eCommerce Returns Fraud

With the rise of online shopping and eCommerce, so too rises the issue of fraud related to returns. Recent studies have revealed that between 6-7% of all eCommerce return items are fraudulent, costing retailers billions in lost income every year. Over time, this loss can add up significantly and result in less product variety for customers or layoffs from employees across businesses, large and small. In this blog post, we'll dive into what constitutes an eCommerce return fraud, some common tactics used by criminals to commit these types of crimes, as well as ways for retailers to combat the impact with preventative measures.

What is eCommerce Returns Fraud

E-commerce returns fraud occurs when a consumer purchases an item online and then, after receiving the merchandise, contacts the retailer to claim that the item was never delivered. The consumer then requests a refund, which is issued without the merchandise ever being returned to the retailer. In some cases, the consumer may return empty boxes or damaged goods in an attempt to receive a refund for undamaged merchandise.

E-commerce returns fraud is a type of friendly fraud which occurs when a consumer attempts to defraud a business without intending to cause financial harm. This type of fraud is also known as chargeback fraud or credit card dispute fraud.

Returns fraud costs businesses billions of dollars each year and can be difficult to prevent. Retailers can take steps to reduce returns fraud by requiring proof of purchase for all returns, verifying the identity of customers, and tracking return activity.

The Different Types of eCommerce Returns Fraud

Returns fraud is one of the most common types of eCommerce fraud. It occurs when a customer purchases an item and returns it for a refund, even though they haven't returned the item or received any money back. There are several different types of returns fraud that can affect eCommerce businesses.

The first type of returns fraud is called “friendly fraud.” This occurs when customers buy something online, use it, and then return it for a refund, even though they don't need to return the item. For example, they might buy a toy and then decide they don't want it after playing with it for a while.

The second type of returns fraud is “manufacturer's defect” returns fraud. This occurs when a customer buys an item and then decides to return it even though there is nothing wrong with the product. This can be caused by customers simply having buyer's remorse or wanting to get something for free.

The third type of eCommerce returns fraud is called “unauthorized returns” fraud. This occurs when a customer purchases an item and then returns it without the merchant's authorization. This can happen if a customer has received a defective item or changed their mind about the purchase.

The fourth type of eCommerce returns fraud is called “product switching” fraud. This occurs when a customer purchases an item and returns it with a different item of lesser value. This can be done to get something for free or to get money back on a purchase they don't want anymore.

Finally, the fifth type of eCommerce returns fraud is called “theft” fraud. This occurs when someone steals an item and returns it for a refund. This is often done by criminals who know that merchants can't track the original purchase and will just accept the return without asking any questions.

How to Prevent eCommerce Returns Fraud?

Any business that sells products online is at risk for eCommerce returns fraud. This type of fraud occurs when a customer returns merchandise they never purchased or items that are not the same as what was originally sent. In some cases, criminals will even return stolen goods in an attempt to get a refund. While it may be impossible to completely eliminate eCommerce returns fraud, there are a few steps businesses can take to reduce the risk.

First, require a proof of purchase (such as a receipt or order number) for all returns. This step will help to ensure that only legitimate customers are able to make a return. Second, inspect all returned items carefully before issuing a refund. If you suspect that an item has been tampered with or is not the same as what was originally sold, do not issue a refund.

Finally, consider using return labels that can only be used once. This will help to prevent customers from making multiple returns or sending back different items than what they received. By taking these precautions, you can help to reduce the risk of eCommerce returns fraud.

What to do If You Are a Victim of eCommerce Fraud?

If you run an eCommerce business, there are a few things you can do to protect yourself from returns fraud. First, make sure you have clear return policies in place. This will help to deter scammers from trying to commit fraud in the first place.

Second, verify the identity of each customer who makes a return. This can be done by requiring a valid ID or using a third-party verification service. Finally, keep an eye out for any suspicious activity. If you think someone might be trying to commit returns fraud, contact your local law enforcement agency. By taking these steps, you can help to protect your business from losses due to returns fraud.

Conclusion

eCommerce retailers should take note of these methods that fraudsters use to return fake items and put policies and procedures in place to prevent them from taking advantage. By being aware of these risks and taking the necessary precautions, you can help reduce returns fraud and protect your business.