Are You Ready to Fight Retail Return Fraud?

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By Rieva Lesonsky, CEO GrowBiz Media & 

If you think the holiday shopping season is crazy, you’ve obviously never been to a mall on the day after Christmas. Believe it or not, the week between Christmas and New Year’s Day is often just as busy as the pre-holiday rush.

Consumers race to stores to grab items at steep discounts, use the gift cards they received as presents, and return unwanted gifts (like that chenille jumpsuit from great-aunt Audrey). And while retailers stand to make hefty profits in that week, they can also suffer big losses if they aren’t properly prepared to fight retail return fraud.

An estimated 10.6 percent of all returns are fraudulent and cost retailers some $22.8 billion a year, according to a 2017 survey by Appriss Retail. To make up for these losses, some retailers increase their prices, which can drive away customers. Others cut operating expenses, which can cost retail employees their jobs.

And there’s not just one type of retail return fraud to look out for. Here are the five most common types of return fraud retailers reported in 2017. All five are up significantly from previous years.

Of the retailers surveyed by Appriss Retail:

  • 68.3 percent suffered returns of stolen (shoplifted) merchandise.
  • 65.1 percent suffered return fraud by employees or employees collaborating with thieves.
  • 57.1 percent suffered returns of merchandise bought with fraudulent or stolen forms of payment.
  • 54 percent suffered returns made by organized retail crime.
  • 39.7 percent suffered renting or wardrobing (the act of using or wearing merchandise and then returning it).

But what’s spurring the growth in return fraud? With so many payment methods available — gift cards, instant online purchasing, mobile payments, etc. — it’s gotten easier for fraudsters to take advantage of confused or overworked store clerks. The trend of increasingly liberal return policies (especially around the holidays) can also enable fraud.

So how can you prevent return fraud in your store? The following steps will help.

 

1. Enforce stricter return policies

For instance, something as simple as requiring a manager to approve returns gives you another pair of eyes to assess the situation and spot anything fishy. You can also charge restocking fees for expensive products or items that are frequently returned fraudulently, like consumer electronics or formalwear.

 

2. Have plenty of staff in-store

It’s tempting to give your employees time off after their good work throughout the holiday rush, but hold off until store traffic slows down. A well-staffed store reduces the risk of shoplifting. And having plenty of employees at registers means you can take more time to carefully review returns without holding up the lines.

To make sure your store is fully staffed, use cloud-based employee scheduling software that includes access to a mobile app. That way, employees always know who’s working when, and you can put out last-minute requests for additional staff whenever you need to.

 

3. Use your POS system to monitor returns trends

At this time of year, it’s a good idea to track returns daily. You may find that certain products are returned at an unusually high rate, or that a certain employee or customer is involved in a suspiciously high percentage of returns. If either is the case, you can take steps like confronting the employee or placing an alert on the customer’s account.

A POS system that uses digital receipts enables employees to verify each purchase, even if the customer doesn’t have a paper receipt. This will confirm the means of payment and who made the purchase.

Return fraud can cut into your sales, but it doesn’t have to. Take a few simple steps to prevent it and you’ll start the new year right.

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