JCPenney, Best Buy Tracking Returns, Annoying Customers. And It Might Be For No Reason

It's late summer so it's time again for the annual consumer panic-fest about the centralized third-party return databases leveraged by so many chains. An Associated Press story on Monday (Aug. 12), however, stressed the need for disclosure to shoppers when their returns are being tracked. Among the chains referenced in the piece are Best Buy, Home Depot, JCPenney, Victoria's Secret and Bath and Body Works.

The consumer advocate argument for disclosure is simple: that it's the shopper's right to know about such tracking, so they have the option to choose to shop elsewhere. But there are quite a few reasons that benefit the retailer for the chain to disclose and for such disclosure to be mandatory.

First, the worst—and fairly ironic—problem that universal disclosure would avoid is having a chain that discloses the returns database lose a customer to a rival chain, which also uses the same database but simply chooses to not tell its shoppers. Hence, disclosure is fine as long as it's universal.

Secondly, the point of such databases is to not merely catch thieves, but to discourage these frauds from happening at your chain. From that perspective, the point of the program is undermined when you keep secret that you're using it. This is why homeowners use security alarm yard signs.

There's also one change in how these returns databases function that would simultaneously quiet consumer fears and make them far more effective. The intent of these programs is to detect systematic shoplifting gangs, who hit many stores across many different geographies. But shoppers fear that it's some sort of intimidation tactic to encourage legitimate returns, implying that shoppers may be prevented from making any returns after they hit some secret limit.

The best solution to this is to make the fraud mechanisms explicit. As part of the policy disclosure, be explicit: "A shopper is allowed an unlimited number of legitimate product returns and this policy will in no way change that. As long as the product is returned in the shape and timeframe specified, we will of course cheerfully take it back. This policy is solely intended to deal with fraudulent returns, especially people who shoplift merchandise at one store and attempt to return it for cash or credit at another."

If a chain chooses to discourage the practice of customers using return policies to get free rentals (buy a dress, wear it to an event, return it for cash the next morning), there are many ways to do that, but using a third-party database for such efforts is dangerous. If you limit those databases to going after organized crime, your disclosures can be much more assuring to shoppers.

The problem with enforcing such rules is it's hard for the store to know for a fact that the shopper had fraudulent intent. The downside of insulting one innocent customer is a lot more costly—especially in today's social media reality—than allowing ten free-rental people to get away with it. Besides, most free rental shoppers make plenty of legitimate purchases, out of guilt if for no other reason.

There was one point made in the Associated Press story that merits clarification. The piece spoke of one popular returns database, from a vendor called The Retail Equation. It said that the length of time shopper profiles are maintained varies, but it said that one Sports Authority shopper recently saw his/her "return activity report" and noted that it included some 2004 activity.

In this instance, store policy really is the point. Retaining nine-year-old (or older) records may prove useful if the store needs to prove the long history of fraudulent activity. What the store does with that, however, is very much another issue.

For more:
- See Associated Press story

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