Ep. 33: Return Fraud · The Register in Reverse

The loss doesn't always go out the back door. Sometimes it walks in the front; smiling, receipt in hand. The store approves the transaction, opens the drawer, and pays it. Don Carr and Jim Cords break down return fraud: stolen goods refunded for cash, receipt games, wardrobing, and the online "it never arrived" claim and every version working the same thing: your own return policy, used exactly as written. The point isn't to kill the generous policy; it's that generosity should be a priced decision, not an unexamined one. Pull your refund data, read your policy the way someone working it would, and choose your gaps on purpose. The refund desk is a register running in reverse. Guard both directions. 

Transcript

Copy Transcript Copied

SPEAKER_00 0:02

This is the City Safe Podcast, a conversation at the intersection of community safety, technology, and leadership, co-hosted by Don Carr and Jim Kortz. Together, we examine the critical issues facing cities today and the smarter tools that can help reduce crime and protect our communities. From instant communication systems to emerging technology, we break down what works, what doesn't, and what's next for urban safety. Because in today's world, keeping people safe requires more than good intentions. It requires innovation, data, and decisive action. Listen to the City Safe Podcast. Available now on Spotify, Apple Podcasts, and YouTube Music. Subscribe today and join the mission to make cities safer for everyone.

SPEAKER_02 0:49

So everything we've covered lately, the loss goes out the back. Somebody conceals something, walks past the register, poof, gone. Today, the loss walks in the front door, smiling with the receipt in hand. And the store doesn't just fail to stop it. The store approves it, opens the drawer, and hands over money.

SPEAKER_01 1:16

And logs it as a normal transaction. That's what makes return fraud its own animal. It doesn't look like theft in any system you're running. It looks like customer service. I'm Don Carr. I'm Jim Kortz. Welcome to the City Safe Podcast. Return fraud is today's topic.

SPEAKER_02 1:36

So let's give people the shape of it, Jim, because return fraud, well, that covers a lot of ground.

SPEAKER_01 1:43

It does. And the flavors matter less than the mechanism they share. You've got stolen merchandise coming back for refunds, right? Steal from one store, return it at another location, walk out with cash or a gift card. You've got receipt games, fake receipts, reused receipts, receipts pulled out of the trash that match the shelved items. And then you've got wardrobing. Buy it, use it, return it. And increasingly the online version, where the claim is it never arrived, or the box was empty, and the refund goes out without anything coming back at all.

SPEAKER_02 2:23

And then every one of those, the store is the participant. That's the part that is wild, right? Because nobody snuck anything past anybody. An employee looked at the transaction and said yes.

SPEAKER_01 2:41

Well, that's because the policy told them to say yes. And that's the real subject today. This isn't about your locks or your cameras, it's about your policy. Whatever your return rules are, somebody out there has read them more carefully than most of your employees have, and they're using the rules exactly as they're written.

SPEAKER_02 3:04

So the generous, no receipt, no questions, return policy, which is a genuine competitive advantage. By the way, customers love it.

SPEAKER_01 3:14

And it's also a standing offer. And I want to be careful here because the answer is not kill the generous policy. Plenty of retailers have done the math and decided that the goodwill is worth that fraud tax. That could be a completely rational trait. The problem is when nobody's actually done the math. When the policy was written by marketing, the loss is absorbed by operate by operations, and no one has ever put those two numbers next to each other.

SPEAKER_02 3:46

Well said, Jim. So it's a visibility problem, really, before it's a policy problem.

SPEAKER_01 3:53

Yep, very well said. So refund abuse hides inside your normal refund volume. You're not looking at it. Return rates by store, by employee, by customer pattern, no receipt returns as your own category. You generally don't know what your policy is costing you. You just know margins are a little soft and really nobody can say why.

SPEAKER_02 4:17

Right. So there's an employee angle here, too, right? Because the refund process is also one of the classic internal schemes.

SPEAKER_01 4:29

Yeah, and it's one of the oldest ones out there. A refund process to a card with no customer standing there, fake return, real money out. And the controls are the unglamorous stuff. You know, who can approve a no receipt return? What needs a second set of eyes? Whether refund activity gets reviewed by somebody other than the person doing the refunding. We'll spend a whole episode on the internal site soon, but the refund desk is where the internal and external problems share a door.

SPEAKER_02 5:05

That's right, Jim. So let's do the practical pass here. Somebody's listening and thinking, fine, what do I actually look at this week?

SPEAKER_01 5:13

Okay, start with the data you already have. Pull your refund numbers and break them out by store, by register, by employee, receipt versus no receipt. In a lot of cases, the outliers will surface on their own. And an outlier isn't an accusation, it's a question worth asking. Then read your own return policy the way someone working it would. Every soft spot they'd lean on, you can find first because you have the same document they do.

SPEAKER_02 5:44

And then decide the trade on purpose. If the generous policy stays, it stays because you priced it and chose it, not because nobody ever looked.

SPEAKER_01 5:54

Yeah, that's the standard, same as always. You don't have to close every gap, but you have to know your gaps and choose them.

SPEAKER_02 6:02

Indeed. And that refund desk is a register that runs in reverse. Most stores guard the register and leave that reverse gear wide open, if you will.

SPEAKER_01 6:15

Yeah, well said, Don. Guard it in both directions.

SPEAKER_02 6:19

Next week, we walk through the door Jim just pointed at the employee side, internal theft, and how the investigation itself can go wrong on you. I'm Don Carr.

SPEAKER_01 6:32

I'm Jim Cort.

SPEAKER_02 6:33

Stay well, stay aware, and stay city safe.

SPEAKER_00 6:38

That wraps up this episode of the City Safe Podcast. Thanks for joining us in the conversation about smarter strategies for safer cities. If you found today's discussion valuable, share it with your network and help us spread awareness about the tools and technology making a real impact. Be sure to subscribe on Spotify, Apple Podcasts, and YouTube Music so you never miss an episode. Until next time, stay informed, stay connected, and stay city safe.