When most people hear the term "retail security," they automatically think of theft, people physically stealing items from the store. While that is not wholly inaccurate, return fraud is also among the most common and devastating types of robbery in the retail industry.
Return fraud usually occurs when an individual tries to exchange a stolen item for cash, uses a counterfeit receipt or attempts to get money back when a product is not damaged or malfunctioning in any way. According to a new study by the National Retail Federation, the industry will lose around $8.9 billion in revenue this year due to return fraud, with $2.9 billion in losses taking place solely during the holiday season. This means that more than 4 percent of all returns during the holiday season are scams.
"Even more troubling is the fact that innocent consumers often suffer because companies have to look for ways to prevent and detect all types of crime and fraud in their stores, oftentimes resorting to shorter return windows and limitations on the types of products that can be returned," said Rich Mellor, vice president of loss prevention at the NRF.
The survey polled 60 executives at varying retail organizations and found that more than 96 percent of respondents lost revenue last year because of fraudulent returns on stolen items. Another 64 percent said their company fell victim to wardrobing – the return of non-defective merchandise – last year, while 45 percent said criminals provided fake receipts to get money back.
"Return fraud in any form is a serious threat, and we know that retailers have made significant strides in their fight against retail crime, and are continuing their efforts working with law enforcement to address this multi-billion dollar problem," Mellor said.
Fighting fire with fire
Although being more vigilant in the returns department will likely reduce the chance of fraud taking place, retailers need to be proactive in preventing theft from even taking place. To do so, organizations should consider using an advanced integrated security system complete with next-generation alarms and gadgets.
Physical security solutions are no joke; they really work. This was highlighted in a study by University of Florida, which revealed the use of surveillance cameras and other tools reduced theft as a percentage of revenue by 1.41 percent – the equivalent of roughly $2.6 billion in savings.
"The decrease in retail theft can be a direct result of the widespread investment in technologies and integrated solutions by retailers," security expert Michael Creedon said. "Clearly security solutions are proving to be a solid investment and have saved retailers billions of dollars in losses every year. There are a number of technologies and services available today that can help retailers continue to prevent theft, decrease shrinkage and track merchandise effectively."
In addition to video surveillance cameras, retailers should consider using access control systems to prevent internal theft and product tracking and monitoring tools to ensure nothing is stolen out of sight.
The holiday season is quickly approaching, meaning retail decision-makers need to put on their game faces. By eliminating theft and being more adamant about a strict return policy, businesses may be able to spread some holiday joy without experiencing unnecessary losses in revenue.
An integrated security system can combine several of the most innovative tools together, giving retailers a leg up over criminals.