STORES - September 2010 - (Page 54)

LOSS PREVENTION / RETURN FRAUD Restricting Returns, Satisfying Shoppers Solutions help retailers walk that fine line between fraud and sales prevention BY MICHAEL HARTNETT etail executives must walk a tightrope when tackling the industry’s multi-billion dollar losses from return fraud and abuse by providing excellent customer service without being patsies for “All companies are career criminals and a handful of dishonest shoppers. aware of return fraud. The question today The stakes are high: 5.2 percent of refor Orchard Supply is: Are those turns were fraudulent in 2009, accountHardware. “The quescompanies agile and ing for $9.6 billion in losses, according tion today is: Are those fearless enough to to NRF. Add return abuse to the picture companies agile and feartake the steps to and the figure jumps to $14.8 billion on less enough to take the reduce the fraud 8 percent of all returns, according to The steps to reduce the fraud without offending Retail Equation. without offending cuscustomers?” R LP measures that reduce return fraud and abuse add critical dollars to the company’s bottom line, but if stringent security procedures drive loyal shoppers from stores, the price for those gains could be too high. “With changes in the economy in 2008 and 2009, retailers knew that returns were a relationship builder, a point of differentiation,” says Joe LaRocca, senior advisor, asset protection for NRF. “LP executives play the largest role at the table with overall management of return policies [and] don’t want loss prevention to be a road block to sales or to legitimate returns.” Instances of competing goals can be as obvious as a company’s LP team being in one office reviewing the best strategy for catching a gang of thieves while, down the hall, the IT team is working out the final details of the company’s new self-checkout system. The retail perspective “Ten years ago the problem of return theft and abuse was a haze, but there is no question that today, all companies are aware of return fraud,” says Ray Cotton, director of security operations 54 STORES / SEPTEMBER 2010 “We let the algorithms do the work,” says William Napier, senior manager of corporate tomers?” asset protection for Ca– Ray Cotton, Many large retail combela’s. “It’s a conversaOrchard Supply Hardware panies are now using softtion between us and the ware programs requiring customers to customer. It’s my sense that a lot of sucproduce identification at the return desk, cessful companies, large and mediumCotton says. Those software programs size, are using this approach. And it use algorithms that allow comparisons of doesn’t require a great deal of training a shopper’s purchase history, return volfor the associates to be successful.” ume and return velocity to identify questionable behavior. Third-party help “We are not relying on individual de“Anyone who says, ‘No sale is ever cisions,” he says. “We don’t want [sales final’ is setting themselves up for fraud associates] looking at someone coming and abuse,” says Tom Rittman, vice through the door and saying, ‘I will represident of marketing for The Retail fuse that customer’s return,’” says CotEquation, whose software solutions are ton. “Ten years ago I would not have used in more than 15,000 stores in the suggested that we ask customers for ID United States and Canada. when making returns, but today the Noting that a retailer’s best customers technology is accurate in identifying” could easily be part of the shopper group that 1 percent of dishonest shoppers. with a high rate of returns, Rittman lists Cabela’s provides its “outfitters”—its several general approaches used in curbnomenclature for sales associates — ing abuse. with a system at point of sale that pro“The easiest step is a change in return duces numerics listing a shopper’s frepolicy — no receipt, no return, or changquency of exchanges and velocity. ing the time limits during which a return When appropriate, the system delivers a will be accepted, separating the return warning to the sales associate, complete desk from POS, having a manager sign with the appropriate dialogue on the off on returns or giving store credits for printed receipt to guide the associate returns instead of cash,” he says. “But through the conversation. the issue is to not treat everybody the WWW.STORES.ORG http://WWW.STORES.ORG

Table of Contents for the Digital Edition of STORES - September 2010

STORES - September 2010
Table of Contents
Editor's Page
President's Page
Retail People
Favorite 50
Retail Showcase
Customer Retention
Social Shopping
Gift Cards
Business Intelligence
Networking & Communications
Customer Centricity
Payments & Credit
Return Fraud
Green Issues
ARTS Update
Point of View
NRF News
Retail Industry Calendar
End Cap

STORES - September 2010