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.

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.

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.

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.

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Wikipedia