Return fraud is when a consumer fraudulently returns an item for a refund or exchange to keep or sell the item rather than use it personally.

While return fraud can be executed on ninety-nine percent of products and in most stores, some items are more popular with criminals than others.

Electronics, especially smartphones and tablets, are prime targets because they can be easily resold through online marketplaces like eBay or Craigslist.

Organized Retail Crime, also known as (ORC), has been steadily increasing over the last several years, with organized groups buying products with stolen credit cards and then returning them to the store for cash.

While many people take advantage of their right to return purchased items and get their money back, others have found ways to exploit the system to steal high-priced products from stores and resell them online or on the black market.

Organized Retail Crime (ORC) can be intimidating, but by learning more about it, you can protect yourself against becoming a victim of return fraud or falling victim to Organized Retail Crime.

How Does ORC Impact Merchants?

As a merchant, you are likely aware of organized retail crime. Organized retail crime occurs when thieves steal large amounts of goods from businesses and resell them at lower prices.

There are three key effects for merchants to worry about:

  1. The costs incurred from ORC fraud.
  2. Lost sales due to customer dissatisfaction with the customer service experience.
  3. Reduced customer loyalty from an overall lackluster shopping experience.

How Can Merchants Minimize ORC Damage?

Retailers need to be extra vigilant about organized retail crime in order to reduce the cost incurred when these criminals steal small, medium, and large amounts of goods from businesses.

Stay current on trends and warnings, contact local law enforcement, share information with other retailers in your area, equip employees with knowledge about these crimes, and ensure return policies are clearly communicated.

How Do We Prevent ORC From Happening in the Future?

Gone are the days when people paid for a product and brought it back if they weren’t satisfied.

These days, some customers either receive or steal products from stores and then return them to places like Home Depot or Target to buy items that have a higher resale value. Then, the reseller sells the stolen goods on eBay or at swap meets.

Companies must look closely at their return policy and determine what is acceptable. One way to address the problem is for retailers not to accept returns for large appliances, tools, electronics and other expensive merchandise that can easily be stolen.

What Should Consumers Know?

Return fraud is a serious issue and has been dubbed organized retail crime. It is when customers purchase large quantities or expensive items with the intention to return them, sometimes in perfect condition, for a cash refund. In addition to loss prevention, stores also lose profit from these fraudulent refunds.
It’s unclear how prevalent this problem is, but consumers should be aware that it can happen. In fact, in 2010, two retailers received over 3 million dollars worth of designer clothing stolen by organized retail thieves for sale on eBay. Customers should be aware that some employees are involved in these schemes, and retailers should look for suspicious customers. Steps like taking pictures of receipt stubs could prevent customer return fraud from happening to you.

Final Word

Return fraud is a widespread problem in the retail industry. A study by the NRF (National Retail Federation) found that return fraud is the second-most costly type of retail crime and that returns were made on 12% of online orders and 8% of in-store orders.

Companies are adjusting their return policies to mitigate losses to combat this issue. For example, Macy’s offers store credit only after seven days, while Walmart requires customers to provide a valid ID before returning items.

Organized retail crime includes returning stolen goods for refunds. Usually, it involves obtaining stolen receipts from store counters with the aid of an employee at the point of sale with their knowledge of involvement working together.

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