There are different times of the year when people have a tendency to purchase an item to use for a brief period of use and return it. When our area experienced Hurricane Matthew, people purchased power generators and when the power was restored they were taking them back to hardware stores for refunds. This might be good for the people who want one at a discounted price but for the stores that sold them it can be cause for a financial loss, depending on the condition of the unit when it was returned. For the first few years I worked for a big box retailer we sold lawn mowers. As the end of summer neared we would have a number of them returned (within the return date cut-off) and the customer would tell us how it no longer worked. A look at the machine often explained a lot about why it no longer worked. Swim suits would be returned by customers who had clearly worn them either for the summer or for the time they were on vacation. Proms were a notorious time for what is referred to as wardrobing. Our store didn’t sell tuxedos but we did sell prom dresses and you could always be ready to take several back that had obviously been worn but were within the store’s return policy guidelines. How about Halloween and all of those costumes our store sold? You guessed it we always had a number of them returned AFTER the Great Pumpkin failed to make another appearance. So what is the point of all these different returns? They are forms of refund fraud, but fraud that was in large part empowered by our own company policies.
One thing I want to quickly mention is that I referenced wardrobing above. Some of you may not be familiar with this type of fraud so let me describe it. Wardrobing is a form of return fraud that makes it appear the customer is following a store’s own policies but they twist those policies. Where it is expected that a piece of clothing would be returned if it did not fit, had a defect or in the event it was a gift that was not well-received, those committing this fraud disregard that aspect of the policy. These people wear the item(s) intentionally, going out to parties or events appearing to have a new outfit and then return the merchandise within a few days. Frequently the clothing has smells that have permeated them and/or stains that have marred them. Unfortunately many retailers have loosened refund policies to the point that all they require are the tags and a receipt (and sometimes even the receipt isn’t required).
Eventually our business did tighten up policies on some things to prevent return fraud and in some instances we stopped carrying a specific line of merchandise. For example, the lawn mower issue became a big enough problem in terms of non-resalable merchandise being returned under the 90 day return policy that the company simply stopped selling them. Seasonal merchandise such as Christmas trees and Halloween costumes were limited in how much they could be returned for after the date of the holiday. Some items that seemed like they should be able to be turned down because they had obviously been worn such as bathing suits were still taken back. Often managers were afraid to refuse a refund because they didn’t want a complaint called in to company headquarters and sent down the chain to the district manager.
Was the best solution to a refund abuse problem to end the sale of a product line? I’m not sure about that, I didn’t have company data to look at regarding the P and L on the lawnmowers. If a business wants to impact return fraud, without hurting customer service tightening up return policies a little bit can be helpful. Another solution for clothing stores would be to use wardrobing tags to prevent customers from wearing an item and returning it. These are red tags that are pinned where they would be seen if the item is worn in public which would be rather embarrassing. The tag has to be cut off by the purchaser when they decide to keep the item and once it is removed the store policy dictates the item cannot be returned. Think about what that would do to help your profit margin while still maintaining a customer friendly environment.
Before you make a move that would impact the variety of items your store carries or drastically restrict return policies. Look for the simple things you can do to keep clients happy and not take a hit on your bottom line. Wardrobing tags may be one solution for you to consider.
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