Best Buy and other retailers are cracking down on the number and frequency of returns, but are risking their customer relationships.

To-the-point analysis about one of the four important stories from the week.  

What happened

  • Best Buy and other retailers have hired a company called Retail Equation, which scores individual shoppers’ behavior (either in-house, online, or both) and uses risk assessment algorithms to set limits on the number of products and how often a customer can make a return. Retail Equation attracted many of its clients in order to detect fraudulent returns or abuse of return policies.
  • JCPenney, Victoria’s Secret, Sephora and Home Depot are among the 34,000 clients of Retail Equation, though some only use it to track customers who return items without the original receipt.

Why it matters

  • Retailers estimate that 11% of their sales are returned—of those returns, 11% are probably fraudulent, according to a 2017 survey by the National Retail Federation. But the limitations on returns at Best Buy and other retailers are drastic and ring out as anti-customer—especially when shoppers have many places to spend their money on the same products. While other companies have restricted their return policies to combat fraud and abuse, they still act to serve both the interests of businesses and customers.  
  • With Retail Equation, retailers are risking their own customer retention rates. For one,  Retail Equation can ban returns from individual customers that don’t match up with a store’s own return policy, effectively punishing customers for following the rules while presenting multiple sets of rules to follow. Many customers are also frustrated that their information is being shared with a third party and are complaining publicly on social media—often times, they don’t know they will be barred from making returns until it is too late. While customers can get an activity report and file a dispute, the report doesn’t include the information that Retail Equation used to make its decision.
  • Brands need to be careful on this issue. There are simply too many other places for consumers to buy the products they need for companies to risk carrying an anti-returns stigma, especially as retail continues to shift online. Instead, companies need to err on the side of caution as they reasonably work to reduce fraudulent returns without going after legitimate ones. 


This article is exclusive to Loose Threads Members, who get access to actionable analysis, insights and private events that drive growth.