Beware Growing Retail Fraud
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Abuse of Promotions
As the "new frugality" becomes a consumer trait, coupon fraud is getting worse.
"The competitive landscape where retailers are offering deals to distinguish themselves has led to an increase in coupon usage, while any kid with a scanner and color printer can create a replica with relative ease," says Joe LaRocca, senior asset protection advisor at the National Retail Federation of Washington, D.C.
But there are practices to keep fraudulent coupons at bay:
Be unique. Incorporate special papers and embedding codes, use particular watermarks, or create other hard-to-replicate markings or features into your coupon, LaRocca says. Work with the agency, medium or printer producing your coupons to ensure you're taking all security precautions.
Be clear. Coupons should have clear expiration dates and disclaimers limiting their validity with other offers or promotions. This prevents too deep a cut into your margins. Develop a standard disclaimer that protects you and be sure to include it on all of your price promotions. Changing or creating new disclaimers opens up an opportunity for a provision to slip through the cracks.
Be wary. Your staff should be trained to spot coupon expiration dates and signs of duplication--such as fuzzy print quality, smeared printing--or tampering. If coupons were printed in a specific medium, keep a copy at the register and check the back of the version presented to be sure both sides match. Encourage staff members to involve a manager, owner or supervisor if there is any question about a coupon's validity.
Be open (to a degree). For some, counterfeit coupons are the price promotion equivalent of the more, the merrier. If you don't care who uses your coupons, as long as a sale is made, you may not need to worry about preventing duplication, LaRocca says. But it's still a good idea to limit any coupon's validity to specific time periods in case you change your mind, he says.
Coupon fraud may not result in the deep losses that shoplifting and return fraud create, he says, but it can significantly cut into a small retailer's profits. Be warned.
Abuse of Policies
Jennifer Saunders considers her store "the end of the line" for merchandise. The Bargain Bin, an overstock retail store in Norwalk, Ohio, has a clear return policy: If the item is broken, return it within 14 days for a refund. If you just don't like it, return it within two weeks for store credit.
Still, she finds that some people try to game the system. "We have people who say a microwave is broken when it isn't just to get their money back," she says.
That's mild compared with some of the things Read Hayes, director of the Loss Prevention Research Council in Gainesville, Fla., describes--such as big-screen televisions purchased in time for the Super Bowl, then returned after the game, or fraudsters brazenly shoplifting items and then trying to return them. But retailers, aside from posting clear return policies, can take other steps to prevent return fraud:
Check for proof. Saunders requires a receipt for returns. But fraudsters are clever. Hayes advises retailers to avoid throwing receipts in the trash, where they can be snatched and used to try to return stolen goods. This also prevents someone from buying an item on the cheap elsewhere and then trying to return it for the full price at your location, he says.
Check for tampering. People making fraudulent returns may have switched tags on an item, trying to return it for a higher price, he says. The National Retail Federation found that in 2009, more than three-quarters of retailers surveyed had returns that were originally purchased with fraudulent or stolen tender, like credit cards. Use your point-of-sale program to ensure that there were no issues with the item's payment.
Check for lying. When a customer claims an item is broken, Saunders checks it on the spot. If it's not broken, she'll give store credit only if the item is returned within the two-week return period. Hayes says retailers also should confirm the customer's information by checking identification and filling out a return form. And while it may seem obvious, staff members should check that the store actually carries the merchandise.
"A customer may try to return a four-pack of razors to a store that only carries six-packs," he says. "It's a small difference, but you may be accepting merchandise you don't even carry if you're not careful."
Also, employee collusion in return fraud is common, says Hayes, who advises that a manager or store owner approve all returns.