Friday, December 26, 2014

With Christmas Over, Millions of Gift Returns Begin

At the Wall Street Journal, "Purchases Boomerang Back to Retailers, Costing Them Dearly; Returns Are a ‘Dirty Business’":
The holidays may be over, but returns season is just getting started.

Ill-fitting sweaters, the wrong Frozen doll and unwanted accessories will be heading back to U.S. retailers, many in the same boxes they came in.

More than 20% of returns happen during the holiday season—about $60 billion in merchandise, according to Optoro, a logistics provider.

The U.S. Postal Service handled 3.2 million returns in the two weeks that followed last Christmas and said there will be even more this year. United Parcel Service Inc. expects to handle four million returns the first full week of January, up 15% from two years ago as online sales continue to grow.

“Returns in the e-commerce segment are a more important issue than they are in the typical retail channel, representing a larger percentage of overall sales,” said Mike Glenn, president and CEO of FedEx Corporate Services, on a recent call with analysts.

FedEx Corp. said it doesn’t provide projections.

Returns may be a boon for delivery companies, but they are a costly for retailers. Best Buy Co. estimates that returns, replacements and damaged goods represent about 10% of revenue and for the year cost the electronics retailer $400 million. The chain is trying to reduce those losses by selling more so-called open-box inventory online and at its stores around the country. Hudson’s Bay Co. , which owns Saks Fifth Avenue and Lord & Taylor, has tried to encourage customers to return products to its stores, so it can try to land another sale in the process.

“Returns—it is just a dirty business,” said Fred Poore, chief executive of logistics platform CommerceHub, which connects manufacturers with major retailers to fill online orders.

And at the Los Angeles Times, "Big discounts, crowds, return fraud expected with post-Christmas sales":
Retailers girded themselves for the second busiest shopping day of the year, but the day after Christmas is also known for something less beneficial to the bottom line: hordes of returns.

Americans were expected to throng stores to give back unwanted holiday gifts, hoping to exchange the duds for cash, gift cards, store credit or other products.

The crowds will be intensified by deep, inventory-clearing discounts meant to lure shoppers and encourage returners to stay in stores...

The crowds at some stores, however, will likely encourage criminals to try their luck, according to experts.

Return fraud is expected to cost retailers $3.6 billion this holiday season, up from $3.4 billion last year and $2.9 billion in 2012, according to the National Retail Federation.

Over the full year, the practice costs companies nearly $11 billion.

This winter, one in every 20 returns is dubious, according to the trade group – a hefty figure considering that the average person returned nearly four gifts last year.

Several strategies are common. Perpetrators purchase items at a discount online or in a store and then return it at a competing retailer’s brick-and-mortar store for full value.

More retailers are allowing consumers to return merchandise in person that was bought on the Internet, according to the National Retail Federation. But more – 18.2% this year compared with 15.5% last year – are also saying that they have endured return fraud with e-receipts.

Some 3.5% of online purchases returned to stores are fraudulent, according to the group.

Other fraud perpetrators recruit store associates, using their employee discounts to score a deal on the product before returning it for the original price. More than eight in 10 companies said they have been victims of employee collusion.

Some use counterfeit receipts – a practice reported by a quarter of retailers. Others buy electronics, take out the valuable components inside, refill the hollowed-out technology with weights and then return it in the original packaging.

The switch is an offshoot of a common tactic known as wardrobing, in which customers return clothing that they have already worn. This year, nearly three-quarters of retailers said they fell victim to the strategy, up from 62% last year.

For the most part, retail experts don’t suspect average consumers. Instead, they finger organized retail crime groups, which tend to steal merchandise en masse and then resell it.

Such groups cost retailers nearly $30 billion a year, according to the trade group. Criminals are most active in Los Angeles, followed by Miami and then Chicago.

The National Retail Federation surveyed loss-prevention executives at 60 retailers – nearly 93% of respondents said their companies experienced returns of stolen merchandise in the past year.

“These knuckleheads know when to come in – they practice this and they’re good at it,” said Bob Moraca, vice president of loss prevention for the National Retail Federation.