There are many ways that online sellers experience return fraud.
At one end of the scale is “wardrobing”, where clothes are bought to wear once and then returned for a refund. At the other end are career criminals systematically making money from the generous returns policies of Amazon and eBay.
Some types of return fraud use brazen tactics to get free products, such as returning a box filled with dirt, so no alarm bells are triggered when it is weighed. Others will quietly subvert the returns process to sabotage their competitors – and might never be discovered at all.
All of these behaviors lose sellers money, take up their time, and create a lot of frustration and anger. Is there anything sellers can do to fight back?
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How does return fraud happen on Amazon and eBay?
Whether you sell on eBay, Amazon, or both, the key factor is how you fulfill your orders and handle returns – in-house or outsourced.
Your own order fulfillment and return fraud
If you sell on eBay, or fulfill your own Amazon orders, every return will come directly back to you, and you will get to see it with your own eyes.
Here’s how you might experience return fraud as a seller who fulfills their own orders:
- The box is empty. The buyer might use prepaid labels and a drop-off delivery service to avoid a low weight being recorded in the postage system.
- The package contains dirt, garbage or even potatoes. The aim here is to make the return seem genuine when it is handled or weighed.
- It’s a different product. Buyers have been known to send older models or cheaper versions of smartphones and other electronics.
- The returned item is a counterfeit. This is dangerous. Not only can the buyer get a genuine product for free but, if you contest it, they can also say that you sold them a fake. Can you prove that you didn’t?
- The product is damaged. Buyers have been known to accidentally bend or cut products as they unwrap them, and then deliberately make the damage worse to cover up their mistake and help them claim that it was received like that.
- The item has been used. This is sometimes known as “free renting” or “wardrobing”. It’s so common that companies are now trying to establish online clothes rental as a new business model.
- You receive a late return. Buyers can return items just within the allowed return period to apply more pressure on the seller to process a refund quickly.
- The package never arrives. Amazon and eBay often issue refunds before the seller receives the return, and buyers can take advantage of this and never send the item at all.
- The buyer chooses the wrong return reason. It’s common for buyers to avoid paying return postage by choosing a reason that pins the blame on the seller, such as “not as described”.
If you outsource your order fulfillment to a third-party logistics company (3PL) you will be relying on them to inspect your returns and take action accordingly. Some 3PLs provide a wide range of returns handling services, while others will simply send the returns back to you.
Fulfillment by Amazon (FBA) and return fraud
If you use FBA or outsource your order fulfillment, you are relying on somebody else to process your returns and decide if there is anything underhand going on.
When an item fulfilled through FBA is returned, the buyer is asked to send it back to an Amazon fulfillment center. It is then inspected and a decision made whether to put it back in the warehouse to be sold again, or to classify it as “unsellable” and store it until the seller creates a removal or disposal order.
Unsurprisingly, Amazon workers are under pressure to process returns quickly and can easily misclassify an item. If the buyer knows the Amazon system and carefully reseals the box, then a product that is used, damaged or even completely missing might be put back on sale.
If a new buyer receives that item, they will no doubt complain. This can trigger red flags in the Amazon system designed to detect issues like counterfeits or items that are “used sold as new”. These are serious violations and can put your entire selling account in danger.
There is less risk if Amazon classifies the product as “unsellable”. However, the item will accrue storage fees until the seller asks for it to be sent back or destroyed – at their own expense. Some sellers will routinely ask for items to be disposed of, rather than going to the trouble of inspecting and deciding what to do with them themselves. But if there was return fraud involved, they would never know.
If you do have the items returned to you, then you will be in the same position as sellers who do their own order fulfillment – as described above. But if you want to dispute the return with Amazon, the time lag and extra step in the process will make it much more difficult.
Why do people try to cheat the returns system?
Understanding the buyer’s motivation is important not only for the seller’s peace of mind, but also in trying to prevent return fraud in the future. Here are some of the reasons that people abuse the returns system on eBay and Amazon:
1. Deliberate fraud
The end result of a “successful” return scam is a brand new, free product that can be sold for cash. For some people, that’s an attractive business opportunity.
In August 2019, James Kwarteng was arrested in Spain for making nearly $370,000 by sending Amazon return packages filled with dirt. Amazon discovered the fraud when they finally opened one of the boxes.
In June 2018, Erin and Leah Finan from Indiana were sentenced to six years in prison for defrauding Amazon out of over $1.2 million in electronics. They requested returns but simply never sent the items back, and instead sold them on.
These are the two largest cases where professional Amazon return fraudsters have been caught, but there are likely to be many more who have stayed under the radar.
2. Casual opportunism
Some people will turn the generous return policies of Amazon and eBay to their advantage when it suits them. It just doesn’t seem all that bad to bend the truth on occasion, and get a little something extra from a faceless corporation.
It’s this kind of self-justifiable behavior that explains why one-fifth of shoppers in the UK have admitted to “wardrobing” – buying items with the intention of wearing them then returning them. Few of these returners will think that what they are doing is illegal, let alone a form of fraud. It seems like a victimless crime, and has been going on for years in retail stores.
As long as people believe that no-one is getting hurt, and the internet makes them feel anonymous and removed from the businesses they are cheating, this behavior is likely to continue at scale.
3. Seller sabotage
There are many types of seller sabotage that occur online, particularly with Amazon and its notoriously hair-trigger account suspensions. This sabotage can be very damaging when combined with return fraud. For example:
- A seller could place a large order and clear out their competitor’s stock, then send back the entire order as late as possible within the return window.
- Sellers have been known to buy a competitor’s product then claim it is a counterfeit. They have a fake version ready to return to back up their claim.
- A seller can simply use multiple accounts to buy and return a competitor’s products over and over, effectively harassing their competitor via the returns system.
Marketplaces like eBay and Amazon are dog-eat-dog worlds. Don’t underestimate the extreme lengths that some sellers will go to, if it gets them an advantage over their competitors.
4. Honest mistakes or carelessness
It’s not unusual for eBay or Amazon buyers to be confused or careless when they request returns. For example, some buyers genuinely don’t know that selecting the wrong return reason will also affect the seller – they just think it’s a clever way to get a free return.
Also, both Amazon and eBay can push buyers into the returns system when they would rather resolve a problem another way, such as being sent a spare part or a partial refund. It might be surprising how difficult it is to resolve issues, from the buyer’s point of view, other than through the returns system.
In another scenario, a buyer might request a refund when a product does not arrive on time. When it turns up later, they forget about the refund – or conveniently ignore it – and keep the product anyway.
What can sellers do when return fraud happens?
If you believe a return to be fraudulent, don’t just brush aside your misgivings. Think about how you want to deal with suspicious returns. Do you want to put some resources into finding out exactly what has happened, so you can “bring the perpetrator to justice”? Or would you rather cut your losses and move on as quickly as possible?
It hurts to let someone get away with ripping you off, but sometimes it just doesn’t make business sense to put a lot of time and money into investigating a return thoroughly.
If you do decide to go ahead and investigate, how do you do that? Here are some tips:
- Check your records of the transaction and draw up a timeline for reference.
- Look through your order history and check for links between this buyer, address, or product, and any other suspicious returns.
- Look at public records like Google Maps, voter registers, phone directories etc. to see what else you can find out about this person. Are they using their real name or a stolen identity?
- If they look like a serial offender, ask other sellers if they have had any problems with this buyer, but be careful not to share any private information when you do this.
Note down everything you have tried and what you have discovered, then decide which of the next three steps to take.
1. Have it out with the buyer
You might decide that this is a case where the buyer doesn’t want to cause a fuss and will back down when questioned. Don’t confront the buyer aggressively. Instead, politely let them know you have received their return and inspected it carefully, and then explain the problem accurately and calmly.
If you have background research on them, don’t tell them everything you know upfront. The ideal result is that they back down without an argument, so you don’t want to make them feel defensive. Give them a way to get out of the situation without them having to admit what they have done.
Let them know, without confronting them directly, what you are prepared to do in cases of return fraud – such as file reports with the marketplace, courier, and their local police station. A brief email footer mentioning your zero-tolerance policy is a good place for this.
If they stick to their guns, you can start explaining in more detail why the return isn’t acceptable. Try to use evidence, such as tracking information, security marking, photos or videos of the order being dispatched, or records of the serial number. You don’t want to get into a protracted argument where it’s just your word against theirs.
If you are not getting anywhere, you might want to try and talk to them on the phone instead. It’s much harder for people to keep up a pretense over the phone. Let them know first that you want to phone them, even if you already have their number. That might even be enough to get them to back down. Phoning them out of the blue, however, could backfire and get you reported to Amazon or eBay for misusing contact information.
If it’s not working out, you might decide to ditch this approach. If you are sure of your ground, report them instead. But if you are not so sure, it might be better to take it on the chin. Either way, try not to get bogged down in an argument.
2. Report the buyer to the delivery service or the police
There are different routes you can go down to report a buyer. Sellers will often go to the marketplace first, but look at all your options and consider which might be most effective for each case.
If the return never turned up, take it up with the delivery service the buyer claims to have used. If they used the USPS, tell the buyer that the loss has been reported to the USPS Mail Inspector. Or if they used a courier company, tell them the name of the department handling the report. It is often a usefully scary-sounding fraud or loss investigation team.
You aren’t accusing the buyer by doing this, you are just taking a normal course of action for missing or stolen packages. They might suddenly “find” the parcel and tell you they forgot to mail it, rather than deal with an official investigation.
If you decide to contact law enforcement, the buyer’s local police department may be more likely to get involved than federal authorities. If the police do take action, most buyers will not like the issue being brought to their doorstep and are likely to back down.
3. Report the buyer to Amazon or eBay
If you received the return, but the item was missing, used or damaged, you can report it to the marketplace.
On Amazon, there is no official seller protection policy but abusive feedback, reviews, messages, and returns can all be reported. For FBA orders, an Amazon returns specialist might escalate concerns over fraud. Abuse can also be acted on by customer service reps or the fraud detection team. So, it’s worth reporting buyers to give Amazon as much information as possible, and increase the chance of them taking action.
Contact Amazon support to file an Abusive Buyer Report, through Seller Central or by emailing [email protected]. If the buyer files an A-to-Z claim in the future you can provide the Abusive Buyer Report ID to tie the claim and the report together and help your case.
If the buyer gave the wrong reason for a return, in order to receive a free return label, you can file a “SAFE-T” claim for reimbursement of the return cost. Here’s the SAFE-T policy.
If you do decide to accept a return that you think is fraudulent, on Amazon you can charge a restocking fee of up to 50% for items that are damaged.
On eBay, there is a detailed abusive buyer policy and seller protection rules. Top Rated Sellers residing in the US or Canada who offer 30-day or longer returns are protected against false “item not as described” claims and items being returned used or damaged. Sellers should report the buyer via eBay to start the process.
If the buyer paid by PayPal, there is also PayPal Seller Protection. This covers items shipped with tracking within 7 days and using a qualified courier, if the buyer claims that they did not receive the item or that they did not authorize the payment. You can start this process through the PayPal Resolutions Center.
4. Take it on the chin and move on
Some sellers will not let abusive buyers get away with it, as a point of principle. That’s fair enough.
Other sellers might want to weigh it up as a business decision. It might not be worth the work and stress of dealing with return fraud head-on. Just letting it go could be the option that saves your precious time and sanity.
Instead you can put your effort into prevention, and making it as easy as possible to tackle return fraud in the future. This way, casual abuse can be minimized so only the most sophisticated fraudsters continue to have an impact on your business. Having a process can take the stress out of the whole situation – you just follow the steps that are set out.
What can sellers do to protect themselves in advance?
The best way to deal with return fraud is to prepare for it. You are unlikely to reduce fraud to zero, but you should be able to reduce the volume and be more able to defend yourself when it does happen. Here are some ideas to consider.
1. Have evidence of what was sent out and what was returned
When a buyer returns a box of dirt, a counterfeit, or a badly damaged item, it’s clearly a scam. But to prove that you need evidence of both what you sent out and what was returned.
There’s a lot you can do to get that evidence in place.
- Log serial numbers, batch codes, IMEIs and any other product identifiers in your order database. Make sure all changes are audited so you can show the information was genuinely recorded before the order was dispatched, and not tampered with later.
- Use invisible security markers to add order numbers to the products and shipping boxes during the fulfillment process.
- Record video footage of both the order packing and the returns processing areas, close enough to show clear product images. Instruct employees to show serial numbers and barcodes to the camera, and even a 360 degree view of each product.
- Use tracked and insured delivery services with GPS tracking and signature and/or photo order confirmation.
- Investigate potential return fraud cases and record detailed findings in a standardized and searchable format. Even if you can’t use the information now, it can help cross-reference cases in the future.
- Educate return processing staff to look for signs of return fraud. Offer a reward for flagging up valid concerns.
- Use software tools that help identify suspicious orders, using approaches such as shared databases of fraudulent activity, and machine learning from your past orders.
Which actions you take will depend on the level of return fraud you experience, the value of the products you sell, and the cost of making those changes.
If you sell generic low-cost goods, you probably won’t be security marking every item. If you sell luxury goods you might do everything in the list above, and more.
2. Let the buyer know you are prepared, and willing to act
The ideal situation for a buyer who wants to abuse the system, is to find a seller who silently accepts their return and processes the refund. They want it to be easy. If the buyer has to communicate with you, that will be a hassle and a risk for them. If they can see that you are defending yourself against fraud, they know the risk is even higher.
Here are some ideas:
- Seal products with visible tamper-proof labels or tape.
- When a return request comes through, ask the buyer to send photos. You might not really need the photos, but it shows that you don’t silently accept returns.
- Show that you have a zero tolerance policy on fraud, in email footers and the bottom of packing slips.
- Add a sticker to the box and the packing slip, stating that the product is security marked.
- Send a shipping confirmation email that says the order has been packed and inspected in your secure fulfillment center. Regular abusers will take the hint that you have video recorded the order dispatch.
If you can put enough doubt in the buyer’s mind that this isn’t going to be an easy scam, without appearing to be rude to genuine buyers, that might be enough to put them off. If you do get a return, there’s a better chance that you will receive the product that you sent them, and not dirt from their yard.
3. Use built-in marketplace protections
On eBay you can set up Buyer Requirements. These are quite weak protections, but might still be worthwhile. They allow you to automatically block buyers who have unpaid item strikes (from auctions), buyers in locations you don’t ship to, buyers with a negative feedback score, and buyers who are bidding on several of your items at the same time.
You can also block specific buyers on eBay. This works by entering usernames on a list, so is only really useful for blocking buyers you have already had trouble with. Again, it’s quite a weak protection but might be useful in some cases.
Amazon has no similar protection settings. They do act on fraud, and ban buyers with patterns of abuse such as excessive returns, but sellers cannot control this.
4. Monitor your account and performance metrics
All sellers should keep a careful eye on their performance metrics, but it is particularly important for FBA sellers who might otherwise have no indication that return fraud is happening. But which metrics and reports are relevant to this?
Buyers who commit return fraud have no reason to complain, so are unlikely to be reflected in the Return Dissatisfaction Rate (RDR), A-to-Z Guarantee claims or negative seller feedback. An exception to this can be seller sabotage, where the buyer might well complain in any way they can to maximize the damage to your account.
You can receive performance alerts from Amazon if they think your product return rate is too high, but you also should monitor returns yourself using the FBA customer returns report.
This is available in Seller Central under the Reports menu, and shows the return date, ASIN, return reason given by the customer, and what Amazon has done with the inventory. To catch increases in returns, due to either fraud or genuine product issues, FBA sellers should download this report every week. High-volume sellers might want to check the report on a daily basis.
For more in-depth monitoring, it’s a good idea to request removal of unsellable returned items from time to time, so they are sent back and you can check for yourself if the returns were genuine. You will at least gain visibility of what is happening behind the scenes, so you can report abusive buyers and take any other actions needed to protect your business.
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