Sweating Shrink? Consider Paying Closer Attention To Your Returns

February 2014 Integrated Solutions For Retailers

By David Speights, Ph.D., chief data scientist, The Retail Equation

Holiday returns fraud data from the National Retail Federation gives us 3.4 billion reasons why we should pay more attention to the returns counter in the battle against shrink.

With the holidays behind us, retail executives are quickly turning their attention to shrink numbers in advance of the traditional February reporting period. Final holiday sales numbers weren’t in when this article went to print; however, the National Retail Federation estimated holiday returns would top $58.5 billion for the 2013 season — with $3.4 billion of those returns being fraudulent. According to the survey, 5.8 percent of holiday returns are fraudulent, which is up slightly from 4.6 percent last year, and it is more than 70 percent higher than the NRF’s estimated percentage for annual return fraud. Nearly all retailers included in the survey say they have experienced employee-oriented return fraud and/or employee collusion with external fraud sources, up 15 percent in the past year. But what does this mean to those frantically crunching shrink numbers for February deadlines? Apparently a lot. There is growing evidence supporting a link between returns, return fraud, and shrink.