There’s been a sudden rise in ‘return abuse’ as customers embrace online shopping and take advantage of retailers’ generous return policies.

While all retailers need comprehensive returns policies and the ability to support their customers to access the right products for their needs online, a surge in the return of unwanted items purchased online is causing significant issues for many retailers.

Effectively, shoppers are purchasing multiple items online, in many cases enjoying fast and free delivery, making buying decisions in their own home and then returning the items they don’t want at the cost of the retailer. This is not online shopping; it is in-home shopping, and it is sending retailers to the wall.

Shoppers are now more careful with their money due to cost-of-living pressures. If a product doesn’t quite meet their expectations, they are also returning the products. Unfortunately, we are also seeing a rise in online occasion shopping. This is where a customer purchases an item for a special occasion, uses or wears it and then returns it stating that it did not meet their expectations.

Returns are an expensive process for retailers and many items cannot be returned to shelves due to safety reasons. In addition, a lot of items are being returned without full packaging and in some cases damaged. In many cases the retailer is also paying for the returns. Unfortunately returns are becoming a logistical nightmare for many businesses that are undertaking their own logistics.

As a third-party logistics partner for a broad range of retailers, we undertake a complete quality assurance check of every returned item as part of our services. This is resource intensive, but it must be done. We are able to do this at a much lower cost than a retailer due to the scale and integration of robotics into our operations.

My strong advice to retailers is to talk to an expert and get help otherwise returns could seriously undermine the financial health of the business. Return abuse is a form of retail fraud where customers exploit a company’s return policy causing serious financial harm. Unless it is properly managed, a business can go under.

The dangers of return abuse for retailers:

Financial losses

Retailers incur direct financial losses when products are returned. If the returned items are damaged or used, they may need to be discounted or written off entirely, reducing the company’s profitability.

Inventory management issues

Return abuse disrupts inventory management. Items returned in unsellable condition or after being used temporarily (wardrobing) can create excess stock that is difficult to move, tying up resources and space.

Increased operational costs

Processing returns involves labour, shipping and restocking costs. An increase in returns due to abuse adds to these operational expenses, impacting the overall efficiency and profitability of the business.

For retailers that undertake their own logistics, the cost is multiplied even further. For businesses that outsource to a third-party logistics provider like B dynamic, the cost of returns is significantly less. Providers also work with retailers to help them develop policies to reduce return abuse.

Price inflation

To compensate for losses due to return abuse, some retailers have to increase prices. This can hurt all customers, including those who do not engage in return fraud, potentially driving them to seek better deals elsewhere.

Policy changes and customer experience

To combat return abuse, retailers might have to implement stricter return policies. While this can reduce fraudulent returns, it may also alienate legitimate customers, leading to dissatisfaction and reduced customer loyalty.

This approach can be tricky which is why it is always a good idea to explore this with an experienced third-party logistics provider that is able to help combat the rise in return abuse without impacting loyal customers.

Devaluation of brand

Consistent return abuse can hurt a brand’s image, making it appear lenient and easily exploitable. This can erode trust and respect among consumers and competitors.

Resource diversion

Dealing with return abuse diverts resources and attention from other critical business areas, such as customer service, marketing and product development. This diversion can stifle growth and innovation. For retailers that manage their own logistics, this is a huge problem.

Potential legal issues

In severe cases, return abuse might lead to legal battles with customers or fraud rings, resulting in legal fees and further financial strain.

Impact on revenue recognition

Frequent returns can complicate revenue recognition and financial forecasting. Uncertainty in return rates can make it challenging to predict cash flow and financial health accurately. This can impact on a business’ entire operations, value and ability to secure finance and decent credit terms.

Employee morale

Dealing with return abuse can be frustrating for employees, especially customer service and retail staff. This can lead to decreased job satisfaction and morale, impacting overall workplace productivity.

Return abuse creates a multifaceted problem for retail businesses, affecting their financial health, operational efficiency, customer relationships, and brand integrity. Addressing this issue requires a balanced approach that protects the business while maintaining a positive customer experience.

Cross-sector 3PL

B dynamic Logistics has introduced a new category of logistics in Australia called cross-sector 3PL. It brings together all areas of logistics, expertise and capability under one roof, within one dynamic AI driven system that is capable of operating thousands of transactions within a short period of time. The result is seamless cost-effective supply chain operations.

Cross-sector 3PL connects customer systems, warehouse management systems and transporter systems, providing customers with extensive integration options, custom data feeds, business intelligence, dashboards and reporting for all facets of logistics including big and bulky, port/manufacturing facility to warehouse, warehouse to stockists and warehouse to customers.

Mal Siriwardhane is CEO of B dynamic Logistics.