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To help retailers avoid fraudulent returns this holiday season, we’ve made it a point to keep an eye out for who’s on Santa’s naughty list and what they’re up to. But what about the nice list?

Hard-working associates, loss-prevention professionals, and seasonal employees work together to maintain a streamlined returns process and ensure retailers have a profitable holiday season.

But, through advancements in AI, and by managing a secure returns process, retailers can do more to support workers on the nice list, while boosting holiday profits and preventing losses.

Fraudulent returns are serious

Unfortunately, within a bustling holiday season, fraudulent returns do increase in the retail industry. According to our study on customer returns, the holiday season saw more than $171 billion worth of merchandise get returned last year, with fraudulent returns accounting for more than 10%.

Fraudsters can take advantage of long lines and busy stores to dupe employees (oftentimes seasonal workers) by returning stolen merchandise, shoplisting, wardrobing items, and more. The fraudulent activity isn’t just in-store either, with return fraud shifting to ecommerce, and buy online, return in-store (BORIS) fraud increasing at a faster rate, according to the study.

What’s more, the holiday season increases fraudulent activity around high-ticket items such as electronics and high-end apparel for gift-giving. This is important to note as for every $100 in returned merchandise accepted, retailers lose $10.40 to return fraud, per the consumer returns report from Appriss Retail and NRF.

Retailers can take proactive measures, however, leveraging AI-powered data and analytics to identify patterns and trends to optimize returns handling. As a result, store management can improve how they train and monitor staff. Associates can run a smoother returns system, keeping customers happy and honest.

In the end, AI can deliver a better returns process for the holidays.

Here are five ways to build a positive returns program:    

#1. include customized returns incentives

Retailers can rely on AI-powered analytical modeling to review a customer’s purchase and returns behavior. The AI can then recommend an incentive that is most likely to influence that shopper’s future purchase decisions. The retailer can further offer customized incentives to unlock new profits while rewarding consumer loyalty. This AI-powered incentives program can boost holiday profits, grow holiday sales, and foster loyalty.

#2. Leverage data-driven insights to support employees

Just as data can be used to incent customers, it can also motivate associates. Retailers have access to technology and tools that examine the retailer’s employee activity log and identify the teammates who are doing well and the associates who need more help. The reporting tool helps retailers support their employees in meaningful ways, leading to improved customer service during a hectic retail holiday season.

#3. implement fine tunable return models

Retailers often bolster their return policies ahead of the holidays. This includes reviewing return policies during returns, which helps retailers track transaction history, detect patterns of abuse, and discourage repeat offenders. However, it’s important for retailers to not have a rigid, one-size-fits all return policy. Instead, retailers need to adjust these policies to fit the needs of each unique shopper and provide targeted incentives to further boost holiday sales. The high-pressure holiday season is an opportunity to delight consumers and a returns process can be part of that.

#4. Improve the customer experience  

Returns can’t be completely avoided during the holidays, and it’s important to remember that most shoppers are returning merchandise honestly. Retailers that provide a hassle-free and straightforward returns process can strengthen customer trust long term. This includes easy-to-use returns portals and clear instructions for smoother returns. Retailers also have an opportunity to reel in more holiday sales. By having an exciting in-store experience and excellent customer service, shoppers will be inspired to stay in-store. Appriss Retail found that only 5% to 15% of consumers stay in a store to continue shopping after a return. Retailers should start to view returns as an opportunity to re-engage with a shopper in-store to help create a positive interaction, despite the return. This new perspective can boost retail holiday profits and improve customer lifetime value.  

#5. Offer post-holiday discounts  

To accommodate returns during the holiday season, retailers also have an opportunity to revise post-holiday sales and promotions that can ease up on overall returns. Deep discounts provide retailers a way to balance profitability along with customer satisfaction. For example, when a clearance price is offered for certain products, shoppers may overlook a strict return policy for those products. Discounts can also limit fraudulent returns, as fraudsters tend to seek top-dollar items.

Retailers can thrive this holiday season

On one end, fraudulent returns are as common to the holiday season as mistletoe and reindeer, but there are steps retailers can take to help prevent losses and boost holiday profits. Additionally, retailers can enhance their returns process, making it hassle-free and dynamic to build a joyful holiday shopping experience. AI-powered analytics can help retailers run a more efficient returns program, while the store and customer experience can keep customers shopping well into the new year.

Protect your store from return loss this holiday season. Retailers can be proactive with AI-powered returns and take action against fraud.  

Let’s keep the nice list longer than the naughty list. 


On Santa’s Naughty List: 6 Common Forms of Fraudulent Holiday Returns



Pete Barker, Director of Product, Appriss Retail

Pete Barker has a long history in Retail Loss Prevention, most notably as the Sr. Manager of Digital Loss Prevention at Dick's Sporting Goods where he built the Digital Loss Prevention department/team from scratch. He was the Director of Fraud and Identity for technology provider SpyCloud before joining Appriss Retail in 2023. Pete is also very active with the Merchant Risk Council (MRC), holding the position of Fraud Community Committee Member since 2019, as well as a mentor for the MRC since 2019. He was also an MRC Regional Advisory Board Member from 2/20-2/21. 

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