On the day before the Super Bowl, a man purchases a big-screen television and returns it for a refund two days later with a convenient excuse. Across town, a penny-pinching wedding planner pulls a similar trick with a video camera, while a woman with a hot date tries a similar tactic with an expensive dress.
Returns fraud and abuse is a $15.5 billion dollar-a-year problem in the United States alone, according to research by The Retail Equation, a technology company that makes a sophisticated tool to help retailers fight the abuse. But the problem is, that tool appears to be alienating many shoppers.
The TRE Verify-1 Return Authorization System is a massive database of shopper behavior, tracked at the point-of-sale to "identify the 1 percent of customers whose behaviors mimic return fraud or abuse," according to the company's FAQ. In practical terms, this means that a customer that wants to return a product must first hand over his driver's license or other qualifying ID card, which is then scanned and compared against the database.
While the company wouldn't disclose the names of its clients or the number of stores the Verify-1 solution is in, its Web site's FAQ does state that "it's likely that every mall in the United States has at least one store utilizing the Verify-1 software."
For retailers, the question becomes whether such a requirement is a good idea, especially in an era of identity theft paranoia.
"I think it is a huge invasion of privacy and I personally get very defensive when asked for photo ID," said Lila Delilah, who runs the popular retail blog Madison Avenue Spy. "After a while, however, it becomes less shocking and you know when to expect it. The downside is that I think twice about shopping at a store like Victoria's Secret because I may not want to go through the ID ordeal if I need to make a return."
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But is it really an "ordeal" to provide identification when making a return to a store? The answer will certainly vary from one shopper to the next, but some shoppers will definitely hate the experience.
Count Cindy Smith among that number. She took a product back to a store within the allotted timeframe for returns, with a full receipt for her cash purchase and with the tags still on the merchandise. When the clerk told her she would need to provide ID, Cindy "got miffed and let the clerk know about it," but was still informed that if she wanted her refund, the driver's license scan was mandatory.
"I (vote) with my wallet," she said. "I don't shop at that store any longer."
But according to Tom Rittman, vice president of marketing for The Retail Equation, a tough economy means tighter return policies are inevitable, and having across-the-board, codified policies and an automated system ultimately will improve the customer's experience.
"Verify-1 allows retailers to provide their customers with a fair and balanced return process that uses an automated system, with unbiased decision making, often allowing more flexible, lenient and customer-friendly policies," he said. "This removes the need for a blanket policy — like no receipt no return, or a 14-day return limit — which could impact all of a retailer's customers, versus the small percent of transactions that pose a risk."
Rittman also pointed out that the solution improves the process for legitimate returns by speeding it up, capturing data more accurately and providing consistency in the application of return policies. He said the company also works with retailers to make sure return policies are clearly posted throughout the store, so that shoppers know before they make a purchase what will be expected of them if they need to return it.
And as for the privacy concern: Noted security and identity protection expert Robert Siciliano says that people need to weigh the cost against the benefit and understand that things change.
"If you want to participate in society, prepare to give up some privacy," he said. "In a society set up on the honor system, where there are unfortunately far too many wolves feeding on the sheep, B2B and B2C (companies) need to protect their interests. Security, unfortunately, is one guy trying to blow himself up using his shoe, and (now) we all need to take our shoes off at the airport."
