07/05/2006
In previous issues of the Business Link (January 2005, September 2005) we reported the increasing use of software by retailers that requires a customer to allow the establishment to swipe their driver's license before the store will issue a refund or exchange merchandise. The software used in these transactions extracts personal information from the driver's license, tracks future returns and exchanges by the customer, and declines to make them if it detects unusual activity.
In our September issue, we told you about the experience of Mao Nguyen, whose attempt to return a sweater was denied (even with price tags intact and sales receipt in hand) not because the software detected unusual activity for her, but because she was not willing to allow her driver's license to be swiped and her personal information gathered and retained. All she could get from the clerk was that the practice was "for tracking purposes." Ms. Nguyen finally handed over her driver's license and left with her refund, but vowed not to return.
The Return Exchange, which manufacturers the software used in these transactions and handles the tracking of the returns and exchanges, was concerned enough about consumer concerns, such as Ms. Nguyen's, that a company representative met with Bureau President Bill Mitchell. Frankly, that meeting changed at least some of our perception of the whole procedure, and we pass some of what we learned along to you to give you a better idea of what The Return Exchange (TRE) and its clients are doing and why.
TRE's representative first enlightened us as to the magnitude of returns and exchanges fraud: a staggering $16 billion per year, resulting in an estimated cost to the average household of $225 per year. Although perpetrated by a very small percentage of customers, and sometimes store employees, the means for carrying out the fraud include presenting fraudulent receipts, shoplifting, price switching, and more. Thus even if a returned item has its original price tags and the customer has the original receipt, TRE and retailers know that the customer still may never have paid for the item, either fully or at all, in the first place. (Indeed, the scam artists are adept at conjuring up fraudulent receipts.) And we remind you that the losses retailers experience through fraud must, unfortunately, be passed along to honest customers.
Understandably, merchants want to rein in their losses, which also results in benefits to their customers. Thus, though we had previously been unaware of it (as you may have been also), we now know that many major retailers had already been employing similar practices.
So what does TRE's software do for merchants and for you? By tracking the returns of individual customers as to the date, location, and amount of each transaction, it helps spot trends and ferret out the "professionals." Thereafter, the merchant may deny future returns in individual cases based upon this kind of activity, stopping losses for everyone.
How about the safety and security of your personal information in the hands of the sales person? First, your information is scanned in much the same way as your check or credit card might be scanned when you make a purchase. Second, the information swiped does not remain with the retailer, but goes directly to TRE. It is not accessible to store employees, and the system, not the employee, determines whether the return should be accepted.
Aside from TRE's software, though, the posting or otherwise informing customers of return policies is something that must comply with California law. And Bureau president Bill Mitchell still believes that informing customers that the store reserves the right to deny returns made in compliance with its posted return policy may not comply with the law as to the contract that was formed at the time of the purchase.
If TRE can resolve this notice problem, Mitchell believes an effort to educate store clerks to be more explanatory with reluctant customers as to what they're doing and why could make a big difference in customers' acceptance of and support for the program.
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