Return to sender – for a fee: Online retailers crack down on returns fraud

Retailers are tightening returns polices after years of consumers taking advantage of perks.

Retailers are tightening returns polices after years of consumers taking advantage of perks. Photo: Getty

The trend of shoppers buying products to abuse return policies is growing, but there are warnings all consumers could suffer as retailers look to strike back.

The warnings come as almost four out of 10 Australia-based online shoppers admitted to having abused a return policy or knowing someone who has over the previous 12 months, research by ecommerce brand management platform Loop found.

More than 20 per cent of shoppers said they had worn or used an item while planning to return it.

Loop chief operating officer Hannah Bravo told Business Wire that merchants have already begun tackling the problem by shortening the period of time customers have to claim a refund, and increasing quality inspections before issuing refunds.

Queensland University of Technology consumer and retail expert Gary Mortimer told The New Daily that in the US alone, the cost of returned products totalled $US744 billion ($1.1 trillion).

Of the returned items, 18 per cent were purchased online and returned via post.

The average return rate for online purchases is typically between 20 and 30 per cent.

Almost 14 per cent are fraudulent, research says.

Mortimer said retailers are often unable to resell returned items if they show obvious signs of being used, such as scuffs or make-up stains.

This also has a negative effect on the environment, as returned items that cannot be resold often end up in landfill.

“As the cost-of-living crisis continues to erode household budgets, there might be a spike in this type of behaviour,” Mortimer said.

“Consumers will still want to go out and to parties or to race days, to weddings, wearing a nice outfit when ultimately they may not be able to afford the item.”

He said online shoppers also tend to order one style of clothing in multiple sizes to make sure they get the right fit, with the intention of returning the items in sizes that don’t fit.

This practice is known as “bracketing”, something 79 per cent of online shoppers in Australia said they have done at least once, Loop reported.

Returns can cost retailers money, not just in the items they might have to throw away, but also potentially in shipping costs as well, especially for the companies who offer free returns.

With fraudulent returns possibly on the rise as budgets strain under the cost-of-living crisis, retailers have already begun tightening their returns policies and instituting return fees.

More than a quarter of retail businesses planned to increase the cost of delivery in 2023, according to order management and shipping software company ShipStation.

Facing increasing operating cost pressures, only 18 per cent of retailers planned no increases to the price of products, delivery or returns.

Meanwhile, only 23 per cent of consumers were willing to pay for returns in 2023 – a 4 per cent drop on the previous year.

Mortimer said putting the cost back on shoppers is unfortunate for those doing the right thing but have mistakenly purchased items that don’t suit.

But it could be an effective “disincentive” for fraudulent returns.

“If it’s free to deliver and free to return, you’re more likely to buy multiple sizes or even potentially buy one outfit, wear it and then return it for free and get your money back,” he said.

Although retailers are not left with many other options to put a stop to fraudulent returns, Mortimer said there does need to be more uniform sizing across clothing and footwear brands so consumers know what clothes will fit them, no matter which brand they buy.

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