According to the National Retail Federation's (NRF) second annual Return Fraud Survey, stores can expect to get lots of returns following the Christmas holiday and many of those will be made with the aim of cheating retailers.
Industry loss prevention executives estimate that nearly nine percent of all returns this season will be fraudulent. Despite the retail industry's attempts to combat this type of activity, the number for this year is actually up slightly from last year's 8.67 percent rate.
The study identified common attempts to defraud merchants. According to the executives who participated in the study, 92 percent have had people attempt to return stolen merchandise, 83.1 percent said returns are attempted by people who originally purchased an item with stolen tender, and roughly half used counterfeit receipts.
Another common attempt to cheat retailers comes in the practice of "wardrobing" where someone purchases a product, wears it and then returns it to the store for a refund. The practice, according to the NRF study, is on the rise with 66.1 percent claiming to have been victimized this year compared to 56 percent in 2006.
Despite the clear risk of being cheated, 35 percent of retailers said they plan to be more lenient when it comes to accepting holiday returns.
"Many retailers offer more lenient return policies during the holiday season to accommodate honest customers," said Joseph LaRocca, vice president of loss prevention for the NRF, in a press release. "But unfortunately, retailers must constantly balance the desire to take care of their customers with the undisputed fact that criminals are constantly looking to take advantage of return policies."
Discussion Questions: Do you see fraudulent returns being more prevalent in certain retail channels compared to others? What steps do you see as being most effective in catching those trying to cheat retailers through bogus returns?