The treacherous economic environment in the UK has triggered retailers to prepare for a challenging winter period. In the run up to last year’s festive period, there were already reports that over two-thirds of the British public planned to reduce their spending.
While the high-profile retail events like Black Friday and Cyber Monday exceeded expectations, it was reported by ReBound, a clothing returns specialist, that returns were up 8.4% from 2021. Combined with widespread concerns around the UK cost-of-living crisis, it is increasingly evident that many shoppers are being more considered in their purchases and exploring ways to cut back and save money.
As retailers prepare for customers to continue more cautious spending habits in 2023, they must also prepare to address changes in consumer behaviour. One such behaviour is policy abuse – a largely underreported trend which threatens to eat into retailer profits this year.
Complicated and misunderstood
Policy abuse is complicated and often misunderstood because it has bad actors who commit acts at huge scales, as well as consumers who commit acts on smaller scales. It also exists in a ‘grey area’ of consumer and merchant trust. Arguably, traditional digital fraud is more straightforward in that it can largely be attributed to ‘bad actors’ with deliberate intentions.
While policy abuse is not the same as traditional digital fraud, it has similar consequences for the retailer in terms of its impact and its potential to cause disastrous financial loss. The motives also largely lie in the same vein – with consumers aiming to either make or save money. Many consumers are completely unaware that their actions mean they are committing policy abuse, while others do not care – some even brushing it off as nothing more than a ‘life hack’.
Put simply, policy abuse occurs when regular, paying customers exploit a retailer’s terms and conditions. There are different forms of policy abuse, and some are more sophisticated than others. One of the most common forms is the misuse of sign-up or promotional codes to access extra discounts. Social media makes it very easy for individuals to obtain and share these types of discount codes, and many online retailers are finding they are being used beyond their original intent.
As it is relatively quick and seamless to create a new email account, there is little to stop someone from signing up several times, or even using a referral promotion to refer themselves using a different email address.
Another common form of policy abuse is related to refunds and returns. Retailers regularly find themselves managing the expensive cost of returns and lost packages, but they often must navigate falsified returns and refund claims too. For example, a customer may reach out to a retailer and claim that their order is missing, causing a duplicate to be sent out or a refund to be activated. Similarly, a customer may also post a return to the retailer but keep the product, instead returning an empty box. Another form that has gained traction over recent years is returning used or worn items (known as ‘wardrobing’).
There are also highly prevalent, sophisticated types of policy abuse that are exceptionally difficult for retailers to monitor for and navigate. Reselling is a particular headache for retailers. It is a common problem with items such as concert tickets and luxury goods – if it is in-demand, it is highly likely that someone is reselling it or planning to. Some committing this type of policy abuse may even view it as a full-time job and income stream.
How retailers can protect themselves
Managing policy abuse is no easy feat for online retailers. While some may choose to turn a blind eye to infrequent abusers to conserve a valuable customer for the long term, the current economic climate makes it so that many cannot accept policy abuse as an inevitable part of running an online business. However, by adopting the right technology and processes retailers can get a grip on policy abuse.
While many fraud prevention solutions tend to focus on account to product-based rules at the checkout, the more effective solutions look to analyse every event throughout the customer’s journey. This will include requests for return authorisation, account creation and missing package claims. The ideal solution will prevent policy abuse without compromising the shopping experience. This is usually done by connecting data from various customer interaction channels to uncover sophisticated overlap across abuse patterns. This way, the retailer can identify when policy abuse is taking place and who is behind it.
Retailers that implement and maintain a strong policy abuse strategy are better prepared to provide their trusted customers with a frictionless and more positive shopping experience. The benefits of which stretch far beyond revenue retention to improve the overall running of the business.
The right technology and data insights can go a long way when it comes to reducing and preventing financial damage caused by ongoing policy abuse. Implementing the right policy abuse strategy places retailers ahead of the game, allowing them to retain and even grow profits across the new year.
