Forecasting and influencing product returns and fraud rates in a Covid-19 world

Covid-19 has significantly aggravated the problem of high product returns rates, which have
been increasing over the last few years. This is a significant challenge for retailers and
society, causing economic, social and ecological harm. Returns lead to added complex
processing, transportation and wasted resources, as many products cannot be resold and
risk going to landfill.
Online shopping thrived during the lockdown, and many retailers extended their returns
periods. A surge of product returns arrived when non-essential retailers reopened. Problems
that are costly in normal periods (e.g. wardrobing, fraudulent refunds, serial returners) have
become worse in this pandemic period. With recent research showing that many customers
will retain their new online shopping habits, the problems will stay, too.

We will conduct a consumer survey, interview 25 retailers and work closely with 5 retailers
(letter of support attached) to improve our understanding of consumer behaviours in a
pandemic. We will then model this at micro and macro levels using explainable artificial
intelligence (AI) techniques to forecast returns and fraud rates in a world dominated by
Covid-19 conditions. To mitigate this, we will develop a set of measures, indicating the
expected effectiveness and environmental impact.

The ultimate goals are to help retailers operate efficiently and thrive in this challenging time,
avoiding the need to cut jobs and thereby increasing the financial burden on welfare. This
project will uniquely combine behavioural research with the development of explainable AI
that retailers can use to mitigate the economic and ecological effects of product returns.

Following the recommendations resulting from our previous work on the costs and
vulnerabilities of product returns processes (Frei et al., 2020b), many retailers had started
to make improvements and get a handle on returns rates, fraud and associated costs of
returns through enforcing their existing returns policies. However, Covid-19 has negated
most of this success. Retailers have recently reported on increased product returns rates
and increased related fraud as well as new fraud types. This consumes a large proportion
of resources, just when retailers are still struggling to recover from a long period of shop
closures, operating under new constraints (e.g. fitting rooms closed and returned products
needing quarantine) and with the threat of local lockdowns.
Furthermore, the restriction of individual mobility in combination with fear and a dislike of
wearing masks have led to a sharp increase in online shopping, which typically leads to
more returns and more fraud. Furthermore, the economic and social crisis is leading to
increased financial and psychological struggles in a large percentage of the population,
which in turn increases the likelihood of fraud.
The environmental and economic effects of this situation need to be assessed, and ways
to mitigate them need to be defined. This challenge addresses the needs of retailers,
expressed in recent discussion sessions with the ECR Community that the principal
investigator attended, and aligns with the research gaps previously identified in Frei et al.
(2020a,b).