With the Research Group for Returns Management estimating that 1.3billion online orders are returned each year, fraudulent returns are a growing issue; the National Retail Federation (NRF) estimates that one in ten online returns are now made with fraudulent intent.

Wardrobing and stolen items being returned, empty boxes being sent back, discounts or cashback being claimed multiple times, payment authorisation being disputed after delivery, or purchases made online from dubious sellers which are then returned to stores. These are all new ways fraudsters are targeting retailers through returns.

However, ecommerce businesses aren’t defenceless – and while this poses major challenges for retailers, it also underscores the need for comprehensive protective measures in returns management. Here, parcelLab‘s COO and Co-Founder, Anton Eder, shares ten effective measures digital brands can use to protect themselves against returns fraud.

1. Implement clear & strict return policies

A transparent and well thought-out return policy is the cornerstone of protection against return fraud.

Retailers should specify exactly which items can be returned, within what time frames and what documentation is required. These policies must be clearly communicated and consistently enforced to prevent abuse while ensuring a fair shopping experience for honest customers.

2. Thorough inspection of returned goods

When accepting returns, a careful inspection of the goods is essential.

Employees should be trained to look closely for signs of use, damage, or tampering. Particular attention should be paid to product categories that are frequently affected by return fraud, such as high-end electronics or designer clothing. A thorough inspection can help identify and prevent fraudulent returns.

3. Implementation of a returns portal

A returns portal requires customers to obtain authorisation before returning an item. This additional step enables retailers to track and evaluate return patterns.

This allows potential fraudulent activities to be detected and prevented early on. At the same time, it offers the opportunity to streamline the returns process for legitimate customers.

4. Analysis of purchase & return patterns

The systematic evaluation of customer data can provide insightful information about purchase and return behaviour.

Unusual patterns, such as frequent returns of high-value items or seasonal spikes in returns, may indicate potential fraud. These analyses enable retailers to take targeted preventive measures and identify high-risk customers.

5. Seamless systems integration

Seamless integration of all relevant systems – from the ecommerce platform to warehouse management, CRM and payment processing – provides effective protection against returns fraud.

Real-time updates prevent data delays that could be exploited by fraudsters. A well-integrated system provides a holistic view of the returns process and makes it easier to detect irregularities.

6. Use of tamper-proof labels and packaging

The use of unique labels or seals that are difficult to replicate, such as those containing serial numbers, holograms or security features like colour-shifting or hidden markings, can significantly simplify the authentication of returns.

Special packaging that shows clear signs of opening or tampering makes abuse more difficult. Additionally, documenting the original condition of the merchandise before shipment using photos or videos can serve as evidence in the event of a dispute.

In addition, documenting the original condition of the merchandise before shipment using photos or videos can serve as evidence in the event of a dispute.

7. Implement receipt verification

Requiring customers to provide a receipt or other proof of purchase for returns can deter fraudsters from returning stolen or counterfeit goods.

Ideally, retailers have implemented a process that uses tools such as barcode or QR code scanning to verify receipts and cross-reference them with the order database.

8. Block frequent returners

Customers who return too many items can make life difficult for merchants; merchants can address this by, for example, limiting the number of returns within a specific time period.

This approach is being increasingly adopted by retailers, including H&M, while research shows that half of Gen Z shoppers have had their online accounts suspended by a retailer for returning too many items, +21 percentage points higher than average shoppers across all age groups (32%).

9. Dispute chargebacks

Merchants who encounter fraud related to chargebacks, for example, when customers return used merchandise and then reverse their payment, should file a dispute with their payment service provider.

Ideally this would include supporting evidence to back up the claim, such as proof of purchase, shipping tracking information and photos of the returned item. It is also helpful to provide your own return policy if a customer initiates a chargeback that violates your terms and conditions.

10. Reporting fraudsters

Depending on the situation, it may be necessary to report the fraud to the appropriate authorities or investigative agencies. In some cases, merchants may also consider taking legal action against fraudsters. However, this is usually a last resort, as criminal prosecution can be time-consuming and costly.

Merchants should therefore only consider legal action if the fraud is serious enough to justify the costs of lawyers and other expenses.

Return fraud costs companies time and, above all, money. The best way to deal with returns fraud is to prevent it from the outset. Clear return policies, the use of a returns portal and attentive employees can put a stop to many fraud attempts right from the start.