Retailers like REI & Target are cracking down on serial returners
As retailers reportedly lose tens of billions of dollars each year due to fraudulent returns, some major retailers have either announced policy changes or stricter messaging toward people abusing their returns systems.
In November, REI told Retail Dive it would stop accepting returns from a small subset of members. Target updated its website to say it could deny returns for “fraud, suspected fraud or abuse,” Business Insider reported in September, though a Target spokesperson told the outlet this was just a new communication and not a change in policy. British fashion retailer Asos sent emails to some customers saying they would charge fees to customers who frequently return items, according to a BBC article also published in September.
This doesn’t mean retailers are widely cutting down return windows. Brands have been trying to stay competitive but also are coming up with new ways to crack down on abuse. Amazon has long offered free returns, and companies have felt obliged to follow suit, but there has been growing resistance as retailers like H&M, Zara, American Eagle and T.J. Maxx have started charging for returns. Now, more players are fine-tuning their approach to zero in on specific bad actors.
Instead, they’re engaging in targeted crackdowns of people said to be abusing return policies. Retailers lost $101 billion from return fraud in 2023, representing about 14% of all returns, according to National Retail Federation research (the organization changed its methodology, so these numbers are not comparable with figures from previous years). The NRF found almost half of the product returns to be used, non-defective merchandise, and 44% was from people returning stolen merchandise. Other returns were of merchandise purchased with fraudulent tender.
REI, which offers a generous one-year return window for members, told Retail Dive that the company is targeting less than 0.02% of its members who, on average, returned $2,400 worth of gear over the past year, or 79% of their purchases, the majority of which came back used. Similarly, Asos said it was targeting a small group of customers in the U.K. with a high return rate and that nothing has changed for the majority of its shoppers, who can return items for a refund within 28 days.
Lenient return policies can still be make-or-break for consumer purchases, and retailers often accept returns for a longer period of time during the holiday season. Walmart has one of the more generous windows, accepting returns of most items purchased between Oct. 1 and Dec. 31 until Jan. 31. Amazon’s policy is similar, accepting holiday returns until the end of January but only on items purchased between Nov. 1 and Dec. 31.
In a Gartner survey conducted in June, 60% of customers said they would be more likely to shop with retailers that offer holiday return policies longer than 30 to 60 days. Kassi Socha, a marketing analyst for Gartner, said retailers need to find a balance between offering more generous return policies to entice customers and increase sales and combating fraudulent returns by, for example, blocking certain e-commerce transactions or alerting local store management of people who frequently abuse return policies.
“Retailers need to be really thoughtful in the way that they rule out these policies and how widespread these policies are to protect their overall customer experience,” Socha said. “I applaud the retailers that have implemented some of these policies in a really targeted approach to ensure that they weed out bad actors, but it doesn’t jeopardize the overall customer experience.”
Barry Thomas, a retail consultant for Kantar and former longtime Coca-Cola executive, said bigger companies could use new technology solutions such as biometrics that can identify customers as they shop, cracking down on certain returns abusers without compromising compelling return policies that drive sales. Earlier this year, for example, Mastercard announced a new biometrics service aimed at streamlining e-commerce logins and payments by using fingerprints or facial recognition to access customer accounts. However, local small businesses often don’t have the capital to invest in such technology and have to resort to tighter return policies.
“The one sort of group of retail that can’t really compete with larger retailers, especially in this area, is just your local community retailer,” Thomas said. “This does impact them a bit more disproportionately.”