Wear and return behaviour is something many have reported on previously, but how do you spot it? How do you deal with it?
When we think of someone stealing from high street retailers, we usually think of shoplifters. But a small number of customers have developed an ingenious pattern of fraud that eats up profit margins. These customers—less than one percent of all shoppers—regularly buy outfits they can’t afford, wear, and return them in depreciated condition.
Wear and return shoppers impact product depreciation and margin
On the surface these shoppers appear lucrative since they’re big spenders, but they account for between 10-15% of all returns. After refunds and the other costs to serve are removed – the retailer actually loses money or essentially has paid those customers to shop.
Our research shows that a persistent wear and return shopper can cost an individual store thousands of pounds every year. Even in tiny numbers, they drain millions of pounds from profit margins.
They appear lucrative – but even in small numbers they can drain millions from profits
The statistical sophistication of the Clear Returns model allows us to accurately identify these sneaky customers, and separate them from people who were legitimately dissatisfied with their purchases. This allows the retailer to detect fraud and put a stop to the revenue-sapping behaviour.
Better understanding allows better targeting to this group
By better understanding customers behaviour, retailers can also better target wear and return groups. These aredefinitely NOT the key segment you want to be offering free delivery or large discounts to regularly, they will only cost you far more in the long run!
Several retailers have opted to differentiate their return policies although last week online retailerSinger22 implemented a radical new returns policy that gives customers an additional 10% of store credit when they return unwanted items.
They view this as being a token of appreciation for repeat business and that the system cannot be abused due to returns monitoring.
Yet even the CEO Jon Singer admitted that instances of wear-and-return fraud would simply be ‘unfortunate’. With this behaviour costing around $18 billion in the U.S they may need to think harder about how to combat this.
Although this type of return policy may be the first of it’s kind, retailers have been experimenting with these for years. For instance footwear retailer Schuh offer a 365 day return policy which some believe encourages customers to abuse the policy.
Boden also offer a no quibble return policy allowing customers to return items within 3 months.
Although these strategies are aimed to increase customer satisfaction do retailers walk a thin line between keeping their customers happy and giving them too much freedom to abuse the system?
A recent survey conducted by Clear Returns has investigated customer return behaviour and the growing trend of consumers continually returning garments they have already worn.
67% of survey respondents have returned items that they ordered online, with almost 40% returning several items.
Much more concerning is the statistic that nearly a quarter of respondents have returned items that they had already worn, basically committing fraud. 52% of respondents also said their friends had committed similar offences. The most common reason given was that customers would buy an item for an occasion, wear it once and then get a refund:
“My friend has WAG aspirations and regularly returns dresses to coast etc she has worn to an occasion. She has commented that more shops are putting labels on the outside now so she can’t hide them or pin them in. I think returning online gives her more anonymity but she has returned in store (rotates the stores she goes to).”
“Wore the clothes, damaged them, returned them claiming they were damaged on arrival”
“No point of keeping it if it was only going to be worn once.”
This behaviour is known as “de-shopping” and it is becoming increasingly common as is returns fraud. A recent publication by Tamira King and John Balmer on this issue provides some further insight.
Worryingly retailers may be encouraging customers to buy more than necessary by providing offers such as free postage or discounts. The survey results found that 22% of customers returned items they had bought on special offers such as these. This suggests that these perks from retailers are potentially detrimental as this may encourage more impulse buys that may cost them far more than they gain in sales.
Posted by Ellie