Big discounts, crowds, return fraud expected with post-Christmas sales

Amid hordes of consumers returning unwanted Christmas gifts, retailers expect fraud perpetrators

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. Only the Saturday before Christmas will have had more foot traffic, according to retail analytics firm ShopperTrak.

At some shopping centers in Southern California, early crowds were light.

Film production worker Kai Morrison, 44, tagged along with his friend Giselle Raymond, 49, as she shopped at the Grove shopping center in the Fairfax district.

Raymond was looking for items for her bakery, the Kitchen Table, and found a spice grinder, a mortar and pestle set and some sea salt at Sur La Table, which she paid for using a $100 gift certificate.

There were no lines.

"For the Grove, this is a very manageable crowd," she said.

Anaheim Hills resident Melissa Tait and her 9-year-old twins Macy and Ryder spent Friday morning weighed down by $500 in bedding and clothes she purchased at Macy's and Nordstrom at Fashion Island.

"I am one of the nuts that loves the crowds," said Tait, 38, though at 9:30 a.m. the shopping center wasn't packed.

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.

Twitter: @tiffhsulatimes

 

Copyright © 2016, Los Angeles Times

UPDATE

12:48 p.m.: This article has been updated with reports from Southern California shopping centers. 

The first version of this article was posted at 8:22 a.m.

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