Returns Fraud: How to Protect Your Ecommerce Business


Are you up to your ears in post-holiday returns? You’re not alone. With any luck, your returns are from honest shoppers with legitimate gripes or valid reasons for changing their minds. However, you should also be mindful of returns fraud and how it can impact your business. Here are a few steps you can take now to cut down your risk.

  • Review your returns policy. As an ecommerce seller, you want your return policy to be generous enough for customers to feel secure about buying sight unseen, but at the same time tough enough not to impact your inventory or bottom line. Consider whether making returns too easy – such as paying for their return shipping or including shipping labels – is promoting more fraudulent returns, such as “wardrobing” customers who pay for an item, use or wear it once, and return it for the full cost.
  • Use tracking numbers on your shipments. Tracking numbers can help prevent chargeback, or “friendly,” fraud – a practice fraudulent return customers use to claim that a product was never delivered and forcibly initiate a refund. Tracking numbers provide confirmation of delivery, and paying extra for a signature upon delivery adds an extra level of protection for sellers.
  • Consolidate your databases. If your purchase and return transactions are in the same database, you can easily cross-reference shoppers’ history and, if the numbers make you uneasy, opt not to fulfill orders of customers who have left a trail of questionable buying and returning patterns. The loss of that sale could save you both time and money in the long run.
  • Expect the unexpected – in those return shipments, that is. Make sure that what you receive back is your merchandise, not duplicate items from other retailers, counterfeits or altogether different items. Careful tracking and documenting of returns can help prevent these items from slipping through your system and costing you money.
  • Shore up your staff for returns season. After a busy holiday season, everyone may be ready for a rest, but now’s not the time to let down your guard. Don’t let human error or exhaustion let fraudulent returns get past you.
  • Invest in fraud-protection software. Returns issued from purchases on stolen or fraudulent cards can be avoided with fraud-protection software that allows you to vet any orders that give you pause.