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Nine in 10 online retailers losing money to ‘policy abuse’

Online merchants are experiencing over $100 billion in annual losses due to customers committing policy abuse, software company Riskified’s study showed.

Riskified partnered with WBR Insights to interview 300 merchants in the US, Europe, Asia Pacific, and Latin America earning more than $500 million in annual revenue. 

The Policy Abuse and Its Impact on Merchants: Global Benchmarks 2023 report identified that nine out of 10 merchants have faced significant costs from return abuse, promo code and loyalty program abuse, and item-not-received (INR) abuse.

Riskified said that inflation, entering a holiday period when consumers have stretched disposable income, and emotional factors including a customer’s bad experience with a retailer contribute to policy abuse.

Seventy per cent of the retailers saw an increase in abuse during the summer shopping season, while 67 per cent reported an increase after the fourth-quarter holiday shopping season.

In addition, 57 per cent of merchants said that they experienced higher costs from INR abuse between 2021 and 2022, compared to a 45 per cent increase for reseller abuse, 38 per cent increase for promotional code and loyalty program abuse, and 37 per cent increase for returns abuse.

Two-thirds of the merchants said that they could recoup less than half of the total value of the returned item.

Despite the abuse, 93 per cent of the merchants still believe that providing generous refund and return policies as important to attract and retain customers.

“Between Amazon fast and free returns, and popular deep discount flash sales, it has been a race to the bottom for merchants who feel that they must offer increasingly lenient programs in order to remain competitive,” said Jeff Otto, CMO at Riskified.

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