Rethinking returns: balancing customer satisfaction, fraud prevention and profitability

Xavi Sheikrojan, Senior Manager, Risk Intelligence at Signifyd
Jun 12, 2024

Returns are the alpha and omega of retail. Long gone are the times when it was believed that all effort and resources should go towards pushing customers down the funnel and making the sale. The ever-changing retail landscape instead now shows that returns are just as – if not more – important than what happens pre-purchase, and retailers must act accordingly in their customer policies.


The Covid-19 pandemic was one of the turning points for returns. It became impossible for consumers to shop, so they headed online.  Since consumers couldn’t inspect the goods before purchase, it inevitably resulted in an increase in returns. Having tested returns policies and with the rise in alternative payment methods such as Buy Now Pay Later, consumers started indulging in trends such as bracketing (buying a product in a range of sizes or variations) and wardrobing (buying an item with the intention to wear it once and return it). 


Retailers quickly realised what an expensive business returns are – and some have begun introducing fees to combat the cost. For example, British retailer ASOS found that 6% of its customers were having a hugely negative impact on its profitability, resulting in losses of £100 million, largely on the account of discounts and returns fraud.


However, the average consumer will return at least one product in their life – and a bad experience could mean that they will never shop with a retailer again. So, what does the European returns landscape look like in 2024 and how can retailers ensure that they get returns right? 


According to new research from Signifyd, it’s clear that return policies play a key role in driving consumer buying decisions. Data from 8,000 consumers shows that 76% of European consumers across the UK, Italy, France and Spain consider return policies fairly or very important when choosing a retailer. Italian and Spanish consumers in particular place the highest value on this factor (48% and 47% respectively saying "very important").


And the ease of returns is paramount. The vast majority (94%) of European consumers find it a crucial factor when buying. So much so that it influences whether they’ll shop with a retailer at all. Half of people (50%) say they'd be less likely to shop at a retailer offering only store credit or charging for return costs (57%).


When it comes to specific return methods, preferences differ. The top three preferred return methods were courier collection (35%), Post Office drop-off (32%), and in-store returns (26%), with return bars being the least popular (7%). Notably, British and Spanish consumers favour in-store returns the most (both at 34%).


Despite the growing number of payment methods, consumers remain relatively conservative. Over half of Italians (55%) and Spaniards (53%) prefer PayPal, while 55% of Brits favour credit cards. Alternative methods like Buy Now Pay Later rank relatively low alongside crypto across Europe.


With retailers tightening returns policies, consumers are also more likely to experience returns rejections. The most frequent reasons for this include exceeding the return window (13%), returning damaged items (12%), and returning products excluded from the policy (9%).


While this can be frustrating for consumers with genuine returns, retailers are ultimately protecting their bottom line and weeding out fraud. According to Signifyd’s recent poll, 86% of retailers anticipate an increase in refund abuse incidents, such as false claims and return fraud this year. Moreover, 41% also said that they saw the biggest financial losses last year due to consumer abuse. 


There is no doubt that retailers are in a difficult position as they navigate the complexities posed by the evolving consumer landscape. Providing a seamless and customer-centric experience throughout the retail journey, including efficient and flexible return options, remains crucial. However, there is equally a growing need to implement robust fraud prevention strategies that will address the challenge of fraudulent returns. Balancing fraud and friction to deliver best-in-class customer experiences is the one way to thrive in this dynamic environment. 


The key takeaway for retailers? Customer experience doesn’t end with the purchase. Retailers need to account for the full retail life cycle and provide a holistic experience that will lead to customer loyalty. They can achieve this by adapting to changing consumer expectations and prioritising both customer satisfaction and security.


About Signifyd


Signifyd offers an end-to-end Commerce Protection Platform that leverages its extensive Commerce Network to maximise conversion, automate customer experiences, and eliminate fraud and consumer abuse risks for retailers. Our solutions provide the transparency and control that brands need to thrive in the rapidly evolving world of commerce.


Recognised among the 10 Most Innovative Companies in AI by Fast Company and named the leading provider of payment security and fraud prevention for ecommerce's largest brands by Digital Commerce 360 for three consecutive years, Signifyd is a trusted industry leader.


Headquartered in San Jose, CA, we have offices in Denver, New York, Seattle, Mexico City, São Paulo, Belfast, and London, ensuring global reach and support for our customers.

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