Return fraud

Return fraud is the act of defrauding a retail store via the return process. There are various ways in which this crime is committed. For example, the offender may return stolen merchandise to secure cash, or steal receipts and/or receipt tape to enable a falsified return. Return abuse is a form of “friendly fraud” where someone purchases products without intending to keep them. Perhaps the most well-known form of this abuse is “wardrobing” or “free renting” – in which the person makes a purchase, uses the product(s), and then returns the merchandise.

There are various types of "return fraud", which impose large costs on retailers.

The retail industry experiences a significant fraud and abuse problem, losing money in the range of $9.6 to $14.8 billion per year, according to studies conducted by the National Retail Federation (NRF) and the Loss Prevention Research Council. A 2015 report published by the NRF states total merchandise returns accounted for over $260.5 billion in lost sales for US retailers in 2015.[1]

The problem has historically caused retailers to raise prices for shoppers in order to offset and recover the losses incurred from fraudulent returns. Alternatively, many stores have created stricter return policies such as “no receipt, no return” or imposed return time restrictions such as a 30-day limit on all returns that impact all shoppers.

A certain percentage of returned merchandise must be marked down or discarded in order to sell the product. After being returned, out-of-season clothing may have to be placed on the sale rack, for example. Or retailers may be forced to discard items such as returned lingerie due to sanitary and/or health reasons.

Types of return fraud

Some examples of the return fraud and abuse problems include:

Return policies have historically served as the primary way for retailers to combat return fraud and abuse; the challenge is keeping policies from being overly restrictive and/or inconsistently interpreted, both of which may discourage loyal customers and affect purchases. Separately, automated solutions have also been developed to help combat return fraud and abuse, including software programs that detect such behavior and help retailers determine whether a return is valid. These software programs allow retailers to maintain reasonable price points for consumers, maintain lenient return policies for their good customers, and offer better and more consistent customer service. Reducing fraudulent and abusive returns helps a retailer’s financial situation by lowering costs, preserving net sales, reducing shrink, while still delivering better service to their shoppers.

See also

References

  1. ↑ "2015 Consumer Returns in the Retail Industry" (PDF). nrf.com. The Retail Equation. 2015. Retrieved 9 May 2017.
  1. National Retail Federation, Press Release, 2012
  2. National Retail Federation, Press Release, 2008
  3. Loss Prevention Research Council
  4. CNN Money article, “Price tag for holiday fraud: $3.7 billion”
  5. Good Morning America article/segment, “Buy, Wear, Return, Repeat”
  6. TIME article, "Word of the Day: Returnaholic"
  7. Speights and Hilinski (2005), Texas A&M, Mays Business School, Center for Retailing Studies Retailing Issues Letter, Volume 17, "Return Fraud and Abuse: How to Protect Profits"
This article is issued from Wikipedia. The text is licensed under Creative Commons - Attribution - Sharealike. Additional terms may apply for the media files.