'Returnaholics' spur retailers to tighten policies - East Valley Tribune: Business

'Returnaholics' spur retailers to tighten policies

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Posted: Tuesday, July 27, 2010 12:02 pm

Derek Rodner calls them "returnaholics," a breed of shoppers costing the retail industry an estimated $10 billion to $15 billion a year, according to the National Retail Federation.

They might buy a big-screen TV for the Super Bowl, a computer to write a term paper or a dress for a special occasion, with no intent to keep the item.

Return abuse has always been an issue, but the economy seems to have intensified the problem, said Rodner, vice president of product strategy at Agilence Inc., a retail loss-prevention technology company.

"A lot of people who are otherwise honest are scrambling just to feed their children but the reason for the return is not always that honorable," Rodner said.

In 2009, U.S. retailers reported losing an estimated $9.6 billion due to return fraud and abuse, down from $11.8 billion in 2008, according to the federation.

Joseph LaRocca, the group's senior asset protection adviser, attributes the decline in dollar losses to retailers reviewing their return policies to better identify shoppers who abuse them or are engaged in criminal behavior. Stores also are more clearly explaining return policies, printing guidelines on receipts or at the registers, he said.

Retailers expect a certain level of returns, but when fraud occurs, it can seriously harm the retailer and affect consumers who have to pay higher prices to offset costs, LaRocca said.

There are several types of return abuse. The bleak job market has some struggling to make a few bucks, so they might buy items on sale and then try to return them for a refund at regular prices.

Returnaholics are often guilty of "wardrobing," buying and returning merchandise after a single use. This often applies to clothes but can apply to other items, such as tools returned after a job is complete.

"They're definitely skirting the ethics boundary," Rodner said.

Rodner calls another category of returnaholics "pointers," consumers who buy products just to get points offered by reward credit cards. Typically, cardholders won't lose the points if they've already been applied to the account when the item is returned, Rodner said.

Retailers lose more than profits when an item is returned. They pay the credit card company a transaction fee at the time of purchase and at the time of return. There are additional costs of repackaging and restocking the merchandise. If it cannot be resold, the sale is written off as a total loss.

These types of shoppers are definitely gaining from the system, but it's hazy as to whether they are actually committing a crime, Rodner said. In contrast, there's no question laws are broken when someone plucks something off the shelf without paying and attempts to return it.

Retailers often tout their hassle-free return policies, encouraging customers to shop with confidence. Reluctant consumers might spend fewer dollars when stores tighten their return policies and shorten the return window.

In the past, few retailers required a consumer to show a receipt for a return. Consumers are losing that freedom, Rodner said.

As of May 2009, Target changed its return policy to "increase flexibility" for guests, said Sonja Pothen, a company spokeswoman. Before then, customers without receipts could return two items that cost up to $35. Target shoppers now can return an unlimited number of items that cost up to $70 in one year without receipts, she said.

The Home Depot customer can return any item with a receipt within 90 days for a full refund. After 90 days, he or she can bring it back without a receipt and get store credit, said Kathryn Gallagher, a company spokeswoman.

The home improvement retailer is also known for its lenient return policy on plants. If a plant dies within a year, a customer can bring in a receipt or the pot it was planted in and the store will replace it, Gallagher said.

Return abuse is a concern, Gallagher said, but there are systems in place that track how many times a customer makes a return and the nature of the return. Most of the time, the store allows the return to maintain the customer's loyalty, she said.

"When you start hassling someone over something small, you're going to lose that customer," Gallagher said.

"It doesn't take much to tick off a consumer," Rodner agreed.

Still, retailers need to protect themselves to stay in business, and implementing return policies is one way to do it, he said.

Many retailers have started using software to track returns. Agilence's software highlights suspicious incidents so retailers can pinpoint returns that exceed a certain value, are processed at a particular time of day, or take place without a customer present.

The software synchronizes a video of each product being scanned along with product data. The ability to view both the receipt and corresponding video is enabling retailers to spot fraudulent activities that many times go undetected, according to Agilence. For every dollar spent on the software, retailers see a $6 return, Rodner said.

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