Return Fraud and Abuse Cost Retailers More than $15.5 Billion


The Loss Prevention Research Council, in conjunction with The Retail Equation, released the results of this year's 'Customer Returns in the Retail Industry" survey. The survey provides information to retailers to improve their consumer returns business processes and provides an estimate of the amount of return fraud experienced within the retail market.

Using 2007 retail data and 2008 survey results, the study revealed that return fraud and abuse is a $15.5 billion problem. It also showed that retailers are increasingly trying to reduce the cost of fraudulent returns. The survey found that nearly 70 percent of the respondents specified that it is an important issue to their company, and the majority of retailers -- 64 percent --- report that focusing on reducing refund fraud is a high priority. However, there is clearly a performance gap because two-thirds of retailers believe that their current return policies and systems are 'ineffective" or only 'somewhat" effective in deterring return fraud and abuse. That indicates that there is still much room for improvement on the issue.

A majority of retailers' current processes and systems for reducing return fraud appear to focus more on non-receipted return situations, but the survey highlights a warning with well over half finding forged receipts used to commit return fraud. This points out a growing trend and should result in closer attention being paid to retailers' increasing vulnerability to fraud on receipted returns.

The survey also indicated that there is a growing movement -- across all four surveys -- toward use of automated return authorization systems. These technological solutions can be found in thousands of stores in hundreds of malls across the country, and save retailers an estimated $200 million or more annually.

According to Dr. Read Hayes, director of Loss Prevention Research Council, 'A retailer's approach to managing returns is largely keyed on tracking customers, and some high-risk products, while acting on consumers' purchase and return histories. Implementing the right technology, combined with employee training that encourages diligent attention to the issue at the store level, will result in decreased return fraud and abuse, as well as increased net sales, higher profits and improved customer satisfaction."

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