Not-So-Happy Returns

Some Retailers Tighten Their Policies to Avoid Fraud, Theft

Stores are expecting nearly 9 percent of holiday purchases to be returned, according to the National Retail Federation. (By Brendan Smialowski -- Getty Images)

Today, everything is twinkling Christmas lights and shiny packages under the tree. We thank Aunt Ida and assure her that we love the cable-knit reindeer sweater and matching socks. Today, we actually believe it is the thought that counts.

Tomorrow, reality will set in. Tomorrow, we shall return.

Stores are expecting nearly 9 percent of holiday purchases to be returned, according to a recent survey by the National Retail Federation, compared with an annual rate of about 7 percent. Many retailers plan to assign staff to do nothing but handle returns tomorrow and will set up special lines to handle customers with their bags of unwanted gifts.

"Retailers know that returns are part of doing business," said Dan Butler, vice president of merchandising and retail operations for NRF. "They plan for it."

But the return is, nevertheless, "one of the most difficult parts of the business," said Paco Underhill, a retail anthropologist and author of "Why We Buy: The Science of Shopping."

It's hard on both parties involved. Stores have to take back unwanted or defective merchandise that often cannot be resold at full price. They also must balance their desire to keep customers happy with the possibility of the return being a ruse by increasingly active retail-crime gangs. Consumers, meanwhile, have a time-consuming trip to the store for a transaction that is often an emotional minefield of guilt or disappointment.

From the retail point of view, at least, things weren't always this way. Caveat emptor -- buyer beware -- was the rule, and customers bore the burden of ensuring that the products they bought were desirable and functional.

Not until Marshall Field founded his famed namesake department store in Chicago in the 1880s did that mind-set begin to change. "Give the lady what she wants" was his motto. And one thing the lady wanted was the ability to refund or exchange purchases that were flawed or didn't meet her needs, no questions asked.

The concept sparked a revolution. Soon, other retailers began to adopt it, and the liberal return policy that American consumers have taken for granted for most of the 20th century was born.

Recently, however, the pendulum has begun swinging in the other direction as retailers have started tallying their losses from less-than-scrupulous shoppers taking advantage of those policies. The industry expects stores to lose $3.5 billion in "return fraud" this holiday season.

Butler said some shoppers are "wardrobing" themselves, purchasing items for one-time use -- say, prom night or the company holiday party -- then returning them. Others bring back stolen merchandise without a receipt and pocket the refund.

More worrisome is the arrival of gangs targeting stores on a large scale. Butler told of one strike a few years ago in which one thief scanned a valid receipt for $500 in store credit from a national retailing chain into his computer and digitally altered the amount to $1,200. Gang members printed copies and presented them in 16 stores across 12 states within an hour of one another. In response, many retailers changed their return policies. This season, about a quarter told the NRF they are becoming more stringent, particularly for customers without receipts.