The Great Prom Dress Heist

Welcome back for another entry to our series, “The top 10 phrases used in the fraud industry (and an explanation what they really mean!)” Today we are talking about ‘Return Fraud’, which is a form of theft that utilizes several other forms of fraud in our list so far.

Return fraud for businesses is the ultimate double whammy. An individual first steals from a company, either by using a stolen credit card to obtain a good from them, perpetrating shipping fraud by claiming to have never received a good when they actually received it or by receiving a good and then obtaining a chargeback from them by claiming the product was broken or defective. The thief then takes the product that they stole from the merchant online and then goes into the same merchant’s brick and mortar store and tries to return it for cash or store credit. For merchants, not only are they out the money the first time from the chargeback or stolen credit card, they are now paying this thief money for a second time to return the product.

What kind of return fraud is most likely?  

Clothes, plain and simple. Almost everyone has heard of the prom dress swap. A girl buys a dress on Friday, wears it on Saturday and returns it on Sunday never having any intention of ever keeping and paying for the dress. For retailers with both web and brick and mortar stores the abuse can be near identical and it is so common that it even has its own phrase, ‘wardrobing’. A customer buys clothes from the web, wears them for a certain period of time and then returns them when those clothes have ‘worn’ their purpose. While certain retailer like L.L. Bean and Patagonia maintain a happy customer base by maintaining a no questions asked return policy, those returns still hurt the bottom line severely. Now combine the used merchandise with the fact that the merchandise is stolen, and retailers have a serious financial threat to be on the lookout for.

A pretty woman at home picking up delivery box package

                                            “Time to make me some easy money!”

How do I stop return fraud?

When accepting a return at a physical location that was purchased from the web, always require a receipt. Not only does a receipt stop the acceptance and payout for a stolen good, the procedure will help stop many looking to abuse liberal return policies to begin with. A receipt also helps stop cross merchant returns. For example a customer might try to return a similar product like a white t-shirt purchased at a low end retailer and then return it at a luxury retailer and pocket the difference. Even for small ticket items, most web retailers will send a receipt not only to a customer’s email but also include a printout with the shipped package to cover both bases in case a customer claims they never received a receipt.

For higher ticket items, always require a signature upon delivery. When a customer signs, they acknowledge that they received the promised product and are taking delivery. This prevents a customer from receiving a package that most likely would contain a receipt, having them claim they never received it and then going to that company’s physical store with receipt in hand and walking out with cash.

Lastly, always use fraud detection software. Using tools to detect fraud prevention can help stop the cycle to begin with by refusing to ship in the first place. And no tool is more powerful than Signifyd. Signifyd can tell merchants if a customer has a history of chargebacks, is blacklisted by other merchants or has a history of fraud. Signifyd can also instantly score every online transaction, telling you if a credit card is stolen or if an order is likely fraudulent or not based on over 120+ indicators. Preventing a shipment to a risky individual in the first place can stop return fraud before it even happens.

Final Thoughts

If your business has suffered ‘wardrobing’, return fraud or your team is canceling so many online orders to prevent fraud that your business is inadvertently blocking good customers in the process, we here at Signifyd would love to speak to you about how we can sort out the good customers from the bad. Reach out to us anytime at sales@signifyd.com

Signifyd

Signifyd, the world’s largest provider of guaranteed fraud protection, enables ecommerce retailers to provide friction-free buying experiences by shifting fraud liability away from merchants.

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