Post-Holiday Merchandise Return Fraud

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Returns and return fraud are a big issue—and getting bigger. In 2014, $284 billion worth of retail merchandise was returned in the United States, according to the Retail Equation. That represented a 6.2% increase over the prior year, and 2015’s numbers are expected to grow even higher. Brick-and-mortar stores report returns in the 5-10 percent range. E-commerce retailers report numbers averaging 10-15 percent, with returns of apparel running as high as 20-30 percent. The research firm IHL Group estimates that, overall, returns cost retailers 4.4 percent in revenue that is lost on items that can’t be resold or must be discarded.

Within the retail loss prevention community, when returns are mentioned, most focus on return fraud. To be sure, it is a huge issue with volume estimated at $9.1 billion, again according to The Retail Equation. When return abuse is added in, that number jumps to an estimated $15.9 billion. But, as large as these numbers are, it is estimated that return fraud and abuse only make up about 6.1 percent of returns. So 94 percent of all return transactions (equating to $245 billion) are legitimate.

Based on these estimates, the vast majority of retail consumers are honest, law-abiding citizens. But, especially during the holidays, everyone gets at least one gift that just has to go back! According to CNBC, Nordstrom, Kohl’s and Bed, Bath and Beyond get high marks for consumer friendly return policies. Some other retailers, not so much. On December 26, USA Today listed the return policies of numerous major retailers and went on to offer tips on how to make the return experience easier. It noted that one major online retailer is even accepting merchandise that was not sold on their site. Other sites were listed as willing to buy back gift cards at up to 92% of their face value.

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If you have to take merchandise back to the store, however, USA Today suggests leaving the merchandise in its original packaging, keep tags in place if possible and try to obtain an original receipt or gift receipt. Also, bring ID, as many major retailers are now requiring it to aid in the battle against return fraud.

When all else fails, you can always re-gift. But be careful. This one can get embarrassing if you get exposed. There are re-gifting guidelines to help prevent this from happening:
• Don’t re-gift to someone in your social circle.
• Make sure the packaging is original and pristine.
• Don’t re-gift something “old” that has been sitting around the house.
• Don’t re-gift anything overly unique or homemade.
• If it’s really ugly, don’t re-gift it. Donate it.

It’s true that return fraud is a serious problem for the retail industry and thus a needed focus for retail loss prevention. However, it’s good to know that the vast majority of returns are legitimate transactions. It’s true that they can affect profits, but with the right controls, policies and attitude, they can go a long way in creating loyal and valued customers.

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