a checkout experience. They have arrived, searched, browsed, discovered, added to cart, and, finally, proceeded to checkout. And right here, between gaining a potential sale and disappointing a potential customer, is the crux: deny a legitimate, first-time order attempt due to anticipated fraud risk, or let it be processed. This micro-moment could cement your image as a great/fun/reliable brand with an easy-to-navigate site and seamless checkout. Or leave a possibly high-value customer, and very likely non-returning consumer, with an awkward anecdote. 

Fear of fraud is serious business, both for brand image and the bottom line. Can data save the day? Signifyd thinks so. Their gigantic Commerce Network is second only to Amazon’s. The network’s data is derived from thousands of merchants which allows a high level of customer understanding and behavioral insight. Has this person previously shipped to this particular home, office, or gifting address before? Yes or no, they can know. This visibility and confidence allow Signifyd merchants to accept more customers while upping order approval rates by 5-9%. Those numbers are not insignificant. By identifying illicit intent and taking data-based action, the fear of fraud is minimized and order acceptance is maximized. A crucial, complex issue is determined and diffused.

Signifyd helps brands validate purchase legitimacy to maximize order processing and ensure a seamless ecommerce experience. This saves merchants money and improves the customer experience of sincere shoppers. “The process does not end with purchase,” says Blissick. “It’s not a sale until it’s not returned.” 

So, from price switching (placing fake labels on merchandise to return them at a higher price than purchased) to substitution fraud (purchasing a working item and returning a defective item), retailers can be prepared. Options for proactive and preventive measures to address return fraud exist. Merchants can take advantage of available services to stem the tide. Who knows what’s next?

Continue the discussion with Megan Blissick, Head of Global Agency Partnerships at Signifyd, on the next episode of Commerce Confidential: Peak Selling and Fraud Prevention Strategies