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

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Covid-19 has significantly aggravated the problem of high product returns rates, which havebeen increasing over the last few years. This is a significant challenge for retailers andsociety, causing economic, social and ecological harm. Returns lead to added complexprocessing, transportation and wasted resources, as many products cannot be resold andrisk going to landfill.Online shopping thrived during the lockdown, and many retailers extended their returnsperiods. A surge of product returns arrived when non-essential retailers reopened. Problemsthat are costly in normal periods (e.g. wardrobing, fraudulent refunds, serial returners) havebecome worse in this pandemic period. With recent research showing that many customerswill 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 apandemic. We will then model this at micro and macro levels using explainable artificialintelligence (AI) techniques to forecast returns and fraud rates in a world dominated byCovid-19 conditions. To mitigate this, we will develop a set of measures, indicating theexpected 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. Thisproject will uniquely combine behavioural research with the development of explainable AIthat retailers can use to mitigate the economic and ecological effects of product returns.Following the recommendations resulting from our previous work on the costs andvulnerabilities of product returns processes (Frei et al., 2020b), many retailers had startedto make improvements and get a handle on returns rates, fraud and associated costs ofreturns through enforcing their existing returns policies. However, Covid-19 has negatedmost of this success. Retailers have recently reported on increased product returns ratesand increased related fraud as well as new fraud types. This consumes a large proportionof resources, just when retailers are still struggling to recover from a long period of shopclosures, operating under new constraints (e.g. fitting rooms closed and returned productsneeding quarantine) and with the threat of local lockdowns.Furthermore, the restriction of individual mobility in combination with fear and a dislike ofwearing masks have led to a sharp increase in online shopping, which typically leads tomore returns and more fraud. Furthermore, the economic and social crisis is leading toincreased 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 waysto mitigate them need to be defined. This challenge addresses the needs of retailers,expressed in recent discussion sessions with the ECR Community that the principalinvestigator attended, and aligns with the research gaps previously identified in Frei et al.(2020a,b).