Return Fraud: Theft By Deception
Many customers today consider a store’s return policy to be synonymous with their level of customer service. Modern customers consider the ability to return merchandise as a right instead of a privilege, and many refuse to shop at stores with strict policies. A lot of stores have lightened up their return policies to the point they are accepting everything, with or without proof of purchase. Unfortunately with the race for grabbing the market share of shoppers, came the trade off for billions of dollars of loss due to return fraud. It has become a monumental problem, and has grown by more than 25% since 1995.
1. Return fraud reduces sales, gross margin, and profit. There is the loss of the profit from the original sale as well as the investment made into buying the merchandise to re-sell.
2. The company loses the time and money spent processing the refund. Then they must determine if the items can be resold. And, if they can be, the loss of time restocking the merchandise back to the shelf.
3. Returns that can’t be resold must then be dealt with, via some form of markdown or just thrown out in the trash. Cosmetics, many clothing items, and even electronics can not be resold for full value if they have been opened and used, even only once.
I deal with returns on a daily basis at the small retail pharmacy I work for. We sell a variety of health and beauty items, and we have a pretty basic return policy. If you have a receipt, you have no problem. Without a receipt, we are supposed to issue a store credit on a card. It works just like cash, and has very few restrictions for what people can purchase with it. It is also completely up to the manager’s discretion whether to accept the return or not. When a customer attempts to return a high retail item without a receipt, I trust my gut more than anything to detect return fraud. We had a guy that was going to some of our stores and trying the same routine at every one of them, and he was very successful. The guy would come in without being seen and go grab a store brand box of hair regrowth formula. Then he would go to the front door and act as though he just came inside. He would come to the checkout and claim he needed to return it because he had an allergic reaction to the product. He would start talking to the cashier or manager, claiming he had talked to our corporate office and they had told him he could get cash back for the item even though he had no receipt. I advised all of our stores to conceal Checkpoint labels inside the box. Sure enough, at the next store he tried, he got back to the front door and the alarm sounded because of the active Checkpoint labels present inside the packaging. BUSTED!
A clothing retailer has a little more of a challenge than the pharmacy business though. People buy clothes many times with no intention of keeping them in the first place. They are what we call wardrobers and they buy it, wear it, and return it expecting a full refund. A new great way to battle this type of return fraud is to attach Alpha Shark Tags to the clothing inventory. (Talk about taking a bite out of crime!) Alpha Shark Tags are a simple tool that becomes a crucial part of the store’s return policy. The tag is designed to be removed at home with a simple pair of household scissors. Once removed, however, the item is no longer eligible for returns. No more buying a party dress to show off for the big neighborhood cookout just to return it two days later, smelling like smoke and spotted with barbeque sauce. Alpha Shark Tags are the new weapon against wardrobers and they are very effective in stopping this especially heinous form of return fraud.
For more information on Return Fraud, contact us or call: 1.770.426.0547