By Khadeeja Safdar
More consumers are finding out that stores are using a
third-party service to monitor their shopping behavior and limit
the amount of merchandise they can return.
Best Buy Co. has been the target of a large share of consumer
complaints on Facebook, Twitter, Yelp and other online forums about
its efforts to police returns with the help of a firm called Retail
Equation. But the same service is used by a variety of other
retailers, including J.C. Penney Co., Sephora, CVS Health Corp.,
Advance Auto Parts Inc., Dick's Sporting Goods Inc., Home Depot
Inc. and Victoria's Secret. Some only penalize shoppers if they
bring back merchandise without a receipt, while others also ding
them for receipted returns.
The Wall Street Journal previously reported that Retail Equation
develops a "risk score" on each customer based on their shopping
behavior, then sometimes issues warnings and denials. The firm,
based in Irvine, Calif., receives information about shoppers when
they provide a form of identification to retailers.
The actions that hurt a shopper's score and the thresholds for
getting declined from making future returns vary by retailer and
often aren't disclosed in their policies. Behaviors that can harm a
score include returning a large percentage of purchases in a short
period and bringing back items that tend to get stolen at that
retailer.
Retail Equation said its system is designed to identify 1% of
shoppers whose behaviors resemble return fraud or abuse, which
occurs when customers exploit the return process, such as
requesting a refund for items they have used, stolen or bought
somewhere else. The firm said it doesn't share a person's data from
one retailer with another.
U.S. retailers lost more than $351 billion in sales last year
due to merchandise returns, and an estimated $22.8 billion of that
came from fraudulent and abusive returns, according to a report by
Appriss Inc., a Louisville, Ky., data analytics firm that acquired
Retail Equation in 2015. The company said it used a recent survey
conducted by the National Retail Federation to determine the
losses. The rise of Amazon.com Inc. has compounded the problem
because more shoppers expect to be able to send back online orders
with little resistance.
Sue Tillman, 55 years old, of Guilderland, N.Y., said she buys
clothes in different styles and sizes online and brings back the
extra items at the retailer's physical store. Over the years, she
said she has made dozens of returns at J.C. Penney, but has also
spent thousands of dollars there. "They are the ones that encourage
you to buy online and return in the store," she said.
Ms. Tillman, a social worker, said she received a warning in
August from Retail Equation when she tried to return men's shirts
at the Penney store in nearby Albany. She said she had a receipt
and was following the store's guidelines. After returning one, she
said a salesperson told her she would be denied from making returns
for 60 days and advised her to contact Retail Equation to request
her so-called return activity report, a history of her
transactions.
Her report reveals the firm has been keeping track of her
shopping behavior for at least seven years. Since the start of
2017, Ms. Tillman returned 10 other items at Penney, each with a
receipt, according to the August report, which was reviewed by the
Journal.
At J.C. Penney, returning too many items or bringing back
products that tend to get stolen such as cosmetics can hurt a
shopper's score. Penney uses Retail Equation to help prevent
fraudulent or abusive returns, but the system doesn't "impact the
vast majority of day-to-day transactions, " said spokesman Joseph
Thomas.
While most retailers don't publicize their relationship with
Retail Equation, many disclose in the their return policies that
they work with a third party.
"When we identify excessive return patterns, we notify those
customers that we may limit future returns or exchanges if no proof
of purchase is provided," said a Sephora spokeswoman.
Victoria's Secret reveals the thresholds for returns on its
website. At the lingerie retailer, owned by L Brands Inc., shoppers
can make up to seven returns in a 90-day period and bring back $250
of merchandise over the same time frame without a receipt.
Home Depot said it only uses Retail Equation to track returns
with no receipt.
CVS started using Retail Equation last year, and about one-third
of 1% of returns have been declined at its stores since, said CVS
spokesman Mike DeAngelis. "Similar to other major retailers, we
reserve the right to decline to accept a return even if accompanied
by a receipt if it does not pass our third-party verification," he
said.
Robert Berardino, 43, a technology manager from Millersville,
Md., said he learned about Retail Equation for the first time in
February when he went to Dick's Sporting Goods in Gambrills, Md.,
and tried to return three items his wife had purchased online.
He said he brought a receipt but he received a warning notice
after the first return, a pair of shoes. Dick's Sporting Goods
didn't respond to requests for comment.
"It was insulting," he said.
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com
(END) Dow Jones Newswires
April 04, 2018 08:14 ET (12:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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