Retailers facing increased losses due to schemes, thefts and dishonest workers www.privateofficer.com
Charlotte NC Jan 25 2011 Return fraud and abuse is estimated to cost retailers between $9.6 and $14.8 billion annually. This growing problem has retailers scrambling for a way to reduce fraudulent activity without compromising customer service and impacting honest customers.
During a Webinar hosted by the National Retail Federation and sponsored by The Retail Equation, a provider of return authorization solutions, two major retailers discussed how they reduced fraudulent returns and the benefits of doing so.
Bill Napier, senior manager, corporate asset protection for Cabela’s, said the retailer had to revamp its return policy in order to reduce costly fraudulent activity. “Cabela’s historically had a very lenient return policy, but there were many data points that caused us to think about examining our exposures on returns,” said Napier. However, in changing its policy, the retailer knew it didn’t want to impact customer service. “We knew only a small percentage of people were harming a large pool of customers and we knew we needed to make a change; it was the smart business thing to do, but the challenges was that we couldn’t negatively impact our good customers.”
The company started by issuing warnings to customers who were identified as engaging in potential fraudulent activity. “We were pleased to see warnings, not hard denials, worked. We issued warnings to let them know these returns are problematic and not acceptable in the future,” he said.
As a result, Cabela’s reduced its returns by 10.8 percent and continues to see a consistent decrease, he said.
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Implementing this new policy meant the company had to change its front-end processes, but Napier said that it improved the company’s customer service and further engaged its cashiers in the process. “The ah-ha moment went beyond returns and it actually enhanced our front-of-sales process and it was a multi-pronged approach that was greater than returns,” he said.
After making these changes, Napier said one of the keys was being deliberate and taking the time to properly implement a new program, but it was also important to establish sharp timelines. Cabela’s also hired a project manager who was assigned to the program, which also aided in speeding up the process.
John Clark, director of asset protection with Sports Authority, said that managing return fraud was a major priority in its 450 stores, which operate in 45 states. One of the most significant motivating factors was because of inflated inventory numbers, he said.
Implementing a return management system also helped Sports Authority improve quality control standards and identify products that are regularly returned, he said. “This provides insight into problematic product lines to ensure customer satisfaction and vendor accountability,” he said.
Establishing a controlled environment for the return process for both the associate and customer meant loss prevention professionals would be immediately notified if deviations occurred. “If a customer complains about something we have immediate insight into that and addressing concerns is key for store operations and inventory control and accounting,” he said.
The Sports Authority has reduced its return rate by more than $101 million since 2006, said Clark.