Fashion Chargebacks: The Ugly Reality
Are you too sexy for your shirt? Or just too sexy to pay for it? A growing number of people are feeling that way and charging back fashion retailers for the clothing they regret buying or simply want for free (so-called liar-buyers).
Fashion retailers have long dealt with a relatively high amount of credit card chargebacks because the high volume of transactions they deal with make them an ideal target for true fraudsters. However, friendly fraud is a growing problem in the fashion goods and apparel sector. According to a study by a fraud solution vendor, 38 percent of fashion retailers saw an increase in friendly fraud in the last year.
Credit card disputes vs. inventory chargebacks
To make matters confusing, there are actually two types of chargebacks in the world of fashion and they should be distinguished from each other. There are credit card payment disputes between the consumer and the retailer – the type of chargebacks we deal with at Justt.
There are also supplier chargebacks. These occur when the retailer receives inventory from a wholesaler that is in unsatisfactory condition and cannot be sold as is. Typical reasons for supplier chargebacks are damage in transit or the poor make of the clothing. It can also include things like using the wrong universal product code (UPC) for labeling the inventory or other details that don’t pertain to the quality of the clothing itself.
By “charging back” inventory, the retailer seeks repayment for inventory that it cannot sell due to some fault of the wholesaler. However, this type of chargeback has nothing to do with credit card payments and Justt does not address it.
One of the major issues that arose from the rush to online shopping in 2020 was an increase in fraudulent “goods not received” chargebacks. Many customers were claiming that a package was missed in transit, hoping to receive their money back for something that they actually received.
This became a larger issue in high-end fashion when some courier services stopped requiring signatures upon delivery to abide by social distancing measures. Since most high-end merchants typically rely on signatures, they became more vulnerable to this type of friendly fraud. Without a signature, fraud review teams found it difficult to determine if the customer was lying during a chargeback dispute.
A related problem experienced by fashion retailers is return fraud. The most common form of return fraud is when shoppers request a refund for goods they received but claim they never got. Another type is shoplifting with a receipt, where the fraudster purchases a good and gets a receipt and then goes back to the store to take another of the same good and return it with the original receipt. This way, they get the money they paid out for the good, while getting to keep the product. For more types of return fraud go to the article we wrote on the subject in August 2021.
In general, the more the retailer tightens the returns process the greater their chargeback rate will be. That can put merchants in a tough spot.
One way to reduce return fraud without boosting chargebacks is to offer a customer in-store credit instead of cash refunds. Offer cash only as the last resort after the buyer has confirmed their identity and turned down all other options. Allowing the buyer to make an equal exchange for another item is also a good option for keeping legitimate buyers happy while deterring scammers.
Let Justt do the work for you
As part of a long-term solution, you will want to push back on chargeback fraud by fighting back against liar-buyers and deterring them from trying again with your site. For this there is Justt. We turn the chargeback process into something fair and simple. Don’t waste your time and effort poring over disputes and writing letters to issuing banks. We’ll handle that for you. All you have to do is pay as a share of the revenue recovered when we succeed. It’s a straightforward proposition. One that allows you to focus on doing what you do well: selling clothing.
Contact us to find out more about Justt and how we can handle your chargebacks for you.