The Bad Romance of Return Policies

November 10, 2010

What were you for Halloween this year? Did you go all Lady Gaga? Or maybe you went as Snooki, hair bump and all. Or perhaps you got your Na’vi on and went as one of the characters in “Avatar.”

If you cloaked yourself in any of these guises, you were certainly on-trend for 2010. But what about next year, when a Snooki hair bump will look as tired as a Kate Gosselin wig did this year?

Maybe, just maybe, you’ve thought about returning your costume for a refund. You wore it only once, after all, and it’s none the worse for wear. What harm could come of it?

First of all, if you got your costume from mega-costumer iParty, they’re on to you. This year at iParty, costumes could be returned only before Oct. 31. Second of all, returning an item you have already used constitutes what the industry considers return fraud. Return fraud includes stolen merchandise returned to stores, merchandise returned using counterfeit receipts, and the return of used, non-defective merchandise such as special occasion clothing (or costumes)–a practice called “wardrobing.”

According to a survey released late last year by the National Retail Federation, the retail industry expected to lose an estimated $9.6 billion in 2009 due to return fraud. (The 2010 edition of the NRF’s annual survey is due to be released this month.)

When asked which examples of return fraud their companies had experienced in 2009, respondents to the survey said:

Returns using counterfeit receipts 43.1%
Wardrobing 46.2%
Return of stolen merchandise 93.1%
Return of merchandise purchased on fraudulent or stolen tender 75.4%

Clearly, retailers must face the challenge of return fraud head-on. However, they face a tricky balance of supporting good customers who have valid reasons for returning merchandise and punishing those who take advantage.

Experts say one of most important tools–for businesses and customers alike–is a clear (and clearly posted) policy on returns and exchanges.

Grading Return Policies

Walletpop.com posted a slideshow that details and grades retailers’ return policies. Macy’s, for example, gets an A for its policy. Macy’s allows customers to return goods within 180 days of purchase. Macy’s sales personnel can look up receipts for customers who have lost them. The lowest score, a C-, went to Target, which allows a refund with receipt within 90 days of purchase but requires receipts for all returns. According to Walletpop, Target does make an exception for the return of two items (up to $35) per year without a receipt.

The NRF survey, which polled 134 retailers, showed that 88 percent of respondents proactively identify “bad returners” in an attempt to curtail fraud. Identification is accomplished through the use of automated systems (35 percent), manual identification (48 percent), or a combination of both (17 percent). Tools for identifying abusers include abuser lists, exception reports, real-time fraud detection systems, and video analysis.