Return fraud statistics have been up and down over the past few years, with the most common types of return fraud fluctuating and retailers’ changing return policies in an attempt to stalemate losses. This phenomenon is due in part to emerging technologies that open windows of opportunities for criminals to perpetrate new kinds of return fraud. It is also due in part to criminals altering their tactics in response to retailers’ changing return policies. Regardless of the reason, return fraud presents an enormous challenge to retailers, with an estimated $3.48 billion in resulting losses projected for the 2011 holiday, according to the National Retail Federation’s annual survey.
Procedural review audits (PRAs) are an effective tool for systematically combating return fraud and ensuring that fraud-prevention processes and policies are not only in place, but consistently followed. PRAs can also help LP professionals structure their thinking around potential windows of opportunity that have been introduced by the use of new technologies.
Procedural Review Audits Prevent Return Fraud on Multiple Levels
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How can you use procedural review audits to ensure your return processes and policies are well-secured against fraud?
Identify inconsistencies in return policy practices. If not consistently implemented, policies are rendered useless. Retailers rely on all customer service associates to correctly and consistently implement their return policies, which are designed to make it difficult to commit return fraud. Whether it’s asking the customer for identification, requiring a receipt, or only refunding merchandise purchased within the last 30 days, PRAs can help identify gaps in return policies, recurring problems, and trends across stores so corrective action can be taken.
Update your thinking. As technologies change, PRAs can be extremely valuable in helping the LP team to identify potential problems from one year to the next. The PRA encourages LP professionals to think through a few key questions, such as: Are any new technologies being used this year?; Perhaps your organization has started offering electronic receipts; Or have changes been made to the return policy that might cause return fraud to fluctuate?; Are there any new associates who need to be trained on return policies? By thinking through these kinds of questions before the holidays, LP can get a better idea of what they will be up against.
Combat Holiday Return Exposure. Professional criminals and even some amateurs know that retailers tend to relax their return policies during the busy post-holiday return rush. Retailers should understand that there is a cost to relaxing protocol in exchange for speed of processing returns. Resist the urge to bypass your solid procedures and utilize PRAs to stay on point and close the gaps that criminals use to exploit your valuable profits during this busy holiday season.
Fight fire with fire. Some technology is used by criminals to perpetrate more fraud, but you can also use technology to combat it. Today’s technology is capable of linking transactions and providing a history on the customer. So if a suspicious return is made, it should be documented in the system so that the next time, you have an opportunity to build a case or investigate a potential repeat offender. PRAs can help ensure that associates track that valuable information to prevent fraud in the future.
With a few simple and effective PRAs in place, retailers can unwrap some new secrets to help them prevent return fraud during the holiday season and throughout the upcoming year.
Andrew Wren serves as chief executive officer of Wren Solutions, a loss-prevention technology provider helping leading retailers reduce loss and increase profits. Wren is responsible for corporate and product strategy, leveraging his more than two decades of security technology expertise. To learn more about Wren’s solutions, visit www.wrensolutions.com.