The stratospheric growth of eCommerce in recent years has been accompanied by a dramatic increase in returns fraud. Online retailers compete, in part, by maintaining liberal return policies which are ripe for abuse by fraudsters. Refunds are often issued long before returned merchandise can be evaluated, as the overwhelming volume of returns can result in huge backlogs. High priced items, such as PCs, are often the subject of returns fraud. Once again, it’s X-ray inspection to the rescue.
PC cannibals, yikes!
Those committing returns fraud will typically focus on high-value products that are easily resold. Personal computers are particularly attractive because they need not provide a counterfeit substitute in order to get a refund. Instead, once they receive the PC they simply open it up and harvest its most valuable components, CPUs for example, then repackage the product and return it for a refund. In a single case, one individual defrauded Walmart to the tune of $1.3 million over a mere 18 months using this approach. Liberal return policies generate high volumes of returned merchandise. In turn, these can cause substantial backlogs that result in refunds being issued long before the fraud is discovered.
Tighter returns policies are no solution
Fierce competition among e-tailers make attractive return policies a must. The online retailer who tightens their returns policies in order to combat fraud can watch their cart abandonment metrics soar, and their sales plummet. Under these circumstances, reverse logistics and returns processing become a significant cost. With expensive electronics like PCs, as well as other premium merchandise, losses can mount rapidly. Online retailers need a solution that allow their return policies to remain competitive, while reducing fraud and preserving the value of returned merchandise.
The ultimate reverse logistics solution
Whether returned PCs are dispositioned to open box channels, refurbishers, or liquidators, reducing fraudulent returns will help recover more value from all returns, as channel partners will have higher confidence in the quality of products they are redistributing. At Creative Electron, we collaborated with one of the global leaders in eCommerce to develop a fully automated X-ray inspection system tailored to their reverse logistics process. Rather than returns being inspected by an army of human hands, merchandise is imaged on an inline X-ray system through its primary, secondary and even transport packaging. Artificial intelligence (AI) powered software evaluates every item for authenticity and calls out any suspect merchandise. This system reduces returns backlog, trims labor cost, and catches fraud at the earliest possible stage in the returns process.
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