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Speaker Panel
Dr. Read Hayes – Director, Loss Prevention Research Council
Libby Rabun – Vice President, Loss Prevention, AutoZone
Kevin Darnell – Director, Loss Prevention, Brown Shoe
Mark Hilinski – EVP, Strategic Accounts, The Retail Equation
Interactive Question Placeholder
Q1: What retail segment are you?
1. Large format/ Discount/Department
2. Grocery/Drug3. Home
Center/Hardware4. Specialty/Apparel5. Other
Q2: What is your return rate percentage?
1. 0-5 2. 6-10 3. 11-15 4. 16+ 5. Unknown
Presentation of Return Fraud/Abuse Survey Findings
Dr. Read Hayes – Director, Loss Prevention Research Council
Customer Returns In The Retail Industry
Conducted on 2007 data and released in 2008 Survey Objectives
Identify retail industry return rates including: total returns, receipted returns, non-receipted returns, and the various forms of fraudulent and abusive returns as identified by the retailers.
Identify current practices in the retail industry for processing customer returns.
Identify issues related to customer returns that are common among retailers.
Share the results of the survey with the retail industry as a whole.
Key Metrics: Survey Averages
Return rate: 7.32% Return Fraud/Abuse percentage: 8.23% Percent returns non-receipted: 14% Calculation:
$2.581 trillion total retail sales* 7.32% total return rate
$188.9 billion total returns* 8.23% fraudulent return rate
$15.5 billion return fraud and abuse
Findings: Importance
70% of the respondents indicated that return fraud is an important issue to their company.
The majority of retailers (64%) report that focusing on reducing refund fraud is a high priority.
Almost half of the respondents believe they have the opportunity to achieve return fraud reductions of more than 30%.
Two-thirds of retailers believe that their current return policies and systems are “ineffective” or only “somewhat” effective in deterring return fraud/abuse.
Findings: Receipts
The majority of retailers’ current processes and systems for reducing return fraud continue to focus on non-receipted rather than receipted return transactions.
But, well over half of those surveyed have found forged receipts used in committing return fraud.
This may indicate a trend and closer attention should be paid to the vulnerability of receipted returns.
Industry Trends
Fraudulent and abusive returns are a persistent problem that will likely get worse in this economy
Across the board return policy changes affect good customers as well as problem shoppers
Intelligent solutions are available
Interactive Question Placeholder
Q3: Have you recently changed your return policy in order to address return fraud?
1. Yes, it’s changed 2. Planning to change 3. No 4. Unknown
Q4: With state of the economy, have you observed incidents of return abuse and fraud…
1. Increase2. Decrease3. Remain unchanged
How AutoZone is Addressing Return Fraud and Generating Real Results
Libby Rabun – Vice President, Loss Prevention, AutoZone
At AutoZone, our philosophy is…“Always put Customers First!”
Before: Previous policy provided very limited scrutiny and
controls No ID No receipt required
Warranty data base acts as receipt Stated a 90 day return policy with little
adherence
AutoZone – Returns Management
At AutoZone, our philosophy is…“Always put Customers First!”
During (how did we convince our operations partners): Small pilot program
Delivered proof of concept and initial ROI Internal IT solution with full system integration Consistent, deliberate communication & training
plan Training, signage, brochures Gained and utilized field operators feedback
Continuous analysis Proof is in the numbers
AutoZone – Returns Management
At AutoZone, our philosophy is…“Always put Customers First!”
After: Our philosophy does not change New program began with clearly stated goals:
Reduce overall return rate through Reduced internal related fraud and abuse Reduced external related fraud and abuse
Increase net sales Increase Store Manager satisfaction Ensure consistent following of written returns
policies
AutoZone – Returns Management
At AutoZone, our philosophy is…“Always put Customers First!”
After: We now:
Reserve the right to limit a return regardless of receipt
Ask for ID Ask for receipt
Still use transaction file and warranty data base Use third party to review authorization requests and
respond with approval, warning, or denial response
AutoZone – Returns Management
Control versus Program Stores
Control stores: Returns Rate bps. Rate
Reduction-15.16% -6 -0.4%
Program Stores:Returns Rate bps. Rate
Reduction-14.41% -75 -4.9%
AutoZone – Returns Management
AutoZone – Returns Management
Customers’ Responses to AutoZone's Overall Return Policies & Ease of Returning
**All KPIs remained flat or showed improvement
The best is yet to come!
Override percentages began at mid 90’s Majority of stores on program for less than 9
months Currently at 43% override percentage
Weekly KPI reporting On-going communication plan Continuous ROI analysis
AutoZone – Returns Management
Interactive Question Placeholder
Q5: Is reducing return rate on your current initiative list?
1. Yes2. No3. Unknown
Q6: Have you performed an analysis to see if high returns correlate to high shrink?
1. Yes2. No3. Unknown
Return Authorization at Brown Shoe
2006 Rollout Information captured
ID Name Phone Number Address
Reports Compliance Reports Internal/External
Internal Fraud – Our Challenge
Tie the Return Data with Exception Reporting Write Exceptions with in the Software:
No ID Swipe No ID Entered Different Name / Same Address Same Name / Different Address Refund % to Sale by Cashier
Video Overview
The subject “Jason” had been with the company for 6 weeks (3 weeks running the register)
The 3 weeks he was working the refund % to sale went from 8% to 30%
89% of all refunds did not have the required Return Information (No ID Swiped or Entered)
50% of the information that was entered was fictitious
After the interview “Jason” agreed to make a post interview video to be used for awareness orientation for new managers and the Loss Prevention industry
Interactive Question Placeholder
Q7: What is the leading factor keeping you from implementing a return authorization solution?
1. Cost2. Customer Service3. Store Operations changes required4. Too many other projects5. Other
Possible Solutions to Address Return Fraud and Abuse
Mark Hilinski – EVP, Strategic Accounts, The Retail Equation
Solutions
From the LPRC survey: Retailers continue to use a variety of methods,
both manual and automated, in order to identify “bad returners” and stop the attempted return transaction.
Tools employed include: policy changes, abuser lists, exception reports, real-time fraud detection systems, pos receipt validation, video analysis, and more.
Recommendations
Ask for an ROI. Reducing fraudulent returns is a measurable action and should come with a documented ROI.
Think twice before you let a restrictive return policy impact your good customers.
Fraud occurs in both receipted and non-receipted returns.
Do your research yourself; other functional areas do not always think like a loss prevention expert when selecting solutions.