At one point I worked for a retailer that had all sorts of shrink issues. Like, more than normal. They were losing money hand over fist! Almost to the point where the shrink issues alone were enough to shut the store down. Believe it or not, we discovered that the majority of the loss was coming from not only merchandise return fraud but by internal theft as well. My DLPM (District Loss Prevention Manager) wanted to focus on the meat of the issue up front, so we focused on running detailed exception reports for all associate activity involving all store transactions. We didn’t quite know where the loss was coming from but we had narrowed it down to transactions at the service desk.
In analyzing a combination of CCTV footage and exception reports, we were able to determine that a high volume of fraudulent merchandise returns were being instituted between two hourly associates. Both of which regularly worked the Customer Service Desk. What we discovered was that one associate would keep a duplicate copy of random customer receipts while on register and she would gather them all up at the end of the evening to examine them. We saw this behavior on camera using the store PTZ systems. It was apparent that she would ‘shop’ the receipts for high dollar merchandise that customers had purchase. When she was done picking the receipts she wanted, she would simply take the receipt home with her overnight.
The second associate involved in this particular case of return fraud, would be the one to actually initiate the transaction. However before I get more into this associate let me talk about the third player in this game: A family member of associate number two! The family member would come in and select particular items from the receipt that associate number one had provided to her prior. Usually the high dollar garment merchandise from the receipts. Items like boots, purses, leather coats and accessories.
That family member would then take the items from the shelves, put them into his cart and push them up to associate number two (who again, was his family member working at the service desk). From there associate number two would proceed to process a complete refund, uninterrupted by management and provide cash to the family member.
We observed the trio of subjects perform this very system multiple times during a course of three days. On day four, our DLPM consorted with store management and they decided to play a little game with the trio just to see their reaction. It was decided that the store would get in a supply of Alpha Shark Tags and initiate a tagging program of all garments. The Alpha Shark Tags work in conjunction with a good store return policy. It’s simple, if the tags are removed by the customer; they are not eligible for a full refund. This may greatly reduce the occurrence of people who intentionally plan to temporarily buy merchandise and return it later.
The next day all of the associates (including the two internal culprits) were briefly trained in the concept of using the tags on garments. Over the course of the next few days, all of the existing stock had been tagged and all of the inbound clothing was being tagged before rotation onto the sales floor. We had not yet made any apprehensions or interviews of the associates because we wanted to see the effectiveness of the tagging program in person. Day after day, we would observe associate number one and two conversing privately on CCTV. They would handle the Shark Tags during their conversations and it appeared that they were trying to work out a plan to get around them. Ultimately, they did not.
We let a couple of more days go by. No more return fraud was executed by the associates and the family member of this trio was never seen in the store afterwards. They simply couldn’t figure a way around the tagging program! They knew that if a Manager observed an associate processing a return for clothing that didn’t have a tag on them that they would be in hot water. So they ended their charade.
In short time, we did decide to pull in both associates to interview them. They admitted to the return fraud and were ultimately terminated and prosecuted. Both of them said frankly that it was too much to figure out so they abandoned the scheme. The tagging program also helped us with other external issues and also assisted in lowering the shrink numbers to a workable level.
To learn more about how Alpha Shark Tags can help prevent return fraud contact us or call 1-770-426-0547.