The holiday season is often a one-two punch of activity for online retailers: First comes the spike in purchases… and then comes the inevitable returns.

Post-holiday returns squeeze already thin margins during what is potentially the most profitable time of the year for many merchants. Making a challenging situation even worse, return fraud is skyrocketing: of the $212 billion in online purchases that were returned last year, an eye-watering 11% were fraudulent.

“Bogus returns are the most painful of all because the merchant doesn’t just lose the revenue from the sale, they lose the merchandise,” says Mike Cassidy, head of storytelling for Signifyd, whose Commerce Protection Platform integrates with Adobe Commerce to protect brands from fraud and policy abuse.

As fraudulent returns ramp up during the holidays, Adobe Commerce customers can leverage Signifyd’s Return Abuse Prevention solution to not only reduce their risk of return fraud but to improve the experience for their legitimate customers—an investment that can pay off in higher conversions and increased customer lifetime value.

A box of rocks

Returns are increasingly being targeted by fraud rings and unscrupulous consumers. This practice is widespread; nearly a quarter of the consumers surveyed by Signifyd admitted to returning an empty box or an item other than the one they purchased in an attempt to get a refund.

Frausters take advantage of merchants who are intent on processing refunds quickly in order to provide an excellent customer experience. Some retailers provide a refund as soon as a shipper notifies them that a package has been picked up and is on its way. They don’t wait to receive and inspect the item. That gives fraudsters the opportunity they need.

“Some people looking to game the system purchase expensive electronics, jewelry, or apparel items and then package up a knock-off, or a broken or outdated product to return in its place,” Cassidy explains. Others fill shipping boxes with rocks, canned food, or other items that approximate the weight of what they purchased and send it back, knowing that many merchants will issue a refund as soon as the return is scanned in by the shipper.

In more sophisticated cases, Cassidy says that scammers who return knock-offs or junk avoid detection by deliberately altering the address on a return shipping label to reroute the package to a nearby, but incorrect warehouse. More often than not, the package is scanned in at the wrong warehouse, which marks it as delivered in the shipper’s system. But because the package is nowhere to be found at the merchant’s warehouse, the merchant assumes it was misplaced.

Reducing return risk

But there is hope for beleaguered retailers. Signifyd’s Return Abuse Prevention solution gives Adobe Commerce merchants a way to fight back against return fraud while creating a better customer experience. And striking this balance is a worthwhile effort: Signifyd’s most recent survey of consumers’ attitudes toward returns showed that 65% of respondents said they would stop buying from a brand based on a poor return experience. 

Return Abuse Prevention makes it easier for retailers to automatically discern between low-, moderate-, or high-risk return requests and respond accordingly. For example, under Return Abuse Prevention protocols, a loyal customer with no history of return abuse would automatically be issued an immediate refund, while a moderate-risk request would be approved for store credit and a high-risk return would require the returned product to be processed and verified in the returns center before a refund is issued. 

Adopting a return approach based on risk allows retailers to issue speedier, friction-free returns to legitimate customers who are already dissatisfied with a merchant’s product while reducing return fraud losses from more obvious scammers.

Reducing fraud all year long

Professional fraud rings, individual scams, and consumer abuse, such as false claims that an item never arrived, are real and growing threats for online retailers. “Given the outsized revenue generated in the fourth quarter, retailers and industry watchers put a lot of focus on managing fraud during the winter holidays,” Cassidy says. “But reducing your risk of return fraud throughout the year provides very real benefits for your business—and your customers—all year long.”

Interested in learning more about how Signifyd’s Adobe Commerce integration can reduce return fraud risk and improve customer experience? Connect with us today.