Fighting Return Fraud

Return fraud comes in many forms which causes loss to the business owner and the honest customer. Fraud presents challenges to retailers as they try to figure out ways to prevent it. The honest customers are affected because it can cause the shop owners to restrict what can be returned and the length of time to return items. It increases prices too. Here are descriptions of return fraud and a plan to fight it.

 

Types of Return Fraud

 

There are different forms of return fraud. The most common of these is called “wardrobing.” This type of fraud consists of customers buying special occasion outfits, suits or evening dresses and often the shoes that go with these outfits, suits or evening dresses. They wear the attire and shoes to the occasion and then return them to the store a day or two later. The suits or dresses may smell like cigarette smoke, have a stain or can even be ripped. The shoe bottoms are scratched. To these "customers," (who are more like "renters") returning doesn’t make them feel guilty in the least. They didn’t want to spend the money for a once-in-a-lifetime occasion. So they purchased, if that is what it can be called, clothing and shoes with the intent of wearing them once and bringing them back to the store.

 

Other types of fraud are receipt forgery with credit card return scams and check fraud. In the first, the dishonest customer returns merchandise purchased on a stolen credit card and has money credited to his or her credit card. With check fraud the customer will return an item for cash that was purchased using an invalid check. This con artist then tries to get the merchandise returned before the bad check bounces at the bank and makes the merchant aware of the scam.

 

How Are the Honest Customers Affected?

 

The honest customers are affected in different ways. The expense of return fraud drives up the cost of merchandise.  Since the return rate has increased with often unsellable merchandise that can’t be resold or merchandise that must be marked down, the amount of good merchandise has decreased driving prices up. The customer may get a bargain on what is returned from time to time, but not enough to offset price increases on all items everywhere. In the case of the wardrobing fraud, for example, the most popular sizes in a dress could be sold out when the client needs it. The honest customer doesn’t get the outfit she wants, and the store loses the real sale.

 

What Can Be Done About it?

 

There are methods to combat return fraud. You can require customers to show identification when returning merchandise. If the customer is a serial returner, he or she can be kept track of in a special file. Also, make sure you review your return policy at least once a year with staff. If your policies are more than three years old, an update is in order. This will help you to avoid the newer forms of fraud being used.

 

Your staff should be trained on what your return policy is and to enforce that policy. Be firm with reluctant staff. You may have to resort to shorter return windows and place limits on returns such as not accepting clothing that is smudged, stained, odorous or obviously worn. Don’t accept clothing with missing tags or without receipts. Shoes must be in pristine condition. Returns must be credited to cards used in the purchase. Another thing to think about is whether you want to give store credit cards for returned merchandise. There are thieves who will still use return fraud in this case because they can sell the credit cards online for cash.

 

So during this Holiday Season, keep a sharp lookout for potential return fraud. It’s lurking under all merchants’ Christmas Trees, but it can be avoided and losses can be prevented.
 

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