New Consumer Survey Reveals How Pervasive Returns Fraud and Policy Abuse Are Among U.S. Retail Shoppers

The data offers insight into what behaviours online shoppers consider to be fraud vs. abuse, and how often they engage in such behaviours.

Loop, a return management platform for ecommerce brands firm, released the findings of its most recent consumer survey on return policy abuse and fraud. The data offers insight into what behaviours online shoppers consider to be fraud vs. abuse, and how often they engage in such behaviours.

Loop surveyed 1,000 consumers based in the U.S. who have made a return in the last 12 months for an online purchase. The survey explored their return policy abuse behaviours and perceptions and was conducted between November 22 and December 3, 2023.

Key findings from the survey include:

• Nearly 4 in 10 U.S. based online shoppers (39%) admit to having either engaged in return policy abuse or fraudulent behaviours themselves in the past 12 months, or know of someone who has. The behaviours respondents were asked about spanned across outright fraud, return policy abuse, and other unfavourable return behaviours.
• Alarmingly, between 20% and 30% of shoppers who admit to engaging in these behaviours do so at a high frequency. For example, 31% of these respondents said they have worn or used an item while planning to return it at least once a week.
• Over half of shoppers (54%) agree they commonly engage in “bracketing” — ordering multiple items to determine size/fit, with the intention of returning at least one item.

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Return policy abuse, fraud, and other unfavourable return-related behaviours can exploit the return process, yet some of these behaviours are common and are not always considered by consumers or merchants to be abusive. These behaviours range from minor policy violations, to unfavourable behaviours that impact merchants financially, to outright illegal activity. The National Retail Federation estimates that 13.7% of returns in the U.S. in 2023 were fraudulent.

“Return policy abuse and fraud pose an enormous challenge to retail brands,” said Hannah Bravo, Chief Operating Officer at Loop. “At Loop, we’ve seen merchants begin to actively tackle this problem, evidenced by an overall decline in refund windows and an increase in quality inspection before issuing refunds. There is still so much more work to do to reduce the impact of returns fraud and abuse on merchants’ bottom lines while retaining their best customers. To achieve this, retail brands need partners with deep expertise and true customization engines powered by broad data sets and machine learning.”

The survey included several additional insights into consumer behaviour, including:

• Over half of Loop’s survey respondents (54%) say they did so to determine the size/fit of an item purchased, and nearly a third (31%) said they needed the money back they’d spent on an item.
• However, a significant number of respondents had less benign intentions, stating they wanted an item for a single event (36%), they were taking advantage of a lenient return policy (23%), or they wanted to keep an item without paying for it (15%).

Targeted Strategies can Reduce the Impact of these Behaviours.

• Loop found that charging a fee for returns would dissuade over a third of respondents (37%) from engaging in fraud or abuse.
• Since over half of online shoppers frequently engage in bracketing, providing more accurate size measurements or improved product images can go a long way toward deterring this unfavourable behaviour.

“Retail merchants are finding their profit margins under deep scrutiny in today’s environment, and returns are receiving dramatic focus,” said Jonathan Poma, CEO at Loop. “Because of this, merchants are increasingly seeking guidance to help them optimise their returns processes. There is no one-size-fits-all approach to returns, and each brand needs to understand their shoppers’ behaviour to craft a targeted strategy that reduces costly fraud while balancing the need for an exceptional customer experience.”

Here is the full report to explore more findings.

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