Preventing Retail Fraud

With today’s economic environment, retailers should be careful when it comes to retail fraud and theft.

As a retailer, you can’t afford to have people defrauding your business in good times. During these tough economic times, it’s just as important to be diligent when it comes to protecting your property and business. Last November, the National Retail Federation reported that sales returns were up by 19% over the previous year. Of those returns, they estimated that approximately $11.8 billion of those returns were fraudulent, up 8% over the prior year. Read Multi-Channel Merchant’s recent article on this subject.

When it comes to fraudulent returns, there are a number of rules of thumb that I think every retailer should watch out for. Here’s a short list of what may happen and what I recommend to help prevent each scenario:

1. Thieves who shoplift products and try and return the items for a refund. I recommend that your store should adopt a policy whereby you do not refund any purchase without a valid store receipt.
2. Sophisticated thieves can now even print out replicas of your store receipt. I recommend that you add graphics to your store receipt (if you are able to with your POS equipment) that are not easily accessible or duplicated.
3. Watch out for the ‘renting’ thieves. Those who buy a product to use for a special event, then return it for a refund. I suggest that you monitor your customer returns and watch for patterns of this happening, and address it then.
4. Returning a different product. All returns should be verified, i.e. the item being returned is the item on the receipt before you give money back. Also look inside the boxes. Some thieves will return a product, with nothing actually inside the product box or packaging, except a heavy object to give the box some weight.
5. Engage your staff. Have all your staff be on the lookout for criminal or dishonest behaviour.

Now I say all these things very carefully. I do agree with the fact that most retailers should watch out for their interest. I also agree that in today’s economic environment, people may become more desperate and fraud may be on the rise; however, I strongly believe in always providing superior customer service at all times, especially now.

I recommend that you go overboard with service. I believe that there is a huge opportunity in today’s economic environment for retailers to gain market share. If your competition starts to claw back on overhead and lowering their service standards, I believe it is an opportune time to do the opposite to help gain market share. And do you know the BEST time to provide superior service that will give a lasting impression? At the time of a product return.

Keep an eye out for fraudulent behaviour, but not at the expense of customer service. I suggest that you deliver top-notch service to everyone and use systems to track and control returns.

Want to return an item at my store? No problem. We keep our customers purchased history in our database, so returns are automatically tracked (no extra burden to the customer) and we can run reports to look out for return trends with our customers. We maintain all PCI Compliance Standards and do not process cash refunds without a receipt, but we will return your item in exchange for credit on a gift card to use toward future purchases without a receipt. Even with a receipt, cash refunds are only given within 14 days of the purchase (some exceptions). Outside of that time frame, it’s on a gift card.

My philosophy has always been to build systems that are seamless and can be used to track fraudulent behaviour (by customers AND staff). But when it comes to the customer interaction, make it easy for them and be sure to provide great service.

I never want to penalize or inconvenience the majority of our customers in anyway in order to control the small number that are giving us headaches.

I know times are tough, and we all do need to look out for dishonest behaviour. Don’t take away from your customer service – the one big thing that makes your store special.

Andy