The excitement around the Super Bowl can be a boon to retailers, as the big game ignites not just fan enthusiasm but also spending. This year the National Retail Federation (NRF) projected that consumers would spend $17.3 billion as they prepared for game day with purchases ranging from food and beverages to televisions, furniture, and decorations as well as team apparel and accessories. However, this spike in sales is shadowed by the darker side of consumer behavior—return fraud.
Amidst the pre-Super Bowl spending frenzy, electronics retailers, for example, see a drastic increase in TV sales as fans buy new TVs, often for watch parties. Some of these shoppers, however, purchase the TVs with the intention of returning them after the big game, a practice referred to as “wardrobing“ or “renting.” Each year following the Super Bowl, retailers and manufacturers brace for the annual swell of returns—a “buy-watch-and-return” pattern that’s become almost as predictable as the game itself.
Indeed, according to goTRG’s internal returns data, the average monthly TV return rate is 8%. But in March, the month after the Super Bowl, the return rate for TVs climbs to 11%—a 36% increase. Similarly, March also sees the highest monthly return rate for TVs with cracked screens, jumping up by 15%. Such a big increase suggests the likelihood of return fraud.
But return fraud is not just a phenomenon exhibited by football fans. While 2023 brought a notable decline in overall retail returns—dropping 8.95% and breaking the pattern of consistent annual increases—the industry saw a surge in fraudulent returns, soaring to a record $101 billion—a $16 billion increase from the previous year.
In goTRG’s most recent “2024 Retail Return Fraud Survey,” which had participation from more than 400 retailers and brands across the United States, a staggering 68.43% of businesses responded that fraud has become a bigger problem over the last 12 months. The most common types of return fraud experienced among retailers over this past year include return of stolen merchandise at 20.4%, wardrobing (using an item and then returning it) at 17.8%, and return of merchandise purchased using stolen or fraudulent credit cards.
With 73% of retailers reporting that they have lost more than $500,000 in 2023 due to returns fraud, retailers need to protect themselves from this threat by developing a comprehensive mitigation strategy with preventative measures set in place at each step of the purchase and post-purchase journey. The following recommendations are ones that can be easily implemented by retailers, both large and small, to protect against return fraud for all products, not just TVs.
1. IDENTIFY POTENTIAL RETURN FRAUD
Certain patterns and behaviors can alert retailers that return fraud is occurring. Some red flags retailers should be aware of include a sudden jump in the number of returns, numerous returns from the same person or persons (also known as “serial returners”), and suspicious customer data. Examples of suspicious data include mismatched shipping and billing addresses, profile name and credit card name not being the same, and multiple credit card attempts. All these inconsistencies depict patterns of return abuse. Having advanced returns management software in place will pick up on these red flags and alert the retailer of suspicious activity.
Furthermore, irregularities in employee handling of returns, such as incomplete capture of necessary information, failure to enforce return policies for ineligible items, or repetitive handling of certain returns by the same salesclerk, can raise red flags. Similarly, heightened return activity at particular store locations warrants attention. Diligent monitoring of these indicators is crucial for early detection and effective mitigation of fraudulent returns.
2. USE RETURNS MANAGEMENT SOFTWARE
Technology plays a crucial role in combating retail return fraud, particularly during peak periods like post-Super Bowl and seasonal surges. For instance, the aftermath of home improvement season, April through June, sees a surge in returns for home, garden, and appliance items, while holidays like Halloween and Easter prompt an influx of decoration returns. Similarly, the back-to-school season in August results in a spike in supply returns. Investing in advanced returns management software that seamlessly integrates with a retailer’s point-of-sale (POS) system is paramount. Such software ensures transparency and traceability in returns, enabling the identification of habitual returners and fraudulent activity with greater efficiency.
Retailers should use software that has the capability to capture serial numbers when appropriate and identify the entire chain of custody for each product, including its every touchpoint and movement for reconciliation purposes. This level of detail will allow a retailer to narrow down where specific items came from and attain the business intelligence needed to help catch criminals when any fraudulent activity occurs.
3. WORK WITH A REFURBISHMENT PARTNER
Teaming up with a sophisticated and certified refurbishment partner is essential for uncovering theft post-return. Through meticulous inspection, diagnostic testing, and refurbishment processes, technicians can identify missing parts within electronic gadgets and ensure the right generation model was returned.
Trained technicians can leverage a software's detailed tracking of product interactions across every touch and movement to identify the original source of the fraudulent activity. They can then provide granular feedback to the retailer, helping stores to tighten return policies and analyze customer data to pinpoint fraudulent behavior. The combined efforts between returns experts and cutting-edge software have proven to be powerful combatants for return fraud.
4. IMPLEMENT EFFECTIVE RETURN POLICIES
Many retailers provide shoppers with flexible return policies, including free returns. Due to rampant wardrobing and other types of return fraud, retailers have begun implementing and testing out stricter return policies to combat return fraud, including 44% of retailers who are now charging restocking fees for returns according to responses from our “2024 Retail Return Fraud Survey.”
When it comes to creating more stringent return policies, retailers are advised to require a receipt for every return, ensure product packaging is intact, and allow only short time frames for returns. When a receipt is not present, offering exchanges or store credit instead of cash refunds can reduce the risk of fraudulent returns. In addition, asking for an ID to match customer and payment data would help deter criminals from targeting a merchant. During the post-Super Bowl season and other periods of high return rates, retailers should enact stricter return policies as these are the most active times for criminals to prey on retailers’ vulnerabilities.
5. RECOGNIZE THE ROLE OF EMPLOYEES
When an employee lacks incentive or proper training to spot suspicious activity, that store can easily become a target for fraud. Employees play a pivotal role in managing in-store returns and identifying fraudulent ones. All staff involved in the returns initiation process should be trained to spot signs of fraud. By noticing mismatched product packaging, sketchy receipts, and inconsistent data, store employees can act as your first line of defense in fighting fraud. Conversely, if they are not trained to look for these signs (or choose to ignore them), store employees can become the biggest enablers of fraud.
Enhanced employee training, coupled with incentives and rewards, are pivotal in fortifying defenses against fraudulent returns. These can include initiatives like offering store credit for reporting crime or suspicious activities, employee recognition programs such as "Team Member of the Month," and highlighting star employees on social media channels. Fostering a positive work environment further bolsters this protection. It's crucial for staff to maintain meticulous records of transactions and returns, enabling them to trace the history of purchased items and spot patterns indicative of fraudulent behavior. In encouraging news, our “2024 Retail Return Fraud Survey” revealed that 90% of retailers provide training to employees on how to detect fraud or prevent fraud.
SAFEGUARDING RETAIL INTEGRITY
These insights into consumer returns underscore the need for vigilance and advanced retail strategies. Retailers, in response to this trend and the potential for fraud, should tighten return policies and employ tracking systems to identify serial returners, ensuring the sustainability of their sales strategies during peak retail return fraud periods. To combat return fraud, innovative processes and fraud identification processes are imperative.
Retailers must tackle return fraud head-on, ensuring that the Super Bowl and other seasonal periods of strong sales are not only a time of celebration for consumers but also a victory for retail security and integrity. It's essential for retailers to understand and anticipate these trends, not just for crafting more robust fraud prevention measures but also for optimizing inventory and sales strategies.
