There’s nothing “friendly” about return fraud

5 Comments | This entry was posted in Holidays, Loss Prevention, Retail Trends

Earlier this week, I was interviewed by a reporter from National Public Radio for a segment about “Friendly Fraud” and wardrobing. While the finished segment itself did a nice job providing the retailers’ perspective, the thought that fraud of any kind may be considered “harmless” makes me cringe.

You might be wondering, “What on earth is friendly fraud”? (When I first heard the phrase, I wondered too.) You can read what Wikipedia has to say, but here’s how I define it:  In cases of “friendly” fraud, dishonest consumers are trying to game the system because they don’t think anyone is hurt by their actions. Maybe they’re claiming they never made a purchase in your store, even though they did, or ordered an item online and received it but say the item never arrived. Perhaps they’re returning an expensive pair of earrings they “borrowed” from a store for a special event or purchased a Blu-Ray player and returned the box with a brick — not a Blu-Ray — strategically placed inside. (Anyone in retail can attest that this happens more often than you’d think.)

As if retailers don’t have enough to worry about during the holiday season, return fraud often increases in the months of November and December. NRF’s Return Fraud survey, released last month, found that return fraud will cost the industry – and our customers – $2.7 billion this holiday season alone.

Quite simply, when it comes to fraud, there is nothing friendly about it. Ever.

While return fraud comes in several forms, many consider “wardrobing” the most harmless. In these cases, dishonest shoppers bring back used, non-defective merchandise for a complete refund. In most cases, the retailers are able to detect that the holiday dress has make-up on the neckline or the laptop computer includes someone’s term paper, and are forced to take a loss on the item completely or discount it substantially to move it out the door. On occasion, though, these items slip through the cracks and are returned to store shelves, enabling unsuspecting shoppers to literally purchase someone else’s leftovers. That doesn’t sound too “harmless” to me.

And this is a widespread problem: nearly half of retailers (46%) report that wardrobing has been an issue for their company within the past year. Additionally, if you’re keeping score, 93% of retailers said stolen merchandise has been returned to their stores in the past year, three-quarters of retailers have experienced returns of merchandise purchased with fraudulent or stolen tender, and 43% say people have returned merchandise with counterfeit receipts.

Just like the small businessman who was interviewed in the NPR segment, retailers who see increases in return fraud need to make tough decisions – and they are. According to the survey, two-thirds of retailers (69%) say their return policies have changed in the past to combat fraud. And, while most retailers’ holiday policies will stay consistent with last year, 16.9 percent of companies said their return policy will tighten.

Are retailers hurt by return fraud? Absolutely. But customers are hurt, too. Who wants to buy someone else’s holiday party dress, which may have a small stain or smell like smoke, or have their kids disappointed on Christmas Day because they purchased a video game someone else returned with a blank CD inside? Of course, this also doesn’t take into account that shoppers are often paying higher prices at the cash register because of return fraud or that honest shoppers may be inconvenienced by changes in return policies, implemented to combat widespread dishonesty. That doesn’t sound too “friendly” to me.

Posted in: Holidays | Loss Prevention | Retail Trends and tagged , , , , ,
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5 Comments

  1. Posted November 25, 2009 at 12:34 pm | Permalink

    Retailers have made their bed. Now they’re getting uncomfortable sleeping in it. Free-and-easy return polices are marketed as good customer service. But their function is really to tip a considered purchase into an actual transaction by reducing the perceived finality of the sale. It makes a buy less of a commitment. But as anyone who has been in an “open” romantic relationship can tell you, lowering the required level of commitment is rarely the basis of a good relationship.

    Returning a brick in a Blu-Ray box is fraud. But wardrobing is nothing more than consumers exercising the freedom that retailers have offered them. It may harm retailers, but they have only themselves to blame. When you lower barriers, traffic flows in both directions.

  2. avatar Charlene Smithson
    Posted November 25, 2009 at 12:46 pm | Permalink

    Wardrobing is too too easy. If retailers want this practice to stop, they need to more strategically place the tags on the garment. If the tags are in the label at the back of the neck, one can easily wear it with the tags on and return it later. On the wrist, tags can be pinned up and the garment worn. If the tag is simply elasticized and fastened around a neclace, it is easy to unfasten, wear the jewelry and refasten and return. Tags should be placed prominently where no such opportunities for shenanigans can be exploited. It isn’t rocket science.

  3. avatar John Minick
    Posted November 30, 2009 at 8:42 pm | Permalink

    Retailers have a tough job. However, Can anyone tell me were does all this product go once returned? 10 top Companies names would be great.

  4. avatar PublicServiceMsg
    Posted December 11, 2009 at 12:45 am | Permalink

    Most all retailers have an automatic discount in their invoicing from manufacturers for defective-returned merchandise so the items never make it back to the manufacturer. Most are sold at markdown or tossed into the compactor. Electronic items may go to a refurbisher and are eventually resold too. You can find quite a bit of refurbished items sold on Ebay, especially cameras and stereos, dvd players etc.

  5. avatar Tianjian Wen
    Posted February 24, 2010 at 11:23 pm | Permalink

    Do you know that sometimes you receive an unsatisfactory service or goods and the merchant refuses to handle the dispute? You prepay the disputed amount and the handling party ignored your request for dispute. In that case, well, either you refuse to pay or file a chargeback as an extreme means.

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