The trees are coming down; the gifts have been opened in a frenzy of wrapping paper and bows, but what about all those gifts that weren’t exactly what we wanted? The National Retail Federation does a report each year canvassing return fraud and its effects on the retail industry. For 2012 return fraud will cost retailers $8.9 Billion, $2.9 Billion occurring during the holiday season alone. This doesn’t include general shoplifting and employee theft, which I discussed in this post.

What is Return Fraud?

Probably the most well-known form is “wardrobing” – where the shopper purchases, uses, and returns the merchandise. However, these are generally mild cases, the more extreme losses come into play when shoppers steal receipts or receipt tape in order to enable a fake return.

“Return fraud comes in a variety of forms and continues to present challenges for retailers trying to grapple with the sophisticated methods criminals are using to rip off retailers,” said NRF Vice President of Loss Prevention Rich Mellor. “Even more troubling is the fact that innocent consumers often suffer because companies have to look for ways to prevent and detect all types of crime and fraud in their stores, oftentimes resorting to shorter return windows and limitations on the types of products that can be returned.”

How Are Retailers Combating Return Fraud?

Historically retailers raise their prices in order to supply the padding needed for their bottom line and the losses incurred. Alternatively, other retailers have created strict return policies, such as “no receipt, no return” or shorter time restrictions such as 30 days which limits returns on all items, sold to any and all shoppers. The loss prevention and security industries are an innovative crew and will, no doubt, incorporate an effective strategy to combat this fraud at least temporarily. How does your organization proactively prevent return fraud?

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