But the holiday season is long over and many retailers are still offering or even expanding generally liberal return policies. Yes, we are in the midst of an economic downturn so more and more storefronts are doing all they can to inspire consumer spending. Still, the questions arise: Are retailers fully aware of the tradeoffs and potential risks such policies entail? In particular, are they gathering customer data in an attempt to reduce fraud, but at the same time potentially exposing themselves to customer privacy breaches?
An array of challenges
When it comes to return policies and practices, retailers face a perplexing array of challenges. Certainly, there is no legal requirement for a retailer to accept returns of any nature. Instead, retailers proclaim and honor a set of return policies as a means of attracting and retaining customers.
Still, by accepting returns, retailers open themselves to all manner of fraud or abuse. For example, certain consumers may practice "wardrobing." That is, they buy designer shoes or a big screen television, use the goods for a weekend party or a month of sporting events, and then simply return the items for a full refund. Such goods at the very least represent a source of restocking costs but equally likely may create a total loss for the retailer.
From there the degree of abuse escalates to outright fraud or felony. One scenario is for employees to hold on to actual customer receipts, in turn handing them off to accomplices who can then return stolen goods for cash. Of course there are myriad variations on the theme. The important realization is that according to the , as much as 9 percent of returns involve fraud or abuse, costing the industry billions of dollars annually.