Shows Warning-Based Return Authorization Systems Improve Net Sales, Reduce
"Fringe consumers" are those marginally profitable shoppers that push the edges
of a retailer's return policy - every retailer has them and tries to pinpoint
ways to make them a more valuable customer. The Retail Equation recently worked
with a nationwide retailer to determine the effect a return warning had on the
net sales and return rate of these consumers.
Through The Retail Equation's
Verify return authorization solution, the company
monitored everyone who received their first warning between August 15, 2014 and
November 15, 2014. These warnings are generated through Verify, which compares
variables such as purchase and return frequency, dollar amounts and/or time
against a set of prescribed rules that form that retailer's return policy. A
warning is issued if the consumer's behavior exhibits habits that are
inconsistent with the retailer's return policy. In this case, 1,200 warnings
were issued during the three-month period.
The company then monitored the purchase and return activity of the 1,200
customers for 120 days after the warning was issued to determine deterrence.
This was calculated by comparing the after-warning activity to the previous
activity (since TRE accepted the warned return).
Interestingly, the net sales after the warning were actually higher than prior
to the warning. Return dollars were reduced by 60 percent while net sales
increased by 12 percent. The following table reflects the data for 1,200
customers for 120 days after the warning.
"Our solution was developed to detect and deter return fraud; however, we
continually identify ways to use our technology to help retailers improve net
sales and reduce return rate," said Adi Raz, senior director, data sciences and
modeling at The Retail Equation. "This study is an excellent example of how The
Retail Equation, using its patented warning process, can ultimately change
consumer behavior for our retailer clients."
About The Retail Equation
The Retail Equation, headquartered in Irvine, Calif., optimizes retailers'
revenue and margin by shaping behavior in every customer transaction. The
company's solutions use predictive analytics to turn each individual shopper
visit into a more profitable experience. This yields immediate financial
payback, increasing store comps by as much as two percent, with significant
return on investment. The Software-as-a-Service applications operate in more
than 27,000 stores in North America, supporting a diverse retail base of
specialty apparel, footwear, hard goods, department, big box, auto parts and
more. For more information, visit