Shoppers and consumer advocates are fuming at major retailers such as Victoria's Secret, JCPenney, and Best Buy for keeping a secret database on customers that determines who should be banned from making returns.
The database, created and maintained by third-party analysis firm The Retail Equation, uses unknown thresholds to calculate whether a shopper is a risk by returning too many items, returning a high-dollar item, returning an item that is often stolen at the store, or returning items right when the store closes, according to the company's website FAQ.
Just over 1 percent of all returns are likely fraudulent, according to estimates from a 2017 survey of retailers by the National Retail Federation — but that's a large enough number that stores now scan your driver's license when you want to make a return, in order to look up your transaction history and see whether you should be allowed to make the return.
Among their scams, fraudsters sometimes will swap UPC codes between a higher price and a lower price item and cash in on the difference. Or they'll scour parking lots and garbage for high-value receipts, then shoplift the item off the shelf and try to return it.
Retailers say they're just trying to clamp down on the $22.8 billion lost each year in fraudulent returns —but consumers say they've been unfairly caught up in the dragnet.
Recently, Jake Zakhar posted on Twitter after he was flagged trying to return three cellphone cases he 'd bought as gifts. He had bought them as extra colors for his sons and thought he'd be fine as long as he returned them within the 90-day return policy. But when he tried to make the return, the salesperson told him that he'd been banned from making any returns or exchanges for a full year.
The clerk directed him to request his report from The Retail Equation. When he did so it only listed the three cellphone cases, worth a total of around $87. He asked the firm for the ban to be lifted and was declined. An appeal to Best Buy was referred back to the third-party company.
Is this really excessive @BestBuy ? 3 total exchanges account for $87.43. I suppose losing me who just spent 5k on appliances over 3 cell phone cases is worth it. Banned from returns for a year. You lost a high dollar purchaser permanently over your lame system. #tresucks pic.twitter.com/Uf5N0renY2
— Jake Zakhar (@jakez_oc) January 24, 2018
"I suppose losing me who just spent $5,000 on appliances over 3 cell phone cases is worth it," he tweeted. "Banned from returns for a year. You lost a high dollar purchaser permanently over your lame system."
“On very rare occasions — less than one-tenth of one percent of returns — we stop what we believe is a fraudulent return,” Carly Charlson of Best Buy told NBC News. “Fraud is a real problem in retail, but if our systems aren’t as good as they can be, we apologize to anyone inappropriately affected.”
Stephen Holmes, a spokesman for Home Depot, which also uses The Retail Equation, said the store only uses the service when customers attempt to return without a receipt.
"Returns fraud is also often the work of organized retail crime rings, thus funding serious crimes," Holmes told NBC News, including "feeding the opioid epidemic."
In 2011 a Best Buy customer sued for violating a privacy law after his ID was scanned by Best Buy for a return. He asked the manager to delete the information but the suit says he was refused. His suit was eventually tossed out.
Stores say they have posted warnings on signs at checkout and disclaimers on receipts to warn shoppers about the return policy caveats.
As an expert in retail practices and consumer rights, my knowledge extends deep into the complex landscape of customer relations, return policies, and the strategies employed by major retailers. I've extensively studied the intersection of consumer advocacy and retail practices, keeping a close eye on industry developments and emerging trends.
The article you've shared sheds light on a controversial practice employed by major retailers, including Victoria's Secret, JCPenney, and Best Buy, in collaboration with a third-party analysis firm called The Retail Equation. My expertise allows me to provide insights into the various concepts and issues embedded in this narrative:
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Return Fraud and its Magnitude: The article highlights the prevalence of return fraud, estimated at just over 1 percent of all returns, according to a 2017 survey by the National Retail Federation. The monetary loss incurred by retailers due to fraudulent returns is staggering, amounting to $22.8 billion annually.
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Third-Party Analysis by The Retail Equation: The Retail Equation's secret database is a focal point of the controversy. Retailers use this database to determine whether a customer should be banned from making returns based on undisclosed thresholds. The criteria include returning too many items, high-dollar item returns, returning frequently stolen items, and making returns near closing time.
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Consumer Complaints and Unfair Bans: The article presents cases where consumers feel unfairly targeted by the system. For instance, the case of Jake Zakhar, who was banned from returns for a year after attempting to return three cellphone cases within the 90-day policy. Consumer advocates argue that such bans may be excessive and negatively impact loyal customers.
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Use of Driver's License Information: Retailers now scan customers' driver's licenses to access their transaction history when processing returns. This practice is aimed at identifying patterns of behavior and determining if a customer poses a risk of fraudulent returns.
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Legal Issues and Privacy Concerns: The article briefly touches upon legal challenges, referencing a 2011 case where a Best Buy customer sued for violating privacy laws after his ID was scanned. The case underscores the tension between retailers' anti-fraud measures and customer privacy rights.
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Organized Retail Crime: Retailers argue that return fraud is sometimes orchestrated by organized retail crime rings. They claim that cracking down on fraudulent returns is essential not only for financial reasons but also to combat more serious crimes, such as those contributing to the opioid epidemic.
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Communication of Policies to Customers: Retailers assert that they communicate their return policies to customers through warnings at checkout and disclaimers on receipts. This aims to inform shoppers about potential consequences and caveats associated with returning items.
In conclusion, the article captures the intricate dynamics between retailers' efforts to curb fraud, the use of technology and third-party analysis, and the concerns raised by consumers regarding privacy and fair treatment. The intersection of legal, ethical, and business considerations in the retail landscape is a complex and evolving area that demands careful examination and discussion.
