Retailers preparing to deal with return fraud

Originally published in the Clarion-Ledger on 12/22/2014.

PDF:Moak_ Retailers preparing to deal with return fraud

The aftermath of Christmas morning likely will be the same in households across America. The floor will be littered with torn wrapping paper, twist ties and bits of cardboard. The kids will have retreated to their rooms (or outside if the weather’s agreeable). Exhausted parents will have settled down for an afternoon nap as neighborhood kids whiz by on their new bikes and motorized scooters.

It’s not really over, though. That rumbling sound you hear isn’t just your turkey-weary stomach; it’s Christmas’ second act, as retailers hunker down for the crush of holiday returns. As consumers decide they’d rather return that ridiculous tie and use the money for something they actually want, shoppers line up in droves. And stores will be ready, with return policies in place. Most people return items in good faith, but increasingly, stores find their holiday profit margins being nipped away at by what’s known as “return fraud.”

The National Retail Federation has just released the results of its 2014 Return Fraud Survey, which asked 60 major retailers to estimate how much money they’ll lose from fraudulent returns. The result: Fraudulent returns will cost businesses about $3.6 billion this holiday season. Increasingly, criminals are getting more sophisticated as they learn how to take advantage of stores’ generous return policies.

Fraudulent returns include several practices, such as returning stolen merchandise for cash or store credit, using counterfeit receipts or fake payment methods. Another increasing concern is “wardrobing,” when consumers buy an item, use it, and then return it, never intending to keep it in the first place. Sadly, much of the crime is an inside job, with more than 80 percent of retailers reporting employee collusion with thieves (that statistic is down a little since last year, one of the few bright spots in the survey.)

“Today’s sophisticated technology does well keeping criminals at arm’s length but often isn’t enough to completely stop the unethical practices of organized and individual retail fraud occurrences,” said NRF Vice President of Loss Prevention Bob Moraca. “Return fraud has become an unfortunate trend in retail thanks to thieves taking advantage of retailers’ return policies to benefit from the cash or store credit they don’t deserve. Additionally, many of these return fraud instances are a direct result of larger, more experienced crime rings that continue to pose serious threats to retailers’ operations and their bottom lines.”

That’s right; he was referring to organized crime. More 3/4 of those polled (78.2%) say they have experienced return fraud through returns by organized retail crime groups, up from 60.3 percent last year.

The rapid growth of wardrobing has gotten the attention of retailers; nearly three-quarters of retailers polled say they have experienced wardrobing in the past year, up from 62.1 percent last year.

All of these statistics point to an inevitable conclusion for consumers: stores are tightening their return policies, making it harder to return anything. Most stores now require you to provide identification if you are returning something, even if you have the original receipt.

Last year, Consumer Reports published some tips to keep in mind to decrease the unpleasantness of returning items. Here are a few of their suggestions:

Be sure before you open that box: Merchants can impose a restocking fee (often 15 percent of the product’s cost), and many do for electronics items. Products such as computer software, CDs, and DVDs aren’t generally returnable once they’re opened. It might also be hard to return products with damaged packaging or missing tags.

Keep all gift receipts: These days, more merchants will turn you away if you don’t have a receipt. If you didn’t get a gift receipt with a product you want to return, you may be out of luck, unless you’re prepared to ask the giver for the receipt.

Check store return procedures online and note any time limits: Big merchants usually allow 90 days for returns of most items but might have far shorter periods for electronics, software, and CDs and DVDs. During the holidays, however, some retailers will extend their deadlines.

Bring your ID: Some companies require a government-issued ID with a receipt. That way, they can track serial returners even if the transaction is in cash.

Know your options: If an item was purchased online and the merchant has walk-in store locations, check the merchant’s website to see if you can return it at a store and avoid repacking and a trip to the post office, as well as shipping fees.

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