Edition 124, April 2023

Mitigating Return Fraud Risks in the “Last Mile” through Product Tracking

By Kristin Secreto, InComm Product Control

The figurative “last mile” of fulfillment – that final segment when orders change hands from merchant to customer – is rapidly evolving, particularly in the restaurant industry as food delivery apps grow in popularity. Apps such as Grubhub and Uber Eats have even expanded to deliver non-food items to users. While this presents more convenient and flexible options to consumers, it also brings a heightened risk of return fraud to merchants. Product tracking based on unique identifiers for individual units can help mitigate return fraud risk that arises during the last mile and throughout the supply chain.

One Last Mile, Many More Challenges

Consider this scenario – a consumer orders the latest gaming console from an electronics retailer, then uses a delivery app to handle store pickup and delivery to their home. They receive a notification from the app saying the delivery is complete…yet the package never arrives. Several things may have happened, and the potential causes grow more complicated when third-party delivery services are involved. The lost delivery could be accidental (e.g., a delivery app glitch or mistaken address) or it could be intentional (e.g., an individual intercepting the shipment). The retailer cannot determine what happened, so the store processes a replacement, which the customer successfully receives. If the original order was intercepted by a fraudster, they could later return the stolen console and secure a fraudulent refund.

Unfortunately, return fraud originating from last mile complications may become more common. In a 2022 National Retail Federation (NRF) report, 41.4% of retailers said they experienced return fraud involving shoplifted or stolen merchandise in the last year. To complicate matters, 50% of retailers also experienced returns of used, non-defective merchandise – an occurrence commonly known as wardrobing. As more consumers practice wardrobing, they may elect to use delivery apps to receive orders or send them back, especially if such apps continue to grow beyond the restaurant industry into general retail.

Left unchecked, return fraud risks from the last mile can significantly impact a merchant’s bottom line. Thankfully, merchants can begin planning now to mitigate these risks. One reliable solution is to track products by unique identifiers assigned to individual units, which provides retail employees the information they need to confidently authorize returns without disrupting the convenience their customers enjoy.

Unique Identifiers for Better Product Tracking

Merchants require accurate information to properly process a return. Acquiring that information is possible today thanks to solutions provided by technology innovators such as InComm Product Control. Some of the most effective solutions use unique identifiers to track individual units from production to distribution and beyond. 

These unique identifiers act as a sort of thumbprint, which could include an item’s universal product code (UPC) and a serial number assigned at the point of manufacture. Whatever the identifier may be, merchants can set up a system to scan that identifier and upload it to a database tracking a product’s status along the supply chain. Thus, when a customer attempts to return merchandise, the retailer can scan its identifier and determine its status – was it legitimately sold, should it still be sitting on a store shelf, or was it marked as stolen? With a clear understanding of a product’s status, retailers can apply it to their business rules and determine whether it is eligible for return.

Now, reconsider the aforementioned scenario in which a fraudster intercepted a gaming console shipment. With a product tracking solution in place, the merchant can flag the unit as lost or stolen as soon as the customer reports the missing package. When the fraudster attempts to return the console, the store employee receives this information upon scanning the item, empowering them to deny the return and take the proper action regarding the stolen merchandise. This illustrates how accurate product tracking enables merchants to mitigate return fraud risks while accommodating customer preferences in the last mile.

Benefits Across the Supply Chain

In addition to return authorizations, effective product tracking can help merchants fulfill customer in-store pickups and support compliance with consumer privacy regulations. Customers who purchase an item online and opt for same-day, in-store pickup expect their local store to have the order ready when they arrive. The risk here is that the retailer may run out of inventory after the customer places an order but before they can arrive to pick it up. With an effective product tracking solution in place, the store can maintain a more accurate count of available inventory and reserve specific units for customer pickup. 

On the compliance side, product tracking can reduce a merchant’s need to collect customer information. Some retailers have systems in place that require a customer to present their driver’s license or other state-issued personal identification when they request a return. This allows the retailer to decide whether to authorize the request based on the customer’s return history. However, consumer privacy laws are becoming more stringent in terms of how businesses can collect and use a customer’s personal information. Relying on product tracking rather than customer tracking can help a retailer ensure compliance with these regulations.

Keeping Up with Last Mile Complications

The last mile continues to evolve as new technology and delivery services transform commerce. With systems in place that assign unique identifiers to individual units, merchants can reliably track products from manufacturing plants to delivery service apps, providing the information they need to confidently authorize returns, reduce fraud and deliver a streamlined customer experience.

Kristin Secreto
Kristin Secreto is Vice President and General Manager of InComm Product Control, a subsidiary of InComm Payments that provides product lifecycle tracking solutions for retailers and manufacturers to make smart and timely decisions about product logistics, sales and returns.