Not to be overlooked, when the technology issues an alert, retailers need to have clearly defined practices. Make sure the data is accurate--few scenarios are worse than accusing an innocent customer of fraud or abuse. Next, it is critical all front line retail personnel have clear instructions on what to say or not say to customers and when to engage the next level of floor management.

Eyes wide open

Less stringent return policies may stimulate sales. At the same time, they invite fraud and related abuses to say nothing of higher restocking costs. By all means, balance potentially higher sales against these potentially higher costs. However, if your firm chooses to collect customer data at the point of return, be certain you are addressing the full range of relevant customer privacy risks.

Editor's note: The views expressed herein are those of the author and do not necessarily reflect the views of .

Sagi Leizerov, Ph.D., works for Ernst & Young LLP.