“There has been a measure of handwringing over the challenge of having retail stores act as fulfillment and processing centers for online transactions, but David Speights, Ph.D., chief data scientist for Appriss Retail, has a different take. He sees new operation strategies such as buy-online, pick-up-in-store (BOPIS) and buy-online, return-in-store (BORIS), as an important innovation for brick-and-mortar stores.
Rather than new problems, he sees a lifeline. “I don’t see it as a problem. I look at it a little differently. I see it more as an opportunity for retailers to compete with Amazon and strictly online retailers that can’t offer that convenience to consumers. It creates opportunities for great customer service.”
It’s a customer experience differentiator that physical stores can leverage to compete on convenience—traditionally the domain of online sellers. “With Amazon, and other purely online retailers, it’s not as easy when you want to return something or get something immediately. BOPIS and BORIS let you [the consumer] go pick up something or return something right then, and that’s something that is a business edge for omnichannel retailers over Amazon and online-only stores.”
These schemes do add to the fraud challenge, Speights explained. “When you’ve bought something online and go to the store to pick it up, there are all sorts of scams you can try.” For example, an individual can pick up an item and then come back claiming that they never got it, or else pick up someone else’s order. As for return frauds, they are the same as those that retailers are used to, but with added risk because of the complication of the online transaction.
Speights explained that the very nature of BOPIS/BORIS presents logistical problems that unscrupulous shoppers can exploit, giving new life to old fraud schemes that retailers have done a good job of combating for in-store purchases and in-store returns. “People are taking advantage of the fact that retail employees are a little confused by the processes. They know it’s a logistical challenge for them,” said Speights, suggesting that it is uncertainty on the retailers’ part through which the fraud seeps in.
For example, a bad actor might go into a store with an item that they’ve stolen, say they bought it online, and make a non-receipted return. “That can present a greater challenge because they are triggering a different set of rules and less defined and practiced policies than how stores have grown used to managing it,” said Speights.
It’s also common for an individual to buy something online that he or she uses a few times and then returns to a store location, known as “wardrobing” in the case of clothes purchases but also common for housewares and tools. “It exists in the pure brick-and-mortar world, of course, but now people can get the items shipped to their houses. They don’t even have to leave home to initiate the abuse.”
Overall, Speights thinks the fraud retailers are seeing most is the multiple-returner, where a consumer will buy something online, return it in-store, steal the same item at another store, and return it on the same online ticket. “It’s always been an issue for retailers. Then POS systems got smarter and that was made more difficult. But omnichannel opens that door of opportunity again,” said Speights, with shoppers exploiting the loopholes that exist in retail systems between online and offline. “Generally, it’s all basic return abuse, but it’s being multiplied,” warned Speights. “It’s the same sort of challenges that retailers have dealt with before, but with an added layer of complication.”
The Latest Data
Appriss Retail, a leader in data and analytics solutions for retail organizations, recently conducted a study of 10 major retailers. Preliminary results from that research project show:
- The percentage of online sales is growing. In 2016, 14.6% of total sales were from online purchases. By 2018, it had grown to 16.3%.
- Returns have changed. In 2016, 78% of all returns were typical store returns—products bought in-store and returned in-store. In 2018, that figure dropped to 70%.
- BORIS has grown by more than 28%. It accounted for 10.8% of total returns in 2016; 15% last year.
“The trend in returns is having the impact of increasing the overall store return rate, which increases the number of potentially fraudulent returns that stores are having to process,” explained Speights. Logistical complications and inventory surpluses can also cause problems, with stores processing returns on merchandise they don’t even sell.
Omnichannel return logistics is a topic of interest recently, but before optimizing that process the ability to authorize legitimate ecommerce returns and prevent fraud from entering the reverse logistics channel should be an important cost-saving step for any retailer.
Some retailers are better positioned to manage the complications than others, said Speights. It’s especially tricky for the many retailers that operate their online business as an entirely separate operation from their brick-and-mortar stores, which may key in names differently, use different address fields, and maintain separate customer databases. “Some retailers are good at [reconciling], but definitely not all of them. Appriss Retail, on the other hand, collects data from both worlds simultaneously. We can lead the charge on safeguarding returns in general, and for online as well, because we’ve always had a very good connection between online and offline. In addition to connecting the two channels after a purchase, we can also vet the consumer prior to purchase. A consumer with a history of extreme behaviors can be served a more restrictive return policy. It is conceptually similar to ecommerce software refusing orders that request delivery to a known fraudster’s address. Some bad actors have found BOPIS to be their work-around, but our data analytics can stop that behavior.”
Despite the potential downsides from mixing online purchases and store returns, Speights thinks retailers should embrace it. “I think the opportunity to compete in the immediate time frame with online retailers makes it an important service for consumers and an important avenue for retailers, not unlike self-checkout, to meet the goal of making it as easy and frictionless as possible for the customers,” said Speights. “But the fraudsters are there, as always, taking advantage of the loopholes, especially if a retailer is trying to implement these services rapidly.” Taken together with new data—which show growth in the percentage of store returns that originate from online—make it important for LP to help their companies to extract the opportunity from the risk, Speights suggested.