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Breaking Down the True Cost of Coupon Fraud

Today, the retail industry loses over $100 million per year to coupon fraud or mos-redeemed coupons. But that amount only scratches the surface of what is truly lost when counterfeit coupons go unchecked. For a retailer, additional direct and indirect costs can make coupon fraud a significant issue, reducing total profitability and damaging relationships with shoppers and key industry partners.

Retailers Often Take Direct Losses

  • While most retailers take deductions from CPGs for denied coupon payments, there are instances where retailers absorb direct losses from coupon fraud that can’t be recovered. Here are a few examples:
  • Counterfeit coupon images are easily captured on mobile devices, and will scan at checkout. When this occurs, there is no paper source document, so the retailer has nothing to claim and must absorb the loss
  • Coupons are sometimes scanned multiple times, usually with “good on next shopping order” or NSO coupons where no specific purchase is required. The NSO coupon can be scanned multiple times, but only the original coupon gets submitted. This often happens at self-checkout, where the transaction is not closely observed.
  • Non-deductible chargebacks, specifically in regulated categories like alcohol and tobacco, create direct costs for retailers.

Everyone Pays Soft Costs; Retailers Pay More
In addition to real dollar losses and opportunity costs associated with coupon fraud — which both CPGs and retailers are forced to absorb — there are significant soft costs that are primarily incurred by retailers, such as:

- Digital Partner -
  • Delayed checkouts from coupons that don’t scan, or significant numbers of fraudulent coupons used in a transaction
  • Longer checkout lanes, leading to shopper frustration
  • Cashier/shopper friction when coupons don’t scan.
  • Shelf-clearing: fraudsters who use large quantities of counterfeits, or who mis-redeem legitimate high-value coupons on lower-value items, often create significant out-of-stocks
  • Coupon fraudsters often perform other criminal acts, such as shoplifting, while in the store.
  • Chargebacks (deductible or non-deductible) take time and energy to manage.

Would you rather subsidize coupon fraud or drive sales and deliver more value to shoppers?…  MultiChannelMerchant

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