Return fraud

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Return fraud is the act of defrauding a retail store by means of the return process. There are various ways in which this crime is committed. For example, the offender may return stolen merchandise to secure cash, steal receipts or receipt tape to enable a falsified return, or use somebody else's receipt to try to return an item picked up from a store shelf. Return abuse is a form of "friendly fraud" where someone purchases products without intending to keep them. [1] Perhaps the best-known form of this abuse is "wardrobing" or "free renting" – in which the person makes a purchase, use the product(s), and then returns the merchandise.

Contents

The retail industry experiences a significant fraud and abuse problem, losing money in the range of $24 billion per year, roughly 7% of all returns and exchanges. [2]

Return fraud and theft have been reported to lead to price increases for shoppers. [3] Some stores create strict return policies such as "no receipt, no return" or impose return time restrictions. [4]

Types

Some examples of return fraud 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 or inconsistently interpreted, both of which may discourage loyal customers and affect purchases. [6] 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. [7]

Wardrobing

Wardrobing, purchasing merchandise for short-term use with the intent to return the item, has been described by industry advocates as a form of return fraud. [8] [9] Wardrobing is a form of return fraud where an item is purchased, used, and then returned to the store for a refund. [10] [11] It is most often done with expensive clothing – hence the name – but the practice is also common with tools, electronics, and even computers. To prevent this practice, some stores make certain items, such as wedding dresses or Christmas decorations, unreturnable. Some observers classify wardrobing as a form of shoplifting. [10]

See also

Related Research Articles

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A cash register, sometimes called a till or automated money handling system, is a mechanical or electronic device for registering and calculating transactions at a point of sale. It is usually attached to a drawer for storing cash and other valuables. A modern cash register is usually attached to a printer that can print out receipts for record-keeping purposes.

<span class="mw-page-title-main">Shoplifting</span> Theft of goods from a retail establishment

Shoplifting, shop theft, retail theft, or retail fraud is the theft of goods from a retail establishment during business hours, typically by concealing a store item on one's person, in pockets, under clothes or in a bag, and leaving the store without paying. With clothing, shoplifters may put on items from the store and leave the store wearing the clothes. The terms shoplifting and shoplifter are not usually defined in law. The crime of shoplifting generally falls under the legal classification of larceny. Shoplifting is distinct from burglary, robbery, or armed robbery. In the retail industry, the word shrinkage can be used to refer to merchandise lost by shoplifting, but the word also includes loss by other means, such as waste, uninsured damage to products and theft by store employees.

<span class="mw-page-title-main">Merchandising</span> Promotion of product sales

Merchandising is any practice which contributes to the sale of products to a retail consumer. At a retail in-store level, merchandising refers to displaying products that are for sale in a creative way that entices customers to purchase more items or products.

<span class="mw-page-title-main">Cashier</span> Person who exchanges money for goods at a store

A retail cashier or simply a cashier is a person who handles the cash register at various locations such as the point of sale in a retail store. The most common use of the title is in the retail industry, but this job title is also used in the context of accountancy for the person responsible for receiving and disbursing money or within branch banking in the United Kingdom for the job known in the United States as a bank teller.

<span class="mw-page-title-main">Online shopping</span> Form of electronic commerce

Online shopping is a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser or a mobile app. Consumers find a product of interest by visiting the website of the retailer directly or by searching among alternative vendors using a shopping search engine, which displays the same product's availability and pricing at different e-retailers. As of 2020, customers can shop online using a range of different computers and devices, including desktop computers, laptops, tablet computers and smartphones.

<span class="mw-page-title-main">Receipt</span> Written acknowledgment that a person has received money or property in payment

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<span class="mw-page-title-main">Fence (criminal)</span> Person who knowingly buys stolen goods in order to later resell them for profit

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A store detective is a member of loss prevention whose main role is to prevent and detect theft and reduce shrink in retail outlets. They do this by patrolling the store in plain clothes looking to identify members of the public who are stealing from the store. More common terms today with major retailers are loss prevention agent, detective or investigator and asset protection officer. Special officer, once common, is now rarely used, as few jurisdictions still allow it.

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In marketing, a rebate is a form of buying discount and is an amount paid by way of reduction, return, or refund that is paid retrospectively. It is a type of sales promotion that marketers use primarily as incentives or supplements to product sales. Rebates are also used as a means of enticing price-sensitive consumers into purchasing a product. The mail-in rebate (MIR) is the most common. A MIR entitles the buyer to mail in a coupon, receipt, and barcode in order to receive a check for a particular amount, depending on the particular product, time, and often place of purchase. Rebates are offered by either the retailer or the product manufacturer. Large stores often work in conjunction with manufacturers, usually requiring two or sometimes three separate rebates for each item, and sometimes are valid only at a single store. Rebate forms and special receipts are sometimes printed by the cash register at time of purchase on a separate receipt or available online for download. In some cases, the rebate may be available immediately, in which case it is referred to as an instant rebate. Some rebate programs offer several payout options to consumers, including a paper check, a prepaid card that can be spent immediately without a trip to the bank, or even as a PayPal payout.

A pre-order is an order placed for an item that has not yet been released. The idea for pre-orders came because people found it hard to get popular items in stores because of their popularity. Companies then had the idea to allow customers to reserve their own personal copy before its release, which has been a huge success.

Refund theft, also known as refund fraud, refund scam or whitehouse scam, is a crime which involves returning goods ineligible for refund to a retailer in exchange for money or other goods. The goods returned may have been acquired illegally, or they may be discarded damaged goods. Other schemes involve sealing weights or other simulated merchandise in the original product packaging, or switching labels on items to purchase them at a lower price and then returning them for their original value.

<span class="mw-page-title-main">Shrinkage (accounting)</span> When a retailer has fewer items in stock than in the inventory list

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<span class="mw-page-title-main">Product return</span>

In retail, a product return is the process of a customer taking previously purchased merchandise back to the retailer, and in turn receiving a refund in the original form of payment, exchange for another item, or a store credit.

Book store shoplifting is a problem for book sellers and has sometimes led stores to keep certain volumes behind store counters.

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Price adjustments, also called price protection, is a retail practice in the U.S. in which customers can obtain a partial refund of the purchase price of an item if they can show it on sale at a lower price within a fixed time frame. In such circumstances, retailers will do a “price adjustment,” refunding the difference between the price the customer paid and the price now available. For example, if a customer buys a TV for $300, and it drops in price by $100, they can go back to the retailer to ask for a price adjustment and get the difference returned to them, often in cash. Retailers with price adjustment policies include Macy's, Gap, and Staples.

Paribus is an American company and creator of the price tracking app of the same name, which syncs with a user's email account to scan for receipts and negotiates with online companies to refund the difference if there is a price drop shortly after a purchase.

References

  1. "Retail Refund Fraud and Abuse". LPM Insider. 21 January 2013. Retrieved 12 September 2003.
  2. "Naughty or nice: 3 things to know about fraud during the holiday season". NRF. Retrieved 2020-09-07.
  3. Kavilanz, Parija B. (11 November 2009). "Store theft cost to your family: $435". CNN Money. Retrieved 12 September 2017.
  4. Kokemuller, Neil. "Merchandise Return Policies". Houston Chronicle. Retrieved 12 September 2017.
  5. Hutton, Caleb (2018-08-04). "Elaborate shoplifting schemes often feed thieves' drug habit". HeraldNet.com. Retrieved 2020-11-14.
  6. Rittman, Tom. "7 Surprising Ways Retailers Lose Money". Retail Info Systems. Retrieved 12 September 2017.
  7. Cardone, Caroline; Hayes, Read (2 August 2017). "The Evolving Impact of Return Fraud and Abuse". LPM Insider. Retrieved 12 September 2017.
  8. Roberts, Deborah; Orso, Alberto (3 December 2008). "Buy, Wear, Return, Repeat". ABC News. Retrieved 12 September 2017.
  9. Rosenbaum, Mark S.; Kuntze, Ronald (May 2005). "Looking good at the retailer's expense: investigating unethical retail disposition behavior among compulsive buyers". Journal of Retailing and Consumer Services. 12 (3): 217. doi:10.1016/j.jretconser.2004.07.001.
  10. 1 2 Kim, Eun Kyung. "Bloomingdale's new b-tags block used clothing returns". Today Money. Retrieved 2 April 2015.
  11. Buchanan, Daisy. "Wardrobing: why returning worn clothes is the latest fashion". The Guardian. Retrieved 2 April 2015.