’Tis the Season of Returns

How can a retailer know if a “returns” customer is the good, the bad or the just plain ugly?

As hard as it may be to accept in this month when stores are bombarded with returns, there are good customers who return items.

For example, I recently returned a window shade to Target. I had the receipt, the package had never been opened and the purchase had been made within the week. The Target associate politely offered me cash or a credit to the payment card used for the purchase.

Also last month, I returned a pair of shorts to Dillard’s that had been purchased in May for my son. He brought them home from college at Thanksgiving, tags intact, with the explanation that they didn’t fit but he’d forgotten to return them.

Seven months after the purchase and with no sales receipt, I approached the Dillard’s sales clerk with considerable hesitation. No problem. Dillard’s identifies sold items with a yellow tag imprinted with a barcode. Scanning that barcode provides Dillard’s with the necessary data to process a return.

In both cases, I consider myself to be a good returns customer—not because of the circumstances surrounding the transactions, but because I am a loyal, frequent shopper at both retailers. However, neither has any information that tells them I make more purchases than returns at their stores.

That would be the definition of a good returns customer: one who spends more than they return.

The “bad” returns customer has received considerable press in recent years. These are the fraudulent returners, who out-smart the retailer’s system, making money on the exchange or leaving the store with items never paid for.

The National Retail Federation’s (NRF’s) Return Fraud Survey, conducted in October, revealed that loss-prevention executives anticipated 8.93% of holiday returns will be fraudulent, comparable to the 8.67% of holiday returns that were fraudulent last year. NRF also predicted return fraud will cost retailers an estimated $3.7 billion this holiday season, up from $3.5 billion last year, and total 2007 retail losses from return fraud will likely hit $10.8 billion.

Fraudulent practices include the return of stolen merchandise, which NRF reported had occurred within the last year at 92% of those surveyed. Similarly, retailers are duped by counterfeit receipts and by returns that were purchased with stolen tender.

Additionally, the return of used merchandise, “wardrobing,” is on the rise. The NRF survey noted that 66.1% had been victims of wardrobers in the past year—up from 56% in 2006.

If customers who make fraudulent or unethical returns fall into the bad category, who are the ugly returners?

In my book, an ugly returns customer is one who habitually costs the retailer money. Not to be confused with a newcomer to your store, who might be returning a gift, or even a previous customer, who realized the purchase was not what they wanted—these returners are customer-service opportunities waiting to happen.

Rather, the ugly returns customer is the one who routinely returns the majority, if not all, of her purchases.

A good returns resolution for 2008 would be to accept that not all customers are always right—and developing a way to distinguish between the good, the bad and the ugly should be a priority.