Mar 31, 2021

What Are Fraudulent Returns And How To Lessen Their Impact

Return fraud is a massive problem in the industry right now.  No company likes to talk about their rate of return fraud, so few are sharing any data, meaning the extent of the problem is difficult to measure in terms of dollars, but as a liquidation company working with very large online retailers, we know first-hand how severe the problem is.  

There are also small peeks into the extent of the problem when we see fraud rings that make the news because law enforcement’s discovered them.  A single fraud ring can be responsible for tens of millions of dollars in fraud.  

One analysis of 2019 returns suggested fraud was present in as many as 20% of all online returns.  Considering the size of the problem, it’s surprising how few people there are talking about it.  Not only is it prevalent, but those committing it are very savvy.  Items will come back looking as though they are new and unopened, only to contain sand, bricks, old dirty socks, kitty litter, empty computer cases (we’ve seen all of those things) or anything else you can imagine.  The end of result of all this is, that the best way to prevent fraud is to open every returned package to verify the contents before offering a refund.  This means opening everything, even if it looks new.  

We understand how drastic that sounds, but weigh that against the damage caused by a customer of yours opening a box, expecting to see what the ordered, only to find junky old model train parts.  Any retailer that simply puts returns back into inventory without verifying them, is setting themselves up for serious customer service issues and brand damage.  Clamshell and other packaging that is both transparent and cannot be opened and resealed without obvious evidence of tampering is helpful, but not all items lend themselves to the packaging of that sort.  Even here, perpetrators of return fraud are surprisingly innovative.  

We have seen drones returned in clear plastic packaging that looked perfect, even after opening the package, only to find out later that the model that was returned was an older model of the same brand as the one that should have been in the box.  The customer had purchased a new model, returned the old one, and no one was the wiser.  We have seen computers returned that work, but are found to be missing hard drives, memory or other components.  We have seen furniture returned only to discover that the customer kept all the hardware needed to assemble it.

Return fraud is so common, and often so difficult to detect, that we strongly recommend that none of our clients put the returned product back into inventory unless they can accurately verify that the item returned is both complete and exactly what was originally sold.  Unless they are very high-end items, verifying that usually costs more than the item is worth.  

At RL Liquidators, we have the ability to act as your third party return center and physically inspect every item, with photographs, allowing you to make accurate and real-time refund decisions.  We look for and report any instances of fraud to our clients.  We then resell the returns through our proprietary sales channels, paying you a mutually agreed-upon percentage of the returns retail value, relieving you of the risk of selling a returned item and finding after the fact, that it was fraudulent.

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