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How To Avoid Common Post-Holiday Return and Refund Scams

For better or worse, the holiday sales season doesn’t end with Christmas Day. The week after Christmas is a hotbed for post-holiday sales. It is also the biggest period for retail returns of the year, with an estimated 25% of all retail returns each year happening in the week after Christmas.

While this can be a boon for retailers--customers could always choose a more expensive replacement or buy something that didn’t make it under the tree--it also opens up businesses to a particularly savvy type of criminal: the return scam artist.

The holiday season includes a heightened vulnerability--let’s go through a list of common return and refund scams.

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Retail Return Scam #1: Shoplifting with a receipt

“Shoplifting” conjures images of criminals slipping small items into their coat, but the modern shoplifter is more savvy. The purpose of shoplifting with receipts isn’t just to acquire product, it’s to acquire cash or store credit as well.

Here’s how it works:

  1. An item is purchased, often with a stolen or otherwise invalid credit card
  2. The item is stored somewhere, like the suspect’s car
  3. Suspect returns to the store and takes an identical item off the shelf
  4. Using the receipt of the original purchase, the suspect does a return on the item they just picked up off the shelf

Now our thief not only has a brand new product, but also the cash or store credit value of the item they “returned”.

Receipt fraud doesn’t end there. Certain nefarious websites provide printable templates for the receipts of major retailers, allowing thieves to print out custom-made receipts for items, take that item off the shelf, and return something to a store that store hasn’t even sold yet!

Lady With Shopping Bags

Retail Return Scam #2: Internal Retail Fraud

Time for a Solink success story featuring our audit and investigations manager, Herbert Melendez. The owner of a popular ice cream shop in Chicago flagged an ice cream cake return as being suspicious. On reviewing the footage from the store’s camera system, it was discovered this return was done with no receipt and with no customer present. Herb was able to search through all the returns and discovered that one manager was responsible for many of these “no customer, no receipt” returns. In the space of just over two months, this manager pocketed over $300 from these fraudulent returns.

This betrayal by a trusted employee, in a position of power, is every owner’s worst nightmare. Luckily, our system was able to catch the perpetrator before he did any more damage.

Customer Returning Product

Retail Return Scam #3: Professional Refund Fraud

Many of the above examples, despite the revenue loss involved, are relatively what we in the security business call “small potatoes.” While still damaging to a business, many of these scams result in little reward to the perpetrator--a few hundred bucks here, the thrill of “sticking it to the man” there.

But what happens when scammers go pro?

In this story from 2004, two couples were arrested for scamming Wal-Mart stores in 19 US states to the tune of $1.5 million. The scheme was simple, though it required a bit of technological investment: using a UPC barcode printer, the couples printed the barcodes for cheap items on sticker paper and pasted them over the real barcodes on items in-store. They would then purchase the items for cheap, turn around and return them for gift cards in much the same method detailed above. The scammers would pull this trick during busy times when the price discrepancies wouldn’t be noticed.

How Solink Helps 1
An astute manager with access to Solink would have been able to identify this right away, as well as search easily for all similar transactions. If these two couples had scammed this store multiple times, it would have been easy to find each instance, then save and share video clips of the offending transactions with the police.

Fighting refund scams isn't as hard as you think

Being aware of your own vulnerabilities and trends in shoplifting is key, so staff can recognise and anticipate problems before they start. Stay on top of sites like The Balance Small Business and Canadian Security Magazine to stay up-to-date on new scams.

Know what to look for.

Does one employee take in more returns than anyone else? Is one manager always signing off on no-receipt returns? An increase in refunds in general is cause for alarm, as word can get out that a certain store is an easy “mark” and become a target for thieves.

Overhaul your return policy.

Require a receipt for returns over a certain dollar amount. Make ID a requirement for returns. Some electronics retailers have a restocking fee for returned items over a certain dollar amount. The trick is making sure the new return policy doesn’t alienate honest customers! 99% of returns are legitimate and customers will expect fast, courteous service--no one wants the experience of returning a TV to feel like going through Customs.

Stop return fraud in its tracks with Solink!

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