As the industry enters the final stretch of the ever-important holiday season, every retailer knows even Santa can make mistakes. How is it possible to get every single shape, size and color correct? Merchandise returns are a part of the holiday season, and legitimate returns are welcomed by retailers, who at the end of the day really want their shoppers to walk out of their store with THE perfect necklace, or coat, or blouse, or gloves. What’s not welcomed are the returns that come from gifts that were never purchased in the first place.
Unfortunately, there are crooks who will prey on retailers and honest customers to take advantage of liberal return policies by making fraudulent returns.
In a segment airing this week, CNN profiles the unethical and sometimes illegal practice of return fraud. During the interview, Dan Doyle, Senior Vice President of Human Resources and Loss Prevention Administration for Beall’s Department Stores and NRF’s senior asset protection advisor Joe LaRocca talk with CNN National Correspondent Susan Candiotti about the problem with return fraud and how it affects innocent consumers.
According to NRF’s latest Return Fraud Survey released last month, retailers will lose an estimated $4 billion to return fraud this holiday season, which is up from last year. Annually, return fraud will cost retailers nearly $14 billion.
A look at the numbers shows that the most common type of fraud is return of stolen merchandise, which 93.5 percent of retailers say they have experienced in the last year. Over one-third of retailers (33.5%) have found criminals using counterfeit receipts to return merchandise.
Wardrobing, or the return of used, non-defective merchandise like special occasion apparel and certain electronics, also poses a huge problem for retailers, especially during the holiday season when office and other special occasion holiday parties abound. More than 60 percent say they have been victims of this activity within the last year, up from 46.2 percent in 2009. Simply put, people buy a little black dress or new loafers, wear them once and then return them for full store credit.
We oftentimes forget to mention the lost sales opportunity surrounding return fraud. When merchandise is stolen from store shelves or unethical customers look to “rent” specific products, this causes a shortage of popular products. Frustrated consumers can alter their shopping patterns when stores are frequently out-of-stock on high-demand items. During a time when every dollar counts, retailers can’t afford to lose good shoppers. Nor can they afford to put up with the unethical behavior of greedy, callous holiday criminals.
3 Comments
Retailers are at a clear disadvantage when it comes to merchandise returns fraud. Any good retailer has conflicting tenants of fraud reduction and of treating loyal customers well which can paralyze some operators with the fear of accusing a good customer of returns fraud. Nothing short of centralizing information and giving store associates direct access to cross-channel, finitely detailed purchasing history will clear up this very costly – $14 Billion every year – problem. If you’re a retailer looking for a solution, I have a couple of ideas that you’ll find interesting.
I operate an Anti-Theft Program that focuses predominantly on retail theft. It is hard enough to convey the clear message into shoplifter’s heads that stealing is wrong and that it hurts everyone, but those who are charged with return fraud, particularly “ward robing”, is doubly difficult. This type of thief verbalizes that they did nothing wrong, particularly since they brought the item back to the store. Cognitively they validate their actions which enhances their belief of “me vs. THEM”, “them” being the retailers.
I wish that retailers would tighten up their policies pertaining to returns and in doing so it might make a difference in the $14 billion lost each year!!! I, myself, wish it would move back to “proof of purchase”.
This is a tough situation for retailers to be in. Do you tighten up on your return policies and risk turning off those “good” customers or do you stay relaxed with the policies and continue to let the “bad” retailers take advantage? I suppose each retailer will have to look at their books and measure the cost of return fraud versus the profit during that time period. I would just hate to see prices go up for the decent shoppers just because of the actions of a few.