Focus on: Preventing Return Fraud


Return fraud and abuse is a year-round challenge, with estimates of industry losses ranging from $9.6 billion to $14.8 billion. The percentage of loss worsens during the holiday season, in large part due to the increased volume of returns. Seasonal workers unfamiliar with a company’s policies and procedures can also add to the problem.

Industry experts say it’s critical that retailers reduce fraudulent activity without compromising customer service. They must strike a balance between preventing fraudsters from taking advantage of them and maintaining fair policies for legitimate returns. To that end, here are some tips from The Retail Equation, a leader in retail transaction optimization solutions, for managing smarter returns during the holiday season:

  • If you decide to relax return-policy parameters during the holidays—such as providing a more lenient receipt-age policy or eliminating restocking fees—make sure you are still protected and have a plan to address fraudulent/abusive return activity. “Don’t throw away margins by illogically accepting returns,” said Tom Rittman, VP, The Retail Equation, Irvine, Calif.

  • Use fraud prevention tools consistently. To ensure that nothing flies under the radar, retailers should resist the temptation to forsake their automated return tools in lieu of transaction speed. “Don’t bypass the standards and checks in your system to get the returns line moving,” Rittman said.

Often times, to accommodate extra seasonal traffic, retailers will set up return outposts apart from the main counter. Make sure that these areas are properly equipped with the correct tools and that the staff has proper training. “Handle all returns consistently,” Rittman said.

  • Don’t underestimate the importance of proper staffing. Often times, a customer making a return is visiting that store for the first time, and retailers should capitalize on the opportunity to make a positive first impression. The more people you have on staff, and the better-trained and knowledgeable they are in answering questions with regard to returns, the better the impression will be and the faster the line will move. “There is no better way to make a good impression on a new customer than by having the right staffing and making a good impression on a return counter,” Rittman said. “Retailers should make the most of the opportunity—more interaction occurs between associates and customers at the return counter than in most other areas of the store.”

  • Maintain a smooth return process with proper training. A slow-moving line caused by employee confusion over return policies and procedures could cause shopper frustration.

  • Supply return customers with a reason to keep shopping, such as an incentive, so that the return doesn’t become a lost sale. “Incentivize the customer at the point of a return to spend their refund dollars with you, right now,” Rittman said. “Maximize the higher level of foot traffic in your store during the holidays by giving the returner a reason to shop.”

  • Be aware of the latest studies and trends on merchandise returns and return fraud. “Retailers should also do their own studies,” Rittman added. “The results will give you the metrics to make the right decisions in terms of staffing and training.

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