Retail fraud is a growing concern for ecommerce merchants: 29% of them claimed that it’s significantly impacting their profitability. 

A big part of the problem is due to returns abuse. Nearly 14% of returns are abusive or fraudulent, which resulted in $101 billion in losses to the U.S. economy last year. 

We’ve previously discussed some of the more common forms of returns abuse, such as wardrobing, bracketing, and chargeback fraud—but the “empty box scam” is another form of returns abuse that’s hitting some retailers hard. 

Here’s what you should know about this scam and how to combat it.

What is the empty box scam?

There are several different types of empty box scams, impacting both consumers and merchants. Let’s break them down.

Fraudulent merchant scams

In one scenario, customers are receiving empty boxes from merchants, rather than the products they ordered. This happens most commonly on purchases from third-party sellers on large ecommerce marketplaces, such as Amazon and eBay. Under the platforms’ customer service policies, the customer may not be entitled to a refund (especially if they’ve signed for the product), meaning that unscrupulous merchants can keep their money. To avoid falling victim to this scam as a customer, be vigilant in checking the ratings and reviews of all marketplace sellers, and purchase only from merchants with a strong history of success.

Fraudulent customer scams

When it comes to customers using the “empty box” scam on merchants, there are two forms of abuse:

In some cases, a customer will receive an order from a merchant, and claim that they received an empty box rather than the product they purchased. Unfortunately, there’s no real burden of proof on the customer to support the claim: eBay forums are full of stories from merchants who say their customers claimed to have received empty boxes, and many of these customers have gotten their payments reversed through PayPal and other payment processing platforms. 

In other situations, a customer will request a refund after they receive their package—but fraudulently ship back an empty box, or an item of lesser value, rather than the original product. 

Because many merchants process refunds immediately on request, the customer will often get their money back while getting to keep or resell the original item. One of Loop’s merchant customers, Vitality, fell victim to a version of this scam: The brand had already processed the refund for the pants the customer claimed to be returning, but found that rather than shipping back the product, the customer had sent them a Yoda doll. 

How to avoid the empty box scam as a merchant

As a merchant, it’s important to be vigilant of customers trying to defraud your business—whether through misrepresentation of the delivery they received, or return fraud.

Dealing with “empty box received” claims

If a customer claims they received an empty box, you’re not required to give them a refund—but they may opt to bypass your customer support and take their claim to their payment processor, which will more than likely take their side. 

If you’re selling on eBay, you can report a buyer who you believe has taken advantage of your business, and may be able to obtain a successful resolution and see the buyer blacklisted from the platform. Amazon’s Seller Central also offers the opportunity to report a buyer for fraudulent activity. PayPal offers a Resolution Center where both buyers and sellers can report fraudulent transactions.

Whichever platform you’re dealing with, make sure to provide as much evidence in your favor as possible, including package tracking data that shows the package weight, as well as any communications with the buyer. Building a strong case can make the dispute more likely to be resolved in your favor, particularly if other sellers have previously reported the same customer for abusive behavior.

Handling “empty box” returns

When it comes to fraudulent returns, an “empty box” return is not always actually empty—it may contain a brick or rock (matching the original item’s weight), a counterfeit product, or anything else the buyer feels like sending (like a Yoda doll). Whatever the case, the buyer is trying to keep the value of the original product by sending back something of lesser (or zero) value.

In this scenario, you have more control over the situation, and don’t need to accept a “customer is always right” mentality. 

Strategies for combatting empty box return fraud include:

• Start with a strong returns policy
  Make sure that your returns policy doesn’t leave room for interpretation. By creating a clear-cut policy that tells buyers the conditions under which their returns will be accepted, you can point to your policy as a reason for not issuing refunds on returns that break the rules.
• Wait for a product inspection to issue a refund
  Many merchants give buyers the benefit of the doubt and issue a refund immediately upon scanning in a package for return shipping. By requiring that the product be inspected prior to issuing the refund, you’ll avoid giving money back to fraudulent buyers. When customers drop off their returns at Return Bars, you can even require that returns be inspected prior to reverse shipping. (Vitality noted that their return fraud rate has dropped significantly since introducing in-person inspections.) If customers mail the package back themselves, you can also set conditions for your warehouse staff or 3PL to approve or deny a refund after inspecting at the warehouse.
• Block repeat offenders
  Suppose certain customers have repeatedly taken advantage of your returns policy by returning empty boxes, low-value products, or used merchandise. In that case, you can block their IP addresses to stop them from purchasing additional items from your store. 

Combatting buyer fraud with automated returns management

Using a returns management platform like Loop can help your brand proactively prevent customer fraud, and respond effectively to incidents when they happen.

Loop gives you the tools to set up customized workflows, so you can instantly approve or deny return requests based on the item status and condition. You’ll have data insights to track return requests and reasons by product and customer, so you can easily respond to fraudulent activity, or identify supply chain issues impacting your product quality. 

With best-in-class technology in place to manage your returns strategy, you’ll be able to minimize the impact of fraud on your business, while maximizing your customer satisfaction. 

Want to learn more?