89% of Retailers Get Burned By Abuse of Their Own Customer Promotions

Retail customers perpetrating policy abuse cost U.S. firms with more than $100 million in annual sales a collective $89 billion in revenue each year, according to Beyond eCommerce Fraud: How Retailers Can Prevent Customer Policy Abuse, a PYMNTS and Forter collaboration. The study is based on responses from 100 executives who have leadership responsibilities in customer service and experience in fraud prevention.

Promotion abuse, which occurs when one consumer uses multiple accounts to take advantage of promotions, is responsible for most of this, costing firms 1.2% of their revenue. Two other common forms include item not received (INR) abuse, which happens when a customer falsely claims theft or non-delivery, and return abuse, which takes place when a customer returns an in eligible item.

Eighty-nine percent of firms have experienced at least one of the three. Promotion abuse is most common, with 73% of firms reporting it. Twenty-one percent of firms said they have experienced all three types of policy abuse over the past 12 months.

Although policy abuse is widespread, retailers reported that combatting losses poses significant challenges.

More than half of the merchants said they have no ability to act at scale. Other challenges include the inability to block repeat users, the desire to avoid falsely identifying consumers as abusers and the inability to identify repeat abusers. Smaller percentages of retailers said there was no clear owner of responsibility or no ability to quantify the magnitude of abuse.