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Point of no return? Some retailers track your history

Consumers return about $264 billion worth of merchandise per year, and retailers want to curb the growth of fraud. But is customer profiling the answer?

By MSN Smart Spending editor Aug 21, 2013 4:38PM
This post comes from Josie Rubio at partner site Dealnews.com

MSN Partner postThe government is monitoring your phone calls; social networks and phone service providers are selling your data; and retailers are tracking your movement through stores using the WiFi signals from your smartphone. And now, the latest privacy concern centers around stores tracking returns.

Sales associate helping customer in a retail store (© Blend Images/John Lund/Marc Romanelli/Getty Images)According to a recent Associated Press article, retailers such as Best Buy, J.C. Penney, Victoria’s Secret, Bath & Body Works, Home Depot, and Nike collect data from merchandise returns and use an outside company to create a "return profile," or a history of customers' returns, in an effort to battle return fraud.

Tracking customer returns with a return profile

If you've ever had to provide a photo ID to return merchandise, a company like The Retail Equation is likely tracking you. The Retail Equation has created return profiles for more than 27,000 stores. Your name, address, date of birth, and ID expiration date are kept on file, along with a copy of your original sales receipt.

The company then analyzes the data: frequency of returns, return dollar amounts, purchase history, and whether the merchandise return is accompanied by a receipt. In about 1% of cases, The Retail Equation notifies a store of suspicious activity and possible return fraud; the store can then reject a customer's returns for a period of time. Fortunately, the Retail Equation doesn't share specific customer returns data amongst retailers, so Home Depot doesn't know you've returned sweatpants at Victoria's Secret.

In an effort to remain transparent among privacy concerns, the Retail Equation offers consumers (those who have been warned or refused a return or exchange) a copy of their return activity report by phone or email.

Generating return profiles as a method of anti-fraud is a growing business. Consumers return about $264 billion worth of merchandise per year, according to industry estimates -- about 9% of total sales.

Of those merchandise returns, the National Retail Federation estimates that retailers lose $8.9 billion per year to return fraud, whether it be from "wardrobing" and "renting" (when shoppers buy items with the intention of returning them after use) or by larger schemes, such as counterfeit receipts, the return of stolen merchandise, or price switching.

According to Rich Mellor, National Retail Federation's vice president of loss prevention, even honest customers are affected by return fraud as stores shorten return windows and limit items that can be returned in an attempt to prevent fraud. However, the Retail Equation says its services allow for more flexible return policies for the honest 99%.

Is preventing return fraud a privacy concern?
While it's always wise to read the fine print before making a purchase, most consumers don't think about a company compiling their data while making a return.

A Federal Trade Commission spokesperson told the Associated Press that many consumers aren't aware of return profiles and that most consumers believe that presenting an ID for a merchandise return is a way to ensure consumer protection. Ergo, a spokesperson for the U.S. Public Interest Research Group believes the practice of returns profiling is an invasion of privacy.

That precise indictment -- and the grounds of a class-action lawsuit -- was thrown out of a federal appeals court earlier this year. A 2011 Florida lawsuit against Best Buy alleged that a customer who had his driver's license swiped during a merchandise return transaction was not aware of the "returns profile" policy until reviewing his receipt after making his initial purchase.

According to a story in the Minneapolis Star Tribune, the court upheld an earlier ruling stating that the Drivers' Privacy Protection Act doesn't apply to information supplied by a customer.

However, as a result of legal action, Best Buy now posts its return fraud policies on notices at registers as well as on receipts. But there are other retailers, such as Victoria's Secret and Bath & Body Works, whose returns policies are still not transparent in-store. (The Victoria's Secret website, however, does contain a disclosure.)

Perhaps most interesting is how these anti-fraud practices affect customers who unwittingly become labeled "suspicious." A Connecticut shopper took his story to The Hartford Courant in March 2012 after he was told he couldn't return a Blu-ray disc -- or anything else -- to Best Buy for 90 days. The shopper says he'd made several returns after the holidays and a few more in the months leading up to returning the defective disc.

Although The Retail Equation's website states that it doesn't "blacklist" shoppers, it does permit retailers to request all merchandise returns for a specific shopper be denied.

That said, in this digital age, we wonder if it's becoming normal to assume somebody's watching our every move. Readers, what do you think: Are these return profiles fair or an invasion of privacy? Let us know what you think.

More from Dealnews.com:

2Comments
Aug 21, 2013 7:37PM
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Every bit of publically known data will be sold to any solicitors except such data that can cause monetary lost to the merchant, lost to the data user, or lost under ligating circumstances (i.e., law-forbidden privately lost data and its public discovery).
avatar

Ha ha ha!

 

They ASSUME the I.D. I use to return things is real!

 

Wait til Chelsea Manning starts getting all that junk mail at Leavenworth!

 

 

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