Many Unhappy Returns

Retailers are using technology to identify and crack down on people who bring things back too often.

December 26, 2004|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

Debra Hollenshade thought she had a simple answer when her goddaughter Jenna declared the corduroy miniskirt she'd gotten her as a birthday present from Abercrombie & Fitch Co. was too short to wear to school.

Just return it, Hollenshade told the 13-year-old.

But because Jenna didn't have a receipt, she said, the store wouldn't allow her even to make an exchange. Instead, she had to call Abercrombie headquarters in New Albany, Ohio, which in turn sent her a label for mailing the skirt back. Seven weeks and many headaches after her birthday, Jenna got a check in the mail for the price of the skirt.

"What they're basically saying is everybody steals," Hollenshade said. "We're the ones shoveling out all this money into their stores, and they're calling our kids criminals."

Estimates are that one in five shoppers will crowd malls and discount stores today to begin cashing in gift cards and to return or exchange that too-big sweater or other gift that just didn't meet their tastes. They'll be met with more scrutiny than ever as retailers crack down on returns.

Faced with a rise in fraud that cost retailers $16 billion last year, and trying to increase profit margins at every turn as a saturated industry has made it harder to keep loyal customers, retailers are becoming less forgiving of the merchandise their customers return and tightening exchange and refund policies.

Merchants, including clothiers Express LLC and Guess? Inc., office supplier Staples Inc., Sports Authority Inc., KB Toys Inc. and Best Buy Co. Inc., are asking for photo identification, refusing returns without receipts or making customers contact distant headquarters for approval. They're charging hefty restock fees of as much as 15 percent and using new technology to track so-called "serial returners," people who have an extreme pattern of bringing back merchandise.

The retailers defend the moves and contend some consumers have forced their hand. Some people buy an item and then return it after wearing - a ploy the industry calls "wardrobing." Others stroll into a store, snatch something off the racks, yank off the tags and then try to return it as if they'd bought it. Retail fraud has jumped 23 percent in 2004, compared with last year, according to some estimates.

"Like any business, they're looking for ways to increase their margins and reduce their costs, and looking at refunds seems to be the way to do that now," said Jonathan Dampier, vice president of marketing for Newgistics Inc., an Austin, Texas, company that advises 32 retailers, including J. Crew and Neiman Marcus, on return strategies. "Refund fraud can be very costly."

But critics of the more aggressive return policies, and even Dampier, say retailers run the risk of alienating loyal customers while they try to weed out the others. A recent survey by Newgistics and Harris Interactive Inc. found that 85 percent of shoppers said they were likely not to shop at a retailer again if their return process was inconvenient.

Heidi Shoemaker doesn't plan to stop shopping at Express anytime soon, but she said she was surprised and a little bothered when they asked for her driver's license when she exchanged a shirt for a different color at Towson Town Center last week. She said they also had her fill out a form with her name, address and other information.

"It was a little weird," said the college student, off for winter break from the College of Notre Dame of Maryland. "I don't know why they needed so much information. It was a little invasive."

Express uses technology developed by Irvine, Calif.-based the Return Exchange to process its returns. With the technology, called Verify-1, a cashier swipes a driver's license or other government-issued identification card and keys in other information, such as product codes on a receipt. The information is compared against a database that includes variables such as frequency of returns and the cost of returns, to determine any pattern of fraudulent behavior and return the information in an instant to the cashier.

The men's and women's clothing retailer began using the system as a customer service tool intended to speed the return process, said Anthony Hebron, a spokesman for Limited Brands Inc., parent company of Express as well as Victoria's Secret and Bath & Body Works. Hebron also acknowledged that one of the benefits of the system is to catch those who cheat the return system.

Hebron said using the technology makes denials of returns less arbitrary. Previously, it was up to the discretion of a manager or other store personnel. He also contended that the system could help prevent identity theft.

"Overall, at least what we've found from some of our informal polling, it's a more secure, speedier process," Hebron said.

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