Combating Fraud with Loop and Rothy’s

Recently, we met with the folks at Rothy’s to discuss a growing trend in returns management: the need to prevent returns fraud and returns abuse.

One of our Senior Product Marketing Managers, Taylor Humphrey, talked with Lauren Inman-Semerau, Head of Customer Experience at Rothy’s, and Ashish Nangia, Sr. Technical Product Manager at Rothy’s. 

In this webinar recap, we’ll cover the following topics from the Rothy’s returns abuse webinar: 

  • What is returns abuse?
  • Strategies for combating returns abuse
  • How Loop’s item grading and disposition API helps prevent returns abuse
  • Returns abuse in 2024 and beyond

For access to the full webinar, click here.

What is returns abuse?

Returns abuse falls into one of two categories: return policy abuse and outright fraud. 

Return policy abuse is when a customer deliberately takes advantage of or violates a company’s return policy. A good example of return policy abuse is something like wardrobing—buying an item to wear it once with the tags on and then returning it as though it wasn’t worn out. 

Outright fraud, on the other hand, can look a number of different ways when it comes to return abuse. It can look like claiming an item never arrived to receive a refund or replacement. It can also look like “making a return” only to send back a box full of rocks in lieu of the item(s) the shopper has claimed they’ve “returned.”

Here’s how Rothy’s defines returns abuse. “We think about returns abuse similarly to how Loop does,” says Inman-Semerau. “We definitely look more closely at the ‘rocks-in-box’ bucket, or outright fraud, where somebody is just telling you something and your data is saying ‘oh no, that’s not actually true.’ We look at that not only on an individual level but also on a larger scale.” Obviously, these examples of returns abuse are blatant and clear, and are thus much more easy to discern as fraud. 

However, with Loop, Rothy’s can also help determine whether return policy abuse is happening, too. “It’s not something that we had a lot of visibility into before, but now that we do have visibility through Loop, we’re able to actually start creating processes around scenarios like, ‘What happens if somebody wears shoes out?’, ‘What happens if they do cut the tags off?’, and all of that is within the return timeframe, so these shoppers are able to send it back,” says Inman-Semerau. 

“Loop is helping us catch [repeat offenders], so what we can do is either stop them in that moment, from returning a box of rocks and force them to return the correct item, or we can stop them next time on the pre-purchase side.”

Strategies for combating returns abuse

Like it or not, returns abuse is on the rise. As ecommerce grows, companies need to be on the lookout for these abusive and sometimes fraudulent behaviors in order to protect their bottom line. According to the American Retail Federation, American retailers lose an estimated 

$24 billion from return fraud per year. Plus, for every $100 in returned merchandise accepted, retailers lose $10.40 to return fraud. 

So, how do you effectively combat returns abuse? 

Rothy’s uses a number of Loop features to support strategies that can mitigate fraud.

Automatically separate returns that need manual review

Rothy’s takes advantage of Loop’s smart automation tool, Workflows, to build customized automation flows that help them sniff out potential fraud, prevent fraud in the moment, and catch repeat offenders.

“One of the examples [of our Workflows] is high value returns,” says Nangia. “If a customer is returning merchandise that is more than, let’s say, $1,000, then we want to make sure that someone in our CX department actually reviews that return first, before we allow the shopper to ship it back. So, before the QR code is generated for them, we want to make sure someone in CX reviews it.” 

With Workflows, merchants are able to automatically separate these larger orders from the queue and set them aside for manual approval, so that the CX department doesn’t waste time reviewing every single return received. Rothy’s also does this with orders for 5 or more items. 

Limit return options for suspected fraudsters

With Workflows, not only can Rothy’s separate orders effectively, they can also exclude the ability for these suspect returners to make a return through return bars, Instant Exchange, or Shop Now—all of which have loopholes a fraudster might try to take advantage of—until the return has been approved manually.

This strategy, of limiting the methods by which suspected fraudsters can make a return, allows Rothy’s to cycle these returns through a much more rigorous review process (and keep from charging a fee on returns that may not ever process).

“If you have been identified as a bad actor, you are now—through Loop—blocked from going to a return bar. You may go to any of our retail locations, which is free, or you may mail in your return. We waive the fee for these mail-ins because we’ve taken away your choice. For us, the advantage of that is that our 3PL has visibility into those mail-ins and through an integration with Loop, I actually can see in Loop what’s coming back. I can see if it’s a box of rocks. I can see if it’s a damaged item. So then we can create Workflows again to stop it.”

Keep your return policy generous, but stay vigilant using data & tools

As a premier luxury shoe brand, it’s very important to Rothy’s that their return policy stays generous and attractive. It helps them with customer lifetime value, and makes the shopping experience for customers easy, fun, and light. 

With the functionality available to them through Loop’s Workflows and Loop’s grading and disposition API, Rothy’s can maintain this open return policy without having to worry about returns abusers taking advantage.

How Loop’s grading and disposition API helps prevent returns abuse

So how can Loop see into these potentially fraudulent returns? Loop’s grading and disposition API integrates with your 3PL to give you much needed visibility on the warehouse side. 

“Essentially what that API allows us to do is send information to the 3PL in terms of what’s being returned, so they get the information from Loop as to what products they should expect in the return,” says Nangia. “So when the return actually lands on the 3PL’s dock, they can scan the return and then see what was expected in it. When they open the package, they can then report back to us at Rothy’s as to what they ended up actually getting.” 

With Loop’s grading and disposition API, merchants can set up different grades to help label and sort returns of all kinds—not just fraudulent ones—for better organization and more streamlined operations on the warehouse side.

“The way we’ve set it up is we have a bunch of different grades—grades A through D. So Grade A is something that has been returned which is in amazing, pristine condition, and that return goes back into the selling dock and we can sell it again. B is something that needs maybe a little more refurbishment before we can resell it. C is something that needs more intensive refurbishment, maybe replacement of an insole, etc. And D is something that was damaged, so we can’t resell it,” says Nangia. “We also have separate labels for empty boxes, wrong products, and trash.”

This data is sent back to the merchant as a line-item review through Loop, where they can then determine whether a return is fraudulent.

“If the 3PL review marks a return as damaged, incorrect item, or trash, they’ll then flag that return in Loop, and our team can go in and review the flagged returns and decide whether they want to not refund the customer, or they can choose to refund the customer if they determine it was an actual mistake.”

If a return is deemed fraudulent by the CX team at this point, the customer does not receive a refund, they are notified that their return was fraudulent, and their name goes on a blocklist that prevents them from purchasing from Rothy’s in the future. In this way, Loop’s grading and disposition API not only helps Rothy’s identify potential fraud, but also helps them prevent fraud in the future. 

For more insights on returns abuse and how you can manage it with Loop, take a look at the full webinar here

Protect yourself from returns abuse with smart tools and strategies from Loop. Book a demo today!