A few months ago, I excitedly awaited the arrival of a mini cassette bag from Bottega Veneta that I was able to get for ~$700 during a sale at a major online retailer. However, all my expectations were crushed when I opened the suspiciously light package to discover the patented box was…completely empty. I couldn’t believe I had just spent $700 to receive absolutely nothing.
After a lot of back and forth, a representative from the retailer told me they had conducted an investigation and decided to refund me.
Fake it till you make it? One TikTok shopper reportedly received a dupe of a luxury item they ordered on Saks Fifth Avenue. Another got, in one now-infamous case, a can of tuna when the customer ordered a $275 Dolce & Gabbana ashtray. At the time of posting those videos, the customers alleged they had contacted Saks but were not refunded. (The customer who received the tuna did ultimately get the ashtray and a $100 gift card.)
So what might be going on?
“If there’s be a bad actor somewhere along the way, before the product goes onto the truck and gets scanned, someone just opens it up, takes the product out, sticks the box back on the truck, and scans it and says it was good,” Michael Osborne, CEO of Appriss Retail, a tech platform that helps retailers identify fraud and theft, told Retail Brew. “But that behavior would be really hard to catch.”
He added the retailer would have to wait for a pattern to develop to be able to pinpoint exactly where the problem originates.
One popular theory, however, is online returns fraud, a phenomena that’s been on the rise recently and impacting everyone from luxury brands to Amazon.
A 2023 study by anti-fraud company Riskified found that policy abuses such as returns fraud were costing retailers $100 billion annually. Luxury retailers are especially at risk because the cost of the products is significantly higher. Although Saks declined to comment, its director of communications, Alexandra Sirota, pointed us to a recent Associated Press interview with Saks CEO Marc Metrick who stated that the problem developed over the past year as new avenues for selling stolen goods emerged.
“Before, if you and I were stealing handbags, we’d have to go to some seedy part of town and [sell] them, just like in the movies,” he said. “Now, it’s like, I’ll just open up a storefront on the market.”
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A dark (re)turn: Osborne added that returns fraud was not the only reason behind the rise of such incidents.
“The overarching theme is that fraudsters are finding more and more ways to crack through and commit fraud without being detected quickly enough to prevent it, and the hardest part for a retailer is actually having to analyze the data quickly enough to spot the patterns that allow them to stop the shrink,” he said.
Katie Thomas, who leads the Kearney Consumer Institute, agreed that retailers need to take more responsibility and implement stricter vetting standards.
“Referring to it as ‘returns fraud’ shifts the blame away from retailers by implying they received an incorrect item as a return,” she said. “But why are those items not being checked and rejected? Luxury employees should be properly trained in examining returned products and quality control, particularly before they get sent out again.”
Some retailers, like Saks, have already started enacting changes to address the problem like installing enhanced video surveillance at their flagships, requiring photo IDs from customers, and mandating receipts and charging return fees, according to the Associated Press.
But the trend is likely to continue as retailers tighten their rules. According to Jonathan Poma, CEO of the software company Loop, the days of free returns or exchanges, for instance, are “numbered” as we’re likely to see tighter return windows, adaptive return policies, and personalized programs, some of which Loop is already working on.
“We were building in functionality to say, ‘Hey, maybe on this return, we charge a $5 fee, maybe on that return, it’s free. Maybe on this return, we don’t initiate a refund or an exchange until it’s checked in at the warehouse. Maybe on that one, we still do it at origination. Maybe this return, we don’t even allow it to be initiated in an automated fashion.’ And we require that the buyer or the consumer reach out to the brand directly via live chat or email,” he said. “In a similar sense to where you see some brands offering shipping insurance, I can see a world where it’s not uncommon for consumers in the e-commerce flow to have to buy a SKU, to have the right to return products, and to have the right to access automated returns and exchanges.”