'Returnaholics' cost retailers billions of dollars a year

By Mitch Lipka Posted 6:00AM 05/18/10 Retail, Economizer, Consumer Ally, Crime

If you've noticed that returning items to stores isn't as easy as it used to be, rest assured: It isn't just you. Thanks to a growing number of people who are returning items they've used or never bought in the first place, retailers have been employing a variety of new techniques to stop so-called "returnaholics" and others from abusing the return process.

Last year, return fraud cost the retail industry an estimated $10 billion to $15 billion, according to the National Retail Federation. In fact, return fraud has become such a problem that it has sparked an industry-wide crackdown. Stores are using databases to identify serial returners.
"This kind of behavior escalates during economic downturns, when people don't have the cash to buy the things they want," said Mike Kraus, a retail expert for Allbusiness and CEO of the consultancy StoreTouch.

Being a "returnaholic" isn't so much a psychological issue as a financial one. Kraus said most people aren't serial returners because they like buying and returning items, but rather because they want to make a buck.

One of the most widely-known schemes entails something that retailers call "wardrobing," which describes the act of purchasing clothes, wearing them and then returning them. Apparel (particularly special occasion clothes), electronics and tools are among the most commonly returned items after they've been used. Take, for example, a homeowner who needs a drill for one project, but doesn't want to shell out the cash to own a drill. They purchase the drill, leave the tags on, use it and bring it back when they're done.

Some returnaholics are even more bold. "One of our customers just identified a woman who was hitting them every single day," says Derek Rodner, a loss control expert and vice president of Agilence Inc., which sells software to help retailers identify repeat offenders and problem returners. "This woman would simply walk into the store, make note of the store manager's name from the sign at the customer service desk or hanging near the front of the store, go into the aisles and pick up several items and go right to the customer service desk and return them without a receipt. She would simply say that she called (using the name of the store manager) and he told her to bring the items back. This woman was hitting 27 of their 133 stores, two a day, and then she would repeat. She admitted to over $10,000 in return theft over the course of 90 days."

Even legitimate returns can cost a store. The store eats the original transaction fee if the purchase was made by credit card, for example. But it's those steal by returning an item for a refund or credit who are the biggest threat. "This is why many retailers have implemented complex software tools that monitor these returns and may eventually limit a customer from returning more items," Rodner said.

And some measures are less high-tech. To well defend against "wardrobing" some stores have started putting the tags in prominent places in the front of garments so they can't be easily tucked away. And, they require that clothes brought for return must still have the tags.