Return Fraud

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Return fraud costs the retail industry billions of dollars in lost revenues every year. The growing crime is expected to cost retail stores across the nation an estimated $3.7 billion this holiday shopping season alone, according to the National Retail Federation. If that estimate holds true, it will represent 35 percent increase over last year’s $2.74 billion loss for the holiday period.
Questions:

1. What is wardrobing? What factors do you think increase this type of fraud? Discuss.
2. What is price arbitrage? What factors do you think increase this type of fraud? Discuss.
3. What internal controls do you think are the most effective in combating return fraud? Discuss in terms of costs and benefits.  Why don’t all retailers have a no return policy to combat this fraud?

Source:
CNN.com Video. (2010). Fake returns: A $14 Billion Crime, December 18 (Retrievable at http://www.cnn.com/video).
Turner, Kevin. (2010). Merchants Are Watching For Return Fraud. Jacksonville Florida Times-Union, December 19 (Retrievable online at http://jacksonville.com/business/2010-12-19/story/merchants-are-watching-return-fraud)
Six.Wise.com Staff. (2007). The Biggest Crime You’ve Never Heard Of—Return Fraud—And How The Criminals Do It, Six.Wise.Com Newsletter, January 7 (Retrievable online at http://www.sixwise.com/newsletters/07/01/17/the-biggest-crime-youve-never-heard-of—-return-fraud—-and-how-the-criminals-do-it.htm)