In the fall of 2008, the National Retail Federation (NRF) released results of their third annual “Return Fraud Survey” .  There were some very interesting facts to be learned from this survey:

receipt-tape

” According to the survey, return fraud continues to plague the industry and will cost retailers an estimated $3.54 billion this holiday season, down slightly from $3.6 billion last year. (Retailers will lose $11.8 billion to return fraud in 2008.) However, retailers seem to be tackling the problem, as return fraud is expected to decrease to 7.5 percent of holiday returns from 8.9 percent last year.

Though retailers seem to be confronting return fraud, incidents continue to permeate through most retail stores. According to the survey, most retailers (88.9%) have had stolen merchandise returned to stores within the past year. Retailers also report being victimized by returns of merchandise originally purchased with fraudulent or stolen tender (74.1%) and returns using counterfeit receipts (45.7%).” (Source – NRF “Third Annual Return Fraud Survey”)

Truly alarming is the revelation that 89% of retail stores surveyed have experienced return receipt fraud.  And -  total losses from return fraud in 2008 exceeded $11 Billion!

These staggering numbers have led Loss Prevention professionals to extreme measures in their efforts to combat the fraud. Some companies have their LP agents “dumpster diving” to pull receipts out of the trash cans in the store parking lot.  Others have tried bar-coding of receipts to ensure that the same receipt is not used multiple times to return the same product (only to discover that this occasionally led to the real customer being unable to return the product).

Another interesting fact from the survey was the high incidence of return fraud involving goods that were originally purchased using counterfeit tender (e.g. – fake currency, skimmed credit cards, forged gift-checks).  Three quarters of retail store respondents reported this experience.  This highlights a common theme in counterfeit crime: the need to “launder” forged instruments.  By purchasing goods with counterfeit tender, the perpetrator is able to return the goods purchased, and in the process, realize a 100% conversion of their counterfeit currency.  Criminals are, in effect, using retailers as a money-laundering service.

Finally, a third interesting fact from the survey was that nearly 50% of retailers had experienced return fraud where the perpetrator used a forged or counterfeit receipt.  Retailers can address this issue easily by utilizing register receipt paper containing verifiable security features.  This will be the topic of an upcoming article on this blog, so please stay tuned and visit often!