Loss prevention specialists have their hands full at this time of year, when retailers see an influx of holiday shoppers. But it’s not just shoplifters, organized retail crime and criminal flash mobs they need to be concerned about. The “returns” counter can be fraught with fraud as well.
Savvy fraudsters know how to prey on holiday cheer, costing retailers thousands of dollars in fraudulent returns and exchanges, says Tom Rittman, vice president of marketing for The Retail Equation, which works with more than 17,000 stores to optimize transactions at point-of-return and point-of-sale.
Sixty-two percent of retailers require an ID to return merchandise with a receipt, according to the National Retail Federation. But even a printed receipt doesn’t eliminate fraud. “Even the best POS systems with centralized receipt databases are vulnerable to improper use of receipts that appear legitimate,” he says.
What to look out for? Here’s Rittman’s list of the nine ways consumers cheat with a seemingly valid receipt:
1. Renting/Wardrobing: Buying merchandise for short-term use with intent to return, such as video cameras for weddings, big-screen TVs for a Super Bowl game, or a dress for a special occasion is a form of fraud. Return abuse—excessive violation of a retailer’s return policies—is often viewed subjectively. No one wants to deter a good shopper, but at some point a person’s returns overwhelm the value of his/her purchases and send that customer into a negative margin situation.
2. Shoplifting with a receipt: Many thieves will shoplift with intent to return for full retail price. The classic example is when the fraudster makes a purchase, takes the item to his/her car, returns to the store immediately with receipt in hand, selects another of the same item from the shelf and proceeds to the return counter claiming he/she “changed his/her mind.” The receipt is valid and the return looks legitimate, but you’ve essentially paid this person for keeping your merchandise.
3. Returning old/damaged merchandise: The process for consumers is simple: buy to replace old/broken item, keep new, return old. This system uses the retailer to keep personal items “up-to-date” at the retailer’s cost.
4. Shoplisting: Also known as “shoplifting using found receipts,” fraudsters shoplist by using a discarded or stolen valid receipt as a shopping list to find items in a retail store and return them for a refund.
5. Employee theft: Associates can usually find a valid receipt in the POS system to return items.
6. Reselling: Another simple process for fraudsters: purchase, sell elsewhere, return unsold. In this case, the retailer is being used for free inventory.
7. Tender liquidation: Consumers may buy on one form of tender (maybe even a stolen credit card) and exchange once or several times to switch to merchandise credit, which becomes saleable in an online marketplace. They also may return with small additional cash outlay to finally return products for cash.
8. Price arbitrage: This process consists of buying differently priced, similar-looking items and returning the cheaper one as the expensive item.
9. Fake receipts: There are fake receipt web sites that thieves can use to duplicate or forge receipts, costing retailers thousands of dollars.