{"id":27389,"date":"2018-03-14T07:42:45","date_gmt":"2018-03-14T14:42:45","guid":{"rendered":"https:\/\/paladinpointofsale.com\/retailscience\/?p=27389"},"modified":"2025-11-06T08:44:23","modified_gmt":"2025-11-06T15:44:23","slug":"identify-fight-merchandise-return-fraud","status":"publish","type":"post","link":"https:\/\/paladinpointofsale.com\/retailscience\/home\/identify-fight-merchandise-return-fraud\/","title":{"rendered":"How to Identify and Fight Merchandise Return Fraud"},"content":{"rendered":"

[et_pb_section fb_built=”1″ fullwidth=”on” _builder_version=”4.16″ global_colors_info=”{}”][et_pb_fullwidth_post_title meta=”off” featured_placement=”background” text_color=”light” text_background=”on” text_bg_color=”rgba(0,0,0,0.68)” _builder_version=”4.16″ text_orientation=”center” use_border_color=”off” global_colors_info=”{}”][\/et_pb_fullwidth_post_title][\/et_pb_section][et_pb_section fb_built=”1″ admin_label=”section” _builder_version=”4.16″ global_colors_info=”{}”][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Intro” _builder_version=”4.16″ use_border_color=”off” global_colors_info=”{}”]<\/p>\n

Retailers are too familiar with the fact that sales are not<\/em> final and today some \u201ccustomers\u201d are engaging in merchandise return fraud to rip off local businesses. You need to understand what return fraud is, and what steps to take to cut those losses.<\/p>\n

According to the National Retail Federation, merchandise return fraud is a steadily growing problem for retailers with loss estimates reaching as high as $9.6 billion. The 2017 NRF National Retail Security Survey done in partnership with the University of Florida shows the average loss per return fraud incident ($1,766) is more than double the average shoplifting incident ($800). It is an issue that doesn\u2019t appear to have an easy solution, or is one that will go away soon. The NRF reports that an incredible 95.2% of retailers experienced some form of return fraud in 2016.<\/p>\n

[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Traits and Definition of Merchandise Return Fraud” _builder_version=”4.16″ use_border_color=”off” border_color=”#ffffff” border_style=”solid” global_colors_info=”{}”]<\/p>\n

Traits and Definition of Merchandise Return Fraud<\/h2>\n

Signs of merchandise return fraud are not greatly different than any other kind of theft, but includes some variables that typical shoplifting doesn\u2019t. Such as:
\n[\/et_pb_text][et_pb_blurb title=”An obvious increase in the number of returns may indicate that your store is being targeted because of a friendly return policy.” use_icon=”on” font_icon=”=||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”An obvious increase…” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”The lack of enforcement of the company\u2019s return policy could show possible employee involvement.” use_icon=”on” font_icon=”=||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”The lack of enforcement…” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”A store might have to hold more markdown sales due to an increased number of returned items. ” use_icon=”on” font_icon=”=||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”A store might have to hold…” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_text admin_label=”Traits and Definition of Merchandise Return Fraud Continued” _builder_version=”4.22.0″ hover_enabled=”0″ use_border_color=”off” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

Both return fraud and shoplifting show a high shrink rate where retailers notice inventory disappearing between counts. A good way to monitor this and protect against it is to implement a system of cycle counts, periodically counting different sections of your store.<\/p>\n

There are many kinds of merchandise return fraud ranging from nearly accidental to the kind perpetrated by organized crime. An article in Loss Prevention Media Insider<\/a> (LPM) gives definitions to various forms of return fraud. It says, opportunistic return abuse is the most innocent form of fraud and is where a customer is refunded an amount greater than they paid for an item. Blatant return fraud can include return of stolen merchandise, check fraud or price manipulation, where price tags are altered or packaging is switched prior to return.<\/p>\n

Intentional return abuse is deliberately taking advantage of a store\u2019s return policy for personal monetary gain. Some people who engage in this often purchase an item with the intent to use it and then return it for a refund. Items \u201crented\u201d in this fashion range from party dresses to mechanic\u2019s tools and account for approximately 52% of fraudulent returns.<\/p>\n

ORC FUELING RETURN FRAUD FLAMES<\/h2>\n

Organized retail crime (ORC) and computer technology have spurred the increase in return fraud.<\/p>\n

Kevin Thomas, former corporate loss prevention investigations manager for Office Depot, told LPM Insider how computer technology is used in many types of return fraud and abuse. He explained that criminals can now place their own computer-generated UPCs (Universal Product Code) on top of the actual UPC to generate more refund dollars or gift card fraud.<\/p>\n

The NRF study also shows the variety of payment options today adds to the increase in merchandise return fraud. Online purchases make it difficult for retailers to identify customers, and sometimes there is a lag between when a product is ordered and when the sale is confirmed.<\/p>\n

[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”How to Cut Your Losses” _builder_version=”4.16″ use_border_color=”off” global_colors_info=”{}”]<\/p>\n

How to Cut Your Losses<\/h2>\n

What is a retailer to do? You want to encourage customers to shop with you and making returns easier is part of that service. So, often return policies are not exactly rigorous. However, retailers are adjusting to limit the losses. The NRF says nearly 30% of retailers updated their return policies in 2017, an increase over the previous two years.<\/p>\n

A CNBC<\/em> study<\/a> of big-box retail stores suggests the following return policies.<\/p>\n

[\/et_pb_text][\/et_pb_column][\/et_pb_row][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Stores should require:” _builder_version=”4.16″ use_border_color=”off” global_colors_info=”{}”]<\/p>\n

Stores should require:<\/h3>\n

[\/et_pb_text][et_pb_blurb title=”A receipt for every return.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”A receipt for every return.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”Product packaging to be fully intact.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”Product packaging to be fully intact.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”Short time frames for allowing returns.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”Short time frames for allowing returns.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”A form of identification from every customer making a return, so you can watch for repeat offenders.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”A form of identification from every…” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][\/et_pb_column][\/et_pb_row][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”If a customer doesn\u2019t have a receipt, offer:” _builder_version=”4.16″ use_border_color=”off” global_colors_info=”{}”]<\/p>\n

If a customer doesn\u2019t have a receipt, offer:<\/h3>\n

[\/et_pb_text][et_pb_blurb title=”Exchanges only.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”Exchanges only.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”Store credit, instead of gift cards that can be used online.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”Store credit, instead of gift cards that can be used online.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][\/et_pb_column][\/et_pb_row][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”The Balance, a financial consulting company, offers these additional suggestions:” _builder_version=”4.16″ use_border_color=”off” global_colors_info=”{}”]<\/p>\n

The Balance<\/em><\/a>, a financial consulting company, offers these additional suggestions:<\/h3>\n

[\/et_pb_text][et_pb_blurb title=”Providing gift receipts can protect your business and increase customer satisfaction. Some retailers will not exchange merchandise without a sales or gift receipt.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”Providing gift receipts can protect your business and increase customer satisfaction. Some retailers will not exchange merchandise without a sales or gift receipt.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”Determine and indicate to customers what condition merchandise must be in when returned and assess restocking fees for open items.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”Determine and indicate to customers what condition merchandise must be in when returned and assess restocking fees for open items.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”Place your policy in plain view at the checkout stands.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”Place your policy in plain view at the checkout stands.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][et_pb_blurb title=”Print return policies on sales receipts to avoid any confusion.” use_icon=”on” font_icon=”||divi||400″ icon_color=”#dc4426″ icon_placement=”left” admin_label=”Print return policies on sales receipts to avoid any confusion.” _builder_version=”4.16″ header_font_size=”16″ global_colors_info=”{}”][\/et_pb_blurb][\/et_pb_column][\/et_pb_row][et_pb_row admin_label=”row” _builder_version=”4.16″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” global_colors_info=”{}”][et_pb_column type=”4_4″ _builder_version=”4.16″ custom_padding=”|||” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Using Technology to Fight Fraud” _builder_version=”4.16″ use_border_color=”off” global_colors_info=”{}”]<\/p>\n

Using Technology to Fight Fraud<\/h2>\n

Point of sale systems<\/a> are essential in controlling inventory, recording sales and making returns easy and accurate with or without the original sales receipts. These systems allow you to connect returns to their original sale price. They also allow you to gain valuable customer information by simply swiping a driver\u2019s license or other applicable identification. POS systems also assist retailers in identifying customers who regularly return merchandise and who may be trying to cheat your store.<\/p>\n

LPM Insider says the key to utilizing a POS system is giving a definition to a \u201cfraudulent return.\u201d While that definition can vary by personal preference, it should consistently feature the following criteria:<\/p>\n

[\/et_pb_text][et_pb_image src=”https:\/\/paladinpointofsale.com\/retailscience\/wp-content\/uploads\/sites\/2\/2018\/03\/5-Indicators-of-Return-Fraud.jpg” force_fullwidth=”on” align_tablet=”center” align_phone=”” align_last_edited=”on|desktop” _builder_version=”4.16″ global_colors_info=”{}”][\/et_pb_image][et_pb_text admin_label=”Using Technology to Fight Fraud” _builder_version=”4.16″ use_border_color=”off” global_colors_info=”{}”]<\/p>\n