How can luxury retailers combat return fraud?

Luxury Daily – The growing popularity of cross-channel returns is creating more complexity for retailers, opening the door to greater fraud risk.

According to the National Retail Federation’s 2018 Organized Retail Crime Survey, while retailers expect less of their returns to be fraudulent this year, three in 10 anticipate fraud rising among purchases made online and returned to stores. From returns of stolen goods to wardrobing, fraudulent returns represent billions in losses for retailers, but companies can combat scams with heightened training and technology.

“Fraudulent returns can significantly erode the margins of luxury retailers, as there is a high price for each returned item,” said Ken Morris, principal at Boston Retail Partners, retail consulting firm. “Fraudulent returns are executed in several ways: returning clothes worn for a special occasion with no intention of keeping, returning items purchased at another store, fake receipts, found receipts and the list goes on.

“Retailers can guard against many of these tactics with proper controls and policies,” he said. “The key to guarding against fraudulent returns is to validate that the specific item returned was actually purchased by the customer.

“Serialized inventory is common for electronic products but hasn’t been adopted by luxury fashion retailers. With each individual product identified with a unique serial number that is embedded in the product and recorded on the transaction log and receipt, retailers can reference the serial number on returned items and confirm the customer that purchased the item.”

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