If you’re in the retail business, you’ve probably gotten an item returned to your store because it didn’t fit properly or didn’t work at all. But that isn’t the only type of return fraud you need to worry about.
There are several types of return fraud, and here are some of the most common ones to watch out for. Any retailer can tell you how frustrating it can be to deal with customers who return products they didn’t purchase or receive as gifts. This kind of behavior can cost businesses billions of dollars every year
There are many different types of return fraud, and understanding how they work can help you determine which tactics are most likely to harm your business and how to stop them before they do so.
Did you know that it isn’t just customers who commit return fraud?
Return fraud may occur when customers return counterfeit, stolen, or damaged merchandise in place of legitimately purchased products or exchange an item purchased online when they do not intend to return the original product.
Retailers should be aware of and prepared to deal with many types of return fraud, as it can be costly to the business. You should know about seven types of return fraud to protect your company from losing profit and reputation.
Finding a solution to the return problem
When we started re-turns.com, We wanted to help solve a problem that has plagued retail businesses from the beginning of time, Fraudulent Product Returns. As we continue to work on our journey, we realize one of the essential things is; First, you must ask yourself how to identify a fraudulent product return from a legitimate return. Once you can identify a legitimate return from a fraudulent return, you’ll need to know how to deal with the fraudulent return to prevent harm to your business now and in the future.
After years of research on product returns, We’ve concluded several different types of product returners.
- The One-Off Fraud Returner
- The Return Abuser
- Organized Retail Crime (ORC)
- Employee Return Fraud
The one-off fraudulent returner will usually make returns very rarely to save themselves money, for example, buying a new item and returning the old item for a complete refund, also known as product switch fraud.
A return abuser usually buys multiple items at once and returns the unwanted item, traditionally found in wardrobing or product renting. Organized retail crime (ORC) rings are the most dangerous to your business’s bottom line. They will target any weakness in a store’s return policy to exploit.
What is Return Fraud?
Stealing merchandise from the retail industry to return the product later for profit. Return fraud costs retailers millions each year in both money lost on returned items and money spent on security measures to prevent this fraud.
- Receipt Return Fraud. Having a sales receipt other than purchasing the merchandise, entering a store, stealing the product on the receipt, and making a return before leaving.
- Employee Return Fraud. This is when an employee of a retail store intentionally assists in the process of a fraudulent product return for profit.
- Product Switch fraud. Purchasing a new item intends to return an old or damaged item in its place for a full refund.
- Auction Swapping. Similar to product switch fraud, this is where the buyer purchases items from an auction, then go out and purchases new items with the intent of returning the damaged items for a full refund.
- Price Tag Switching. Switching the price tag from a higher price to a lower-priced item allows the buyer to purchase the product at a lower cost and return it later for a higher price.
- Product Bricking. Purchasing an electronic item to remove the valuable components, then returning it for a full refund. Sometimes, a person may replace the valuable components with less expensive parts and then return the electronic item for a full refund. “Bricking” basically means a device has turned into a brick, and it’s as useful as a brick.
- Open-Box Fraud. A Buyer will purchase an item only to open the package and then return for a full refund with the intent to later re-purchase that product at a lower cost under the store’s “open-box” policies.
- Cross-Retailer Return. Purchasing merchandise at a retail store and returning or exchanging that item at another retail store for profit.
- Wardrobing or Product Renting. Purchasing merchandise for short-term use and then returning for a refund.
NOTE- Making a fraudulent product return during the post-holiday season seems to be the easiest time for criminals to take advantage of a store’s return policy than any other time of the year.
