Returnaholics: A Trendy Danger to the Retail Industry?

In the wake of the recent recession, consumers have been behaving much more conservatively with their money, which has arguably been one of the few positive outcomes of these rough economic times. Recent years have seen several new shopping patterns, including cost-conscious comparison-shopping and a significant increase in coupon use. However, a new trend that’s currently on the rise begs the question of whether consumer conservatism has gone too far. Returnaholics, as they are called, are shoppers who are obsessed with buying and retuning items on a regular basis. This compulsive, and sometimes downright fraudulent, behavior is starting to cause harm and headaches to retailers both large and small. Today, we explore the reasons Returnaholics can’t seem to hang onto their purchases and look at the large effect that this small group of shoppers has on stores and, ultimately, the rest of us.

Just Sampling The Merchandise

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A common explanation that a number of Returnaholics give is that they simply cannot commit to any moderately priced item before they try it out in their own home and see how it feels. In order to fully decide whether or not the purchase (new curtains, for example) is ultimately worth the money, they will buy the item knowing knowing full well that they might end up returning it a short time later. When they take the purchase home, they allow it to just sit for a while and see how they feel about it a week or so later. If they end up not liking it, they will carefully repackage it and bring it back to the store in exchange for another item or for their full money back.

In a recent interview with CBS, Alma Swik, a confessed “Returnaholic Queen,” explains this mentality. “Money is important to me and if I’m going to buy something that costs 30, 40, 50, or 200 dollars, I want to bring that home, try it out and see if I like it, and live with it for a couple of weeks,” Swik said.

It is important to understand the magnitude of what Swik is saying. Returnaholics don’t just return an item here and there, but they return a great many items on a consistent basis. And it is this exact phenomenon which has begun to put stores in danger. “This will be my fourth return for the day,” Swik told CBS while packing away a recently purchased lamp, adding that four to five returns a day is quite common for her.

Bad-Faith Purchases

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Though questionably efficient, Returnaholics like Swik are not necessarily behaving in an immoral way.  Sometimes, it really is necessary to take an item home and see how it fits with the rest of your furnishings, wardrobe or lifestyle. But there is a second kind of Returnaholic whose behavior is much more questionable. Returnaholics who are “bad-faith purchasers” are those who buy an item with the intention of using it once or twice and then returning it to the store. The most commonly used and then returned items are apparel and electronics, since these are both expensive and easy to use once and then bring back for a full refund. Imagine a woman who needs a formal dress for a single occasion but cannot afford to shell out the money to buy an especially nice one. Instead, she might buy an expensive dress, carefully remove the tag or tuck it in where it cannot be seen, wear it for the one night, and promptly return it a day or so later. These Returnaholics take the idea of trying an item out to the next step, one which is certainly immoral, but extremely difficult to prove as illegal behavior.

Return Fraud

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The two types of returnaholics discussed above are certainly affecting the retail industry, but they are not doing so in an illegal way. The third and most dangerous kind of Returnaholic is one who cheats stores out of money by breaking the law. These individuals engage in a crime commonly referred to as return fraud, which is when a shopper will approach a customer service desk bearing items that they did not purchase at that establishment and attempt to return them for money or store credit.

In the report, “Returnaholics Cost Retailers Billions of Dollars a Year,” WalletPop interviewed Derek Rodner, a loss control expert and vice president of security company Agilence, Inc., who spoke of how far some return fraud can go: “This [one] woman would simply walk into the store, make note of the store manager’s name from the sign at the customer service desk or hanging near the front of the store, go into the aisles and pick up several items and go right to the customer service desk and return them without a receipt,” he said. “She would simply say that she called (using the name of the store manager) and he told her to bring the items back. This woman was hitting 27 of their 133 stores, two a day, and then she would repeat. She admitted to over $10,000 in return theft over the course of 90 days.”

Effect On Retailers and Customers

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In essence, every single time that any return is made, including a legitimate one, the retailer takes a loss. The transaction fee and cost of restocking, re-inventorying  and advertising returned goods are paid directly by the store. While this may not seem like a big deal at first, when the data is taken in total, those small losses add up. WalletPop.com reports that return fraud alone cost the retail industry $10-$15 billion last year.

In order to protect themselves from Returnaholics and the extra costs they bring, many retail stores have invested serious capital in high-tech software and equipment to detect frequent or fraudulent returns. The purchase of this technology has a direct effect on the overall price of goods sold in the store, as the company must raise prices in order to recoup the money spent. In addition, several retailers have started instilling return policies that are much more stringent than before, making it more difficult for honest shoppers to return a garment that was purchased with a broken zipper or an electronic that never turned on in the first place. To discourage bad-faith buyers from wearing an item once or twice and then returning it, stores have also begun placing tags and price stickers in very obvious places where they cannot be concealed. With stores doing everything they can to protect themselves and cut losses, it seems that Returnaholics have made it a lot more difficult for the rest of us to both get a good deal and make an easy return.

Retail expert and CEO of StoreTouch Mike Craus tells WalletPop that, “this kind of behavior escalates during economic downturns, when people don’t have the cash to buy the things they want.” Perhaps as the economy ticks back to stability we will see a reduction in compulsive buying and returning, but it’s pretty doubtful that this will be the case or that it will really help get things back to the way they used to be. And, since so many retailers have already invested in fraud-detecting technology and the implementation of harsher return policies, it seems that we’ll be paying the price for the rise of Returnaholics for a long time to come.