Wardrobing-5 WC Blog 441
Return Fraud-3
Do Gift Cards Remove The Incentive To Commit Return Fraud? Part 1
As a Retail Loss Prevention Manager I remember getting frustrated at the growing trend I was seeing over the years of people returning merchandise without receipts and we stopped issuing cash back or credit card credit and started giving refunds back in the form of a store credit or gift card. I wanted to see more even exchanges for no-receipt refunds. The concept behind the gift cad issuance as I understood it was, if we give a gift card we are keeping the money in the store so we really don’t lose anything. On the surface it sounds right. The person committing the fraud can only use the store gift card in our stores so I guess it really does stay in the store. Then I started finding that those committing return fraud were turning right around and attempting to sell the gift cards to customer in the parking lot or in the store. We would chase them off letting them know we had a no-solicitation policy. That worked for a bit and then we found out through an apprehended shoplifter that he was returning stolen merchandise, getting gift cards as a refund and then taking the gift cards to local pawn shops and selling them. Added to the mess of fraudulent returns were those who engaged in wardrobing. Their returns were more complicated because while fraudulent they didn’t meet the criteria of fraud for any type of prosecution.
What is wardrobing you may ask? It is a type of return fraud when the person intentionally buys an item to wear once or twice and then return for a full refund. The customer makes the purchase, keeps the tags on the clothing by hiding them and of course keeps the receipt. They may also carefully remove tags and replace them when they are ready to take the garments back to the store. The merchandise is worn to dinner, an event or party and it appears the person has a new addition to their clothing repertoire. Rather than keep the clothes and continue to wear them in the future they go back to the store for a full refund. Making matters worse for the retailer is that many times the clothing being returned by a wardrobing customer is that the merchandise has odors from perfume, cologne, food or cigarettes or there may be make-up stains or food stains.
As gift cards have become a more popular form of credit for retailers to avoid the “incentive” of giving cash back for fraudulent transactions the need for selling the cards on the street or in pawn shops has been eliminated. There are now online web sites that will purchase gift cards from people. One web site claims a gift card seller can get up to 92% of the value of a gift card. As I perused the site I found I could buy a $100 CVS gift card for $90 and another website offered a $25 American Outfitters gift card for $19. I found that the website tells a seller that a credit card has to be on file so they will charge it if it is found a gift card was obtained through fraudulent or illegal means. What was not clear to me is how they make this determination? While there are some gift cards I was able to put a stop on because I could prove they were obtained through fraudulent means, such as the use of a stolen credit card or stolen checks, those situations were the exception. I don’t know how or if the site can determine gift cards were obtained through return fraud.
By the way, if someone is committing wardrobing fraud in most cases they don’t worry about getting the gift card. They are receiving cash back because they have all of the proper tags and receipts. There may be a few situations where they receive the gift card because of excessive wear and tear on the garment but often they raise their voices and create a scene to get their way. In part 2 of this article I will discuss how retailers can deal with wardrobing versus other types of fraud.
Get more information on return fraud contact us or call 1.770.426.0547 today.
As a Retail Loss Prevention Manager I remember getting frustrated at the growing trend I was seeing over the years of people returning merchandise without receipts and we stopped issuing cash back or credit card credit and started giving refunds back in the form of a store credit or gift card. I wanted to see more even exchanges for no-receipt refunds. The concept behind the gift card issuance as I understood it was, if we give a gift card we are keeping the money in the store so we really don’t lose anything. On the surface it sounds right. The person committing the fraud can only use the store gift card in our stores so I guess it really does stay in the store. Then I started finding that those committing return fraud were turning right around and attempting to sell the gift cards to customer in the parking lot or in the store. We would chase them off letting them know we had a no-solicitation policy. That worked for a bit and then we found out through an apprehended shoplifter that he was returning stolen merchandise, getting gift cards as a refund and then taking the gift cards to local pawn shops and selling them. Added to the mess of fraudulent returns were those who engaged in wardrobing. Their returns were more complicated because while fraudulent they didn’t meet the criteria of fraud for any type of prosecution.
What is wardrobing you may ask? It is a type of return fraud when the person intentionally buys an item to wear once or twice and then return for a full refund. The customer makes the purchase, keeps the tags on the clothing by hiding them and of course keeps the receipt. They may also carefully remove tags and replace them when they are ready to take the garments back to the store. The merchandise is worn to dinner, an event or party and it appears the person has a new addition to their clothing repertoire. Rather than keep the clothes and continue to wear them in the future they go back to the store for a full refund. Making matters worse for the retailer is that many times the clothing being returned by a wardrobing customer is that the merchandise has odors from perfume, cologne, food or cigarettes or there may be make-up stains or food stains.
As gift cards have become a more popular form of credit for retailers to avoid the “incentive” of giving cash back for fraudulent transactions the need for selling the cards on the street or in pawn shops has been eliminated. There are now online web sites that will purchase gift cards from people. One web site claims a gift card seller can get up to 92% of the value of a gift card. As I perused the site I found I could buy a $100 CVS gift card for $90 and another website offered a $25 American Outfitters gift card for $19. I found that the website tells a seller that a credit card has to be on file so they will charge it if it is found a gift card was obtained through fraudulent or illegal means. What was not clear to me is how they make this determination? While there are some gift cards I was able to put a stop on because I could prove they were obtained through fraudulent means, such as the use of a stolen credit card or stolen checks, those situations were the exception. I don’t know how or if the site can determine gift cards were obtained through return fraud.
By the way, if someone is committing wardrobing fraud in most cases they don’t worry about getting the gift card. They are receiving cash back because they have all of the proper tags and receipts. There may be a few situations where they receive the gift card because of excessive wear and tear on the garment but often they raise their voices and create a scene to get their way. In part 2 of this article I will discuss how retailers can deal with wardrobing versus other types of fraud.
Get more information on return fraud contact us or call 1.770.426.0547 today.
