Return Lots of Merchandise? Retailers May Be Tracking You

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Mari Torres retailer tracking product returns privacy
Manuel Balce Ceneta/APShopper Mari Torres believes retailers' tracking of consumers' product-return frequency is "an invasion of privacy."
By JENNIFER C. KERR

WASHINGTON -- It's not just the government that might be keeping tabs on you, many retailers are tracking you, too -- or at least your merchandise returns.

The companies say it's all in the name of security and fighting fraud. They want to be able to identify chronic returners or gangs of thieves trying to make off with high-end products that are returned later for store credit.

Consumer advocates are raising transparency issues about the practice of having companies collect information on consumers and create "return profiles" of customers at big-name stores such as Best Buy (BBY), J.C. Penney (JCP), Victoria's Secret (LTD), Home Depot (HD) and Nike (NKE).

The practice led to a privacy lawsuit against Best Buy that eventually was tossed out.

Each year, consumers return about $264 billion worth of merchandise, or almost 9 percent of total sales, according to industry estimates.

Many buyers aren't aware that some returns, with and without receipts, are being monitored at stores that outsource that information to a third-party company, which creates a "return profile" that catalogs and analyzes the customer's returns at the store.

"I had absolutely no idea they were doing that," said Mari Torres of Springfield, Va., during a shopping trip with her daughter at the Pentagon City Mall in Arlington, Va. "I honestly think it's an invasion of privacy."

Torres, 39, says she's a responsible shopper and she'd like to know what kind of information retailers keep on her, with whom they may be sharing it, and how long they keep it.

One company that offers return tracking services, The Retail Equation in Irvine, Calif., says it doesn't share information in the profiles it creates with outside parties or with other stores.

For example, if TRE logs and analyzes returns from a Victoria's Secret customer, TRE only reports back to Victoria's Secret about the return activity. It doesn't then also share that information with J.C. Penney or other retailers that use TRE.

Even so, consumer advocates don't like it.

"There should be no secret databases. That's a basic rule of privacy practices," says Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group. "Consumers should know that information is being collected about them."

The retail industry says it's not about monitoring the majority of its shoppers, but fighting theft.

Lisa LaBruno, senior vice president of retail operations at the Retail Industry Leaders Association, says organized retail crime is costing retailers tens of billions of dollars each year.

LaBruno says the problem goes way beyond the small-time shoplifter and involves organized groups of criminals that make a living from the large-scale theft of merchandise. For example, they might switch the UPC code on a $600 faucet with a lower-cost code that rings up at $50. They buy the faucet, then replace the fake UPC tag with the original, higher-priced code, and return the faucet to the store without the receipt for a $600 store credit, which can later be sold online.

"It's not to invade the privacy of legitimate customers at all," LaBruno said in an interview. "It's one of many, many, creative solutions out there to help combat a really big problem that affects retailers, honest customers, the entire industry and the public at-large."

The problem, says government privacy experts, is disclosure, or lack of it in many cases.

People need to be aware when they make a purchase that if they return it, some information from the transaction may be stored, according to the experts.


"Most people think when they hand over a driver's license that it's just to confirm identity and not to be kept to be used for future transactions," says the Federal Trade Commission's Bob Schoshinski, assistant director at the agency's division of privacy and identity protection. "It shouldn't be that a third party is keeping a profile on someone without them being informed what's going to happen when they hand over their driver's license or some other information to a retailer."

In some cases, the disclosure by retailers is conspicuous. In others, not so much.

At Best Buy, a sign at each cash register states the return policy, and it's also on the back of the receipt, telling consumers that returns are tracked and an ID is required. T

The disclosure adds: "Based on return/exchange patterns, some customers will be warned that subsequent returns and exchanges won't be eligible for returns or exchanges for 90 days. Customers who are warned or have been denied an exchange/return may request a copy of their 'Return Activity Report'" from The Retail Equation by contacting the company.

At Victoria's Secret and Bath and Body Works, disclosures at the cash register said nothing about The Retail Equation's tracking returns.

Home Depot spokesman Stephen Holmes says the return tracking isn't just about money.

"This isn't only about protecting our bottom line," Holmes said in an interview. "It's about protecting our communities, too. We know from working with law enforcement at the state and federal levels that organized retail crime is feeding other crimes, such as drug trafficking and even terrorism, in some cases."

The Retail Equation says more than 27,000 stores use its services. Best Buy, Home Depot, J.C. Penney, Victoria's Secret, Bath and Body Works, and Nike are among its clients. TRE wouldn't say how long the profiles on consumers are kept in its database; it varies from retailer to retailer. But a recent "return activity report" obtained by one consumer turned up returns to The Sports Authority dating to 2004.

Here's how the tracking works:
  • A consumer buys an item at Best Buy and later returns it. Even if the shopper has the original receipt and is within the time frame when returns are permitted, store policy requires that Smith provide a photo ID, such as a driver's license. Other stores, such as Home Depot, only require the ID if there's no receipt or if the item was purchased with a store credit.
  • The ID is swiped and then some information from the transaction is sent by the store to The Retail Equation. The company says the information captured from the ID typically includes the identification number, name, address, date of birth and expiration date.
  • The Retail Equation catalogs return activity by the shopper and creates a "return activity report" on him with his returns at the store. If TRE determines that there's a pattern of questionable returns that suggests potential fraud, it would notify Best Buy, which could then deny returns by that shopper at the store for a period of time.
The threshold for too many returns is determined by each retailer. TRE says the vast majority of returns -- about 99 percent -- are accepted.

In a 2011 lawsuit in Florida against Best Buy, Steven Siegler complained after the magnetic strip on his driver's license was swiped for a return. He wanted the manager to delete the information.

His suit said Best Buy refused. He alleged that Best Buy violated privacy law when it swiped the license. But a federal appeals court agreed with a lower court ruling that the Driver's Privacy Protection Act didn't apply in the case.



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25 Comments

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dailyfinancesux

This is why, after many years as a reward zone silver customer, I no longer shop at worst buy. looking forward to seeing them follow borders bookstores.
I go to amazon and costco. amazon has a much better selection, and they even pay for the return shipping by letting you print out a free postal return label. can't beat that.

August 15 2013 at 12:36 PM Report abuse rate up rate down Reply
jacksonville Fl

I feel if any store is tracking what you buy or return, They should have a sign warning us what's going on. That way its our choice to buy or not to buy.

August 12 2013 at 9:26 PM Report abuse +1 rate up rate down Reply
denwel7

Finally! Something to deter the chronic returner!!! Believe me, I work retail in a very popular, high end womens apparel store. It is indeed a sickness, called compulsive spending, a shopaholic, what have you. She does it many times not just for the 'high', but because it makes her feel 'important' to drop $500+ , all to return it the very next day. We have you figured out ladies....the next day returners have hit the buyers remorse brick wall known as the husband who obviously freaked to see what was spent. Those who place the merch in their closets for months at a time are those who have obviously worn them for certain events. The wrecking of perfume, cigarette smoke, body odor, and dare I even say WORSE is a dead giveaway! Can't ever understand why it would take 60 days to decide you already have a black pencil skirt!

Yes, loss prevention is a concern, but the 'return frenzy' hits the bottom line. Is it any wonder why apparel prices are increasing, and stores are closing???

Be smart people!!! Don't go shopping online without being aware of what an item looks like, what the garments fabric feels like, or for goodness sake what size to buy! Those online returns greatly affect the brick/mortar stores you return them to. Ask yourself how convenient it will be when that local shop isn't there anymore!!!! Be responsible!!!

August 12 2013 at 9:22 PM Report abuse rate up rate down Reply
betty_brock

I don't blame them. Some people buy clothes, wear them and then take them back. Must be liberals.

August 12 2013 at 7:55 PM Report abuse rate up rate down Reply
malcolm.tucker1

I remember when BestBuy forgot to turn on encryption on wireless computer terminals, allowing people in the parking lot, with laptops to collect credit card data, resulting in one of the largest breaches of credit card information in history.

So, we live in a time when ID thieves need only a few pieces of information in order to steal someone’s identity and rob them blind. Most companies have learned to recognize this threat, but sharing customers’ information without guarantees of privacy, including lack of auditable trails creates issues...

You can do quite a bit with information on a Driver's License. Most Mag-strips have your full name, address, height/weight. That's a lot!

But BestBuy and other retailers are now sharing your private data to deny service..? it's interesting!

If this is the future-- constantly looking at ways to lower costs and increase shareholder value, through any way possible, they may as well also consider closing the physical stores, and compete with Zappos and Amazon online. This way, retail companies can compete with companies that don't hire and train the return salespeople, who are often hired to provide customer service.

BestBuy used to sell returns on eBay, with the name "TechLiquidators" and "CowBoom" but were kicked off. Now they have their own auction site.

My guess is BestBuy got tired of selling products at a 15% discount in the store, and prefers to hire shippers for eBay and auction sites instead of product specialists, and employees who listen to what a customer wants.

I don't buy anything at BestBuy. In the past 5 years, I bought a 5-pack of black DVDs for $25.00 3 of them didn't work. I returned them, and got my money back.

The next day, the ones I ordered on eBay arrived, costing $3.50, and worked just fine.

Bestbuy is run by a bunch of jewish people, who are overly concerned about security.

August 12 2013 at 7:49 PM Report abuse +1 rate up rate down Reply
1 reply to malcolm.tucker1's comment
TTigerLilyx2

So, you sounded fairly coherent till that last sentence.
Do you have any facts to back up that claim? Because its some pretty stupid and bigoted to me.

December 12 2013 at 9:03 PM Report abuse rate up rate down Reply
Susan

This is why I don't do business with Best Buy any longer. They're going downhill fast and this is one of the reasons.

August 12 2013 at 6:50 PM Report abuse -1 rate up rate down Reply
Alan Wallace

"There should be no secret databases. Consumers should know that information is being collected about them" - Ed Mierzwinski

Hey, Ed. About 35 years ago, I bought some batteries at Radio Shack. That was when I became aware companies collect information about us. When di you catch on? Last Wednesday?

To your point, I propose an easy solution: Instead of a "secret database" which is already common knowledge among consumers who pay even the slightest bit of attention, why don't we just post online the personal information of thieves who make a living returning stolen items, and the dimwits who make a religion out of repeatedly buying, then returning, items they didn't want or couldn't afford in the first place?
Problem solved. No more secrecy.
Better?

August 12 2013 at 5:35 PM Report abuse rate up rate down Reply
lawrie

folks who do this and expect the rest of us who actually think and make informed honest decisions are fooling no one, they are why their children have no compunction to be responsible...they deserve to be tracked and that they think the rest of us don't get hurt by their irresponsibility, or care about anyone but themselves, is nothing but disgusting.

August 12 2013 at 3:54 PM Report abuse rate up rate down Reply
Phyllis

I will retrn it if I have to no doubt about it, but having worked in retail, I know that women buy clothes wear them to a party or whatever and then bring them back. I had never heard of such a thing before and I was a woman with grown sons, but I did not know people were so low that they would do that.

August 12 2013 at 12:12 PM Report abuse rate up rate down Reply
tedgastman

MANY CUSTOMERS BORROW MDSE AND THEN RETURN IT. THEY WILL BUY A DRESS FOR AN EVENT/WEAR IT/THEN RETURN IT.
STORES LOSE MONEY ON HIGH RETURNERS CONSIDERING TIME TAKEN TO SELL THE MDSE AND THEN TIME TAKEN TO RETURN IT.
MOST RETURNS ARE LEGITIMATE BUT HIGH RETURNERS ARE NOT PROFITABLE
AND LIKE EVERYTHING ELSE THE LEGITIMATE CUSTOMERS PAY MORE IN THE LONG RUN BECAUSE OF HIGH RETURNERS TEDDY BOY

August 12 2013 at 11:18 AM Report abuse rate up rate down Reply
1 reply to tedgastman's comment
goodforme456

AND THEN SOME PEOPLE TYPE IN ALL CAPS

August 12 2013 at 3:01 PM Report abuse +2 rate up rate down Reply
1 reply to goodforme456's comment
Susan

Most excellent. Those are people who have no sentence structure, capitalization and punctuation skills.

August 12 2013 at 6:51 PM Report abuse -1 rate up rate down