Return fraud to cost retailers $2.9 billion this holiday season

Biggest day of the year for store returns is the day after Christmas.
Wire
Dec 25, 2012

The biggest day of the year for store returns is the day after Christmas, and while retailers work to accommodate the influx of shoppers at the customer service desk, they’re increasingly mindful that some people may be naughty instead of nice.

This year, retailers estimate they will lose $2.9 billion due to fraud during the holiday season, according to the results of an annual return fraud survey from the National Retail Federation.

Retailers estimate 4.6 percent of holiday returns are fraudulent, the survey said.

The percentage of returns the day after Christmas more than doubles compared to a typical day, according to Jen Hausfeld, manager of Target in Middletown.

“On the average day … it might be 6 percent of what we’re making for the day is returned,” Hausfeld said. “It goes up to 15 percent the day after Christmas.”

To handle the influx at Target locations nationwide, most stores are equipped with multiple service desk registers, she said.

“During the average time of the year, we man that with one person from open to close,” Hausfeld said. “But for the five days after Christmas, we have a minimum of two people there every day.”

Retailers estimate that 13.4 percent of the returns made throughout the year without a receipt are fraudulent, according to the survey. As a result, 73.2 percent of retailers now require customers returning items without a receipt to show identification. Just 7.1 percent of retailers require customers making returns with a receipt to show identification, and 26.8 percent say they do not require identification during the return process.

When it comes to their company’s holiday return policy, most survey respondents — 83.1 percent — said their return policies will remain unchanged compared to the 2011 holiday season, and 10.2 percent said they will relax their policies to help ease the process for gift givers and recipients.

“We have a pretty lofty return policy,” Hausfeld said. “We offer receipt look up for guests who want to return (an item but) they don’t have a receipt.”

However, Target does take precautions by limiting the dollar amount of returns accumulated during the course of a year, tracking via identification how many returns are made per year by each customer and requiring a receipt for refunds on items that cost $70 or more, she said.

“Anything over $70 without a receipt is limited to just an exchange,” Hausfeld said.

Returns of store merchandise at J.C. Penney are accepted without a receipt, said Karen Robinson, manager of the retail giant’s location at Bridgewater Falls lifestyle shopping center in Fairfield Twp.

“We don’t even worry about that,” Robinson said. “We just want to provide the best possible customer service for the company and make the customer happy.”

Survey results show that retailers will lose as much as $8.9 billion to return fraud for all of 2012, according to the NRF.

“Return fraud comes in a variety of forms and continues to present challenges for retailers trying to grapple with the sophisticated methods criminals are using to rip off retailers,” said Rich Mellor, NRF’s vice president of loss prevention. “Even more troubling is the fact that innocent consumers often suffer because companies have to look for ways to prevent and detect all types of crime and fraud in their stores, oftentimes resorting to shorter return windows and limitations on the types of products that can be returned.”

While $2.9 billion in return fraud at the holiday season is still “a big chunk of change,” actual sales supersede that by a large margin, Robinson said.

“You’re getting so much more out of the ones who are in here that are doing the right thing and not being fraudulent,” she said.

Clothing accounts for the bulk of items returned after Christmas, with customers wanting to exchange them for something else because they are “either the wrong size, wrong color or it’s just ugly,” Robinson said.

This holiday season is shaping up to be better than last year’s but not as much as what it first projected.

ShopperTrak, which monitors store sales worldwide, said last week it was cutting its holiday buying forecast.

After initially projecting sales would increase 3.3 percent from last year, the Chicago-based company now projects retail sales will rise by about 2.5 percent. It ascribes the slowdown to the Newtown shootings and Superstorm Sandy, saying both have made a dent in consumer enthusiasm.

Tips for stress-free returns after the holidays

1. Know the retailer’s return policy before you buy. Most retailers have return policies prominently displayed in the store and also outline their return policies on their website.

2. Save and file all receipts. Some retailers will allow consumers to exchange merchandise without a receipt, but oftentimes will only provide merchandise credit for the lowest markdown price at which the item was sold during the holiday season.

3. Provide all original packaging and all parts — including tags — when giving a gift. Some retailers won’t accept returns unless the item is in its original package.

4. Make online returns easy by finding out if you or the merchant must pay for return shipping. Also, determine where to make returns. Does the retailer have a physical store, and can returns or exchanges be made there? Be sure you have the correct address if you need to mail returns back to the company.

5. Be patient when returning merchandise. Remember, the week after Christmas is one of the busiest weeks of the year for retailers.

SOURCE: National Retail Federation

By the Numbers: Return Fraud

$8.9 billion: amount lost to return fraud in 2012

$2.9 billion: return fraud this holiday season.

4.6 %: amount of holiday returns that are fraudulent.

96.5 %: amount of retailers who have experienced the return of stolen merchandise in the last year

84.2 %: amount of retailers who experienced the return of merchandise purchased on fraudulent or stolen tender.

64.9 %: reported amount of returned used, non-defective merchandise like special occasion apparel and certain electronics

45.6 %: amount of retailers who reported use of counterfeit receipts to return merchandise.

Source: National Retail Federation’s Return Fraud Survey

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Eric Schwartzberg - Dayton Daily News, Ohio (MCT)

©2012 the Dayton Daily News (Dayton, Ohio)

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