Returns are a real — not imagined — problem for all retailers. Fraudulent returns are an even bigger pain point. Retailers have the right to identify and discourage chronic returners from taking advantage. How this is done is the trick. It should not be highly publicized but done subtlety and one-on-one with the culprits. Retailers don’t want to alienate everyone with big negative publicity, especially when they are trying to solve a problem with a specific group.

Amazon’s return policy is one of the reasons why it has seen incredible sales growth and success. Banning people, or threatening to do this, especially in the face of errors in making these decisions is not a good move for any retailer. Amazon’s 1 percent of sales (11 percent of 11 percent) being fraudulent returns is nothing excessive in the retail environment, especially the online environment where things are not as they appear, including fit of clothes, taste of food or performance of product. Most importantly, it is not Amazon who pays for these returns, but the vendors who supply Amazon along with the consumer. Amazon charges more than 1 percent for its returns, and suppliers expect this as they calculate their selling price to Amazon. For Amazon’s model to work, and continue working, it should not change this part of their retail formula. Why change a winning strategy?

Generous return policies are there to make life easier for genuine customers. They are not there for the benefit of fraudsters or serial abusers. As such, retailers have a right to review returns levels and ban those who they believe are taking advantage of the system.

However, care needs to be taken in doing this and common sense applied. I have seen rather a lot of cases (especially at Best Buy) where algorithms have banned or restricted returns from customers who are using the system in a reasonable way.

I’m with Amazon on this one. Retailers have to have common-sense policies that allow returns, but stop fraudsters and abusers from gaming the system. If you’ve used a frying pan for 30 years, you shouldn’t get to return it for a new one, no questions asked.

During its history and huge growth, the assurance of returns is an important contract between Amazon and buyers. This is especially true with categories where “fit” or “taste” is important. The assurance that we can return things drives additional purchases we might not otherwise make. These situations don’t impact most shoppers and are a little overblown via media reports. However, this can make shoppers think twice and create a negative halo.

In order to succeed as an online retailer, Amazon must have a liberal return policy. `It’s essential to the customer equation.

That makes this announcement a bit of a shock. Or at least confirms that Amazon is struggling to make its retail-like business profitable. We’ve known that from several years of putting the screws on sellers. We know that from their grab for advertising revenue. We know that from their purchases of brick-and-mortar stores as well as their deals with brick-and-mortar stores like Kohl’s.

Returns are a problem Amazon has carefully ignored in its press. From these press reports, it sounds like Amazon is finally having to confront the dark side of high online sales — very high online returns and high risk of fraud.

One of the benefits of shopping on Amazon is its generous return policy. Here’s the thing: consumers who order online cannot be sure of what they will receive. Will it look like the photo? Will the quality be the same as featured? Will it fit? In order to purchase online shoppers need to be able to return or exchange the things they do not like.

I remember a focus group that veered off into a discussion on returns, and one woman being upset because in spite of QVC’s unconditional 30-day return policy she was banned from shopping at the retailer. She was told she had returned too many items.

There is a difference between theft, those who abuse the policy, and someone who just wants to return a bad purchase. Retailers definitely have a right to draw the line, but consumers shouldn’t be blindsided by a retailer that suddenly labels them a “chronic returner.” Where’s the line and how do customers know it’s there?

I do side with Amazon on this very tender issue. The problem is not with a large population of Amazon faithfuls, but with those few who choose to abuse the system. One Amazon customer told us she buys apparel from Amazon, and orders four to five different sizes of each item to try on – and then returns the balance. And she is consistent. And she is a retailer! And she brags about it to her friends. Here’s the point: In my department store past, we walked tenderly on our return policies, but we called out the abusers. It is a shame that a few can have such an impact on policy. Every seller has to be very careful not to reach knee-jerk reactions because of these abuses, but still must take control away from abusers.

I suspect this is much less “news” than it may appear to be. I gather from the article that this is not a new policy for Amazon, rather a long-standing policy that recently garnered attention because of the customer with the $450 gift card having trouble. As long as these “banning” incidents remain isolated while the vast majority of shoppers continue to enjoy liberal return privileges, I suspect this will be a non-issue. I would, however, caution Amazon to do everything possible to be very careful about banning shoppers so that news of these incidents does in fact remain isolated.

Amazon’s return policy is part of the trust and confidence the company has built into their model. Returns are a natural element of any retail operation and can easily erode margins, so it’s understandable to see Amazon focus on this large number. My only suggestion is to err on the side of caution so that customers making legitimate returns are not thrown out with the bathwater.

While generous return policies have long been a significant advantage for Amazon, L.L. Bean and others, it does not justify a policy with no limits or constraints. Yes, there is a downside to firing innocent customers, however, that is not an excuse for turning a blind eye to customers who abuse the system. The fact that Amazon and others are shining the light on such abuses, by itself, may deter others from taking advantage of the system. Even 11 percent of the 11 percent returned that is deemed fraudulent has an impact on the bottom line.

Just as banks and other financial institutions have rights to hold and authenticate payments for fraud verification, the exact same actions are rightfully reserved for retailers. Returns have a very real cost, and like in anything, the actions of a few bad apples can have massive impact on the actions of many honorable customers. It drives up price and fulfillment costs to the majority of customers. I don’t anticipate these types of reports to have any effect on the majority of consumers who consume and return with best intentions with Amazon.

This isn’t about Amazon’s liberal return policies. It’s about creating some guidelines and boundaries that allow Amazon to continue its liberal and easy return policies for honest customers. If there are 11% returns, and 11% of those are “fraudulent,” that means that just over 1% of returns are bad returns. What Amazon is doing is protecting 99% of the people who return items from being punished for the sins of a very few. Even L.L.Bean said that if a customer has a receipt, they will consider exchanges outside of the one year guarantee.

No doubt the some publications will take advantage of the negative side of the news. It is a little “sensational,” but the reasons behind limiting returns in certain situations are vital to the overall customer experience.

Amazon is stellar at serving customers and they have every right to ban bad customers. Good customers — those that do not game or abuse policies including those affecting returns — have no reason to go anywhere else.

LP, including fraud — through returns, loyalty programs or promotions — is a real problem and when you have the right approach to data, it’s increasingly easy to spot.