Return fraud
Encyclopedia
Return fraud is the act of somehow defrauding
a retail
establishment 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 “renting” – in which the person makes a purchase, uses the product(s), and then returns the merchandise.
The retail industry experiences a significant fraud and abuse problem, losing 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.
The problem has historically caused retailers to raise prices for shoppers in order to offset 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 returned lingerie for health reasons. The retail company also incurs restocking time from returns, which could be time an associate spends driving new sales revenue by assisting customers.
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 unbiased 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.
Loss Prevention Research Council: http://www.losspreventionresearchcouncil.org
Dr. Mark Rosenbaum: http://www.prweb.com/releases/2009/12/prweb3381674.htm
Dr. Mark Rosenbaum and Dr. Ronald Kuntze Looking good at the retailer's expense: investigating unethical retail disposition behavior among compulsive buyers: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VGN-4FHJGBR-1&_user=535898&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1150883558&_rerunOrigin=google&_acct=C000027018&_version=1&_urlVersion=0&_userid=535898&md5=cb5fc1956d0bf48bf1add285e0389fdf
Dr. Mark Rosenbaum and Dr. Ronald Kuntze The relationship between anomie and unethical retail disposition: http://www3.interscience.wiley.com/journal/106566841/abstract?CRETRY=1&SRETRY=0
Fraud
In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
a retail
Retail
Retail consists of the sale of physical goods or merchandise from a fixed location, such as a department store, boutique or kiosk, or by mail, in small or individual lots for direct consumption by the purchaser. Retailing may include subordinated services, such as delivery. Purchasers may be...
establishment via the return process
Returning
In retail, returning is the process of a customer taking previously purchased merchandise back to the retailer, and in turn, receiving a cash refund, exchange for another item , or a store credit...
. 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
Friendly Fraud
Friendly fraud, also known as friendly fraud chargeback, is a credit card industry term used to describe a consumer who makes an Internet purchase with his/her own credit card and then issues a chargeback through his/her card provider after receiving the goods or services...
” where someone purchases products without intending to keep them. Perhaps the most well-known form of this abuse is “wardrobing” or “renting” – in which the person makes a purchase, uses the product(s), and then returns the merchandise.
The retail industry experiences a significant fraud and abuse problem, losing 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.
The problem has historically caused retailers to raise prices for shoppers in order to offset 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 returned lingerie for health reasons. The retail company also incurs restocking time from returns, which could be time an associate spends driving new sales revenue by assisting customers.
Types of return fraud
Some examples of the return fraud and abuse problems include:- Wardrobing or renting: Purchasing merchandise for short-term use with the intent to return the item, such as a dress for a special occasion, a video camera for graduations and weddings or a big-screen television for the Super BowlSuper BowlThe Super Bowl is the championship game of the National Football League , the highest level of professional American football in the United States, culminating a season that begins in the late summer of the previous calendar year. The Super Bowl uses Roman numerals to identify each game, rather...
. - Returning stolen merchandise: Shoplifting with the objective to return the item(s) for full price, plus any sales tax.
- Receipt fraud: Utilizing reused, stolen or falsified receipts to return merchandise for profit. Alternatively, returning goods purchased on sale or from a different store at a lower price with the intention of profiting from the difference.
- Employee fraud: Assistance from employees to return stolen goods for full retail price.
- Price switching: Placing lower priced labels on merchandise with the intention of returning the item(s) at the higher price point.
- Price arbitrage: Purchasing differently priced, but similar-looking merchandise and returning the cheaper item as the expensive one.
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 unbiased 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.
External links
National Retail Federation: http://www.nrf.comLoss Prevention Research Council: http://www.losspreventionresearchcouncil.org
Dr. Mark Rosenbaum: http://www.prweb.com/releases/2009/12/prweb3381674.htm
Dr. Mark Rosenbaum and Dr. Ronald Kuntze Looking good at the retailer's expense: investigating unethical retail disposition behavior among compulsive buyers: http://www.sciencedirect.com/science?_ob=ArticleURL&_udi=B6VGN-4FHJGBR-1&_user=535898&_rdoc=1&_fmt=&_orig=search&_sort=d&_docanchor=&view=c&_searchStrId=1150883558&_rerunOrigin=google&_acct=C000027018&_version=1&_urlVersion=0&_userid=535898&md5=cb5fc1956d0bf48bf1add285e0389fdf
Dr. Mark Rosenbaum and Dr. Ronald Kuntze The relationship between anomie and unethical retail disposition: http://www3.interscience.wiley.com/journal/106566841/abstract?CRETRY=1&SRETRY=0