Super Bowl ‘Steals’: Short-Term Rentals Rattle Consumer Electronics Chains
Consumers may call it “borrowing” or “renting,” but buying a TV for a Super Bowl party — with every intention of returning it — can only be called one thing: “returns fraud.”
Of course, it’s not just TVs and football parties. Consumers buy sound bars for graduation parties, slow cookers for cookouts or holiday events, and whatever else comes to mind. But, the reality is, consumers do commit this returns abuse, treating electronics like short-term rentals.
A study by Lending Tree found that 4 in 10 consumers admit to buying a product with the objective of returning it. By category, 43% of consumers do this for electronics or gadgets, and 36% admit to doing it for kitchen tools or appliances. Consumers may think it’s harmless, but this behavior creates long-term damage, compounding margin loss and shrinkage.
Impacts of rentals on total retail loss
It’s true that this renting tactic is most common in fashion and apparel, also termed “wardrobing,” but consumer electronics retailers are heavily impacted. Every fraudulent return eats up unnecessary shipping and repackaging costs, and the return can impact resale value and cash flow.
Additionally, there are the considerations that these fraudulent returns waste an associate’s time reboxing and re-stocking an item, and these borrowed goods can often end up as products that don’t resell, resulting in limited warehouse space.
Short-term rentals erode a retailer’s profitability, which is especially harmful for independent consumer electronics sellers with fewer staff and resources. Many don’t have the flexibility to markdown items like major retailers and can be hurt by having limited inventory.
When retailers get stuck with used items, they often take a total loss. Over time, those losses reduce inventory investment and tighten how much a local electronics retailer can reinvest in its business.
Reduce renting with AI and streamlined analytics
Renting or wardrobing is a serious offense against retailers, despite it becoming a viral trend at retailers like Costco and Target. In fact, research from Deloitte and Appriss Retail found wardrobing or renting to be the highest form of returns fraud abuse among 150 retail executives surveyed, with 6 in 10 experiencing the abuse of used merchandise being returned.
Unfortunately, simply creating a stricter returns policy on items isn’t enough to slow renting behavior, and often has a more negative impact on loyal consumers who follow the rules.
To tackle the abuse from a more personalized approach, retailers can implement AI solutions into their sales systems, linking in-store, online, and customer service call centers, so that all returns are being reviewed in concert, in real time.
Imagine a consumer who returns a TV to a store, days after buying it, claiming it “didn’t fit the wall.” AI can instantly analyze that consumer’s shopping history and behaviors across stores and flag suspicious patterns, such as repeatedly buying a TV during Super Bowl weekend and returning it after. The associates can use that information to tell the consumer that the system denied the return, avoiding friction with the consumer, and handing over more information to follow up, if needed.
Go beyond renting to prevent returns fraud and abuse
With AI embedded into a system, retailers receive an extra layer of protection to fight fraud. More than spotting rental abuse, AI can detect unusual online behaviors, like someone buying multiple PS5s with different credit cards, names, and shipping addresses.
AI can also flag if receipts look doctored by a criminal using AI and photo tools. Essentially, advanced loss prevention technology monitors unusual behavior, supporting frontline staff in stores and online. Retailers can further train associates to recognize patterns and help reduce losses.
Empowering them with retail analytics tools and AI also ensures decisions are fair and unbiased, removing them from needing to make a subjective decision on a return.
Times are tough for all retailers, and high-end consumer electronics chains are not immune to fraud and abuse, such as rentals. Holidays, football parties, and other celebrations can lead to spikes in retail loss, but AI can help monitor the abuse.
About the Author
Kara Holthaus is chief customer officer at Appriss Retail. She is a results-oriented marketing professional with over 15 years of experience at companies in various growth stages. Earlier in her career, Holthaus immersed herself in the world of retail ecommerce and then went on to focus on customer success and professional services.
Before joining Appriss Retail, she led the customer success team at Contentsquare, where she fostered company growth and strong relationships with clients, and served as the vice president of client success at SmarterHQ, where she played a pivotal role in the company’s growth — ultimately leading to its acquisition by Wunderkind. Connect with her at LinkedIn: https://www.linkedin.com/in/karabalbert/
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