Wal-Mart's Gift Receipt POS Headache: Weak Associate Training Brings FTC Investigation

Wal-Mart's gift-receipt troubles may be just beginning. A string of television news reports established that Wal-Mart was short-changing customers who returned items with gift receipts. On Tuesday (May 24), a U.S. Senator demanded a federal probe to see if the errors—all in Wal-Mart's financial favor—were intentional. Wal-Mart's explanation—which seems almost certainly the truth, given the evidence unearthed in the reports, a simple examination of a current gift receipt and interviews with various Wal-Mart employees—is that it all stemmed from weak training and employees simply hitting the wrong key.

The suggestion that Wal-Mart deliberately orchestrated employees doing this to boost profits simply makes little sense. Wal-Mart's gift receipts are stuffed with data for identifying where, when and for how much each item was purchased, and Wal-Mart has systems for slicing and dicing all that data—data that's crucial to keeping the chain dominant in a low-margin, cutthroat business. Why would Wal-Mart sabotage its own CRM and inventory-management efforts by intentionally mishandling returns?

The errors came about when a customer purchased an item for, say, $50, and then gave it as a gift to a friend with a gift receipt. A few days after the customer completes the purchase, the price of the item may drop. When the customer's friend returns the item for store credit two weeks later, the associate looks up the item's price and only credits the lower price. This could work, because of the nature of a gift. The friend wouldn't have known the cost of the item so she/he would have no reason to complain.

If the employee followed proper procedure and hit the correct key, the system would display—and credit—the price paid at the time of purchase. That's the essence of the promised retraining.

U.S. Senator Barbara Boxer (D-Calif.) asked the Federal Trade Commission to investigate whether the retail giant was intentionally refunding less than the original purchase price. Boxer's letter to the FTC recapped a report by a Sacramento TV station, which bought items at local Wal-Mart stores for a total of $51.82 and then returned them later with gift receipts and was refunded only $26.99. "Wal-Mart blamed staff for the errors, but similar results occurred at their stores in other areas of the country, raising the possibility that this practice is common," Boxer wrote.

Actually, the news reports were based on stings by TV stations in only two cities, Sacramento and Philadelphia, where reporters specifically bought holiday items in those regions at full price and then waited until the items went on sale before returning them with gift receipts. And because Wal-Mart's gift receipts include a barcode containing the price, it seems likely that the training of customer-service associates would be to blame.The problem may also stem from the fact that Wal-Mart accepts returns with regular receipts, without receipts or with gift receipts, each of which involves different procedures. In particular, receipt-less returns reportedly get the lowest price the store has charged for the item in the past 30 days—which matches what the TV reporters described. (It also sounds like that old Wal-Mart slogan: "Always low prices. Always." What we didn't know then was that the full phrase was "Always low prices for returns. Always.")

Wal-Mart didn't respond to specific questions about the issue—hey, the chain could see this PR train wreck coming—but did issue a statement saying that all U.S. stores have put associates through a refresher course in handling gift receipts.

That doesn't absolve poor training practices or eliminate the possibility that some store managers have been less than scrupulous about checking on how no-receipt and gift-receipt returns are handled.

But at a chain-wide level, it's hard to see how cheating on gift receipts makes sense for Wal-Mart. It irritates customers, it's easy to test and, unless it's very carefully managed, it's likely to lose the retailer money at least some of the time.

Worse than that, it contaminates valuable data on what customers buy and how they return it. If gift receipts are mishandled and gift-receipt returns are treated as no-receipt returns, Wal-Mart has no way of knowing how many items bought as gifts are actually being returned. The chain loses track of when items were bought, how long it took to return them and whether discounted gift items are returned more or less often—in short, exactly the sort of inventory-control data that Wal-Mart finds critical.

The technology and systems to collect and manage all that data are in place. But they're useless if stores don't train associates correctly or, worse, if managers are cheating.

With an FTC investigation on the way and class-action lawyers already casting their nets for representative victims, there should be plenty of evidence one way or the other soon enough.