Target, a Stickler on Returns?

While I was having dinner with a few friends last night, we were discussing several different topics. One thing that came up was an article in Sunday’s Minneapolis Star and Tribune. I thought I would post it here and see what your thoughts were before I unleashed mine!!

Target turns into more of a stickler on returns
Chris Serres, Star Tribune

Melissa Hampton looked dismayed as she stepped away from the return counter at the Target store in downtown Minneapolis.

The 22-year-old optician, who didn't have a receipt, couldn't return the $200 computer monitor and $100 phone sitting in her shopping cart. "I know rules are rules, but I've never had a problem returning something at Target before," Hampton said.

The days of Target's ultra-generous return policies are coming quickly to a close.

Last month, the Minneapolis-based discounter began requiring shoppers to show receipts for any return worth $40 or more, down from the previous $100 limit. In August, the limit will be cut to $20.

Target officials said the rules are meant to curb the tens of millions of dollars a year it loses through fraudulent returns.

Such fraudulent returns include when people return stolen merchandise or items that they have used once but had no intention of keeping.

Yet Target is focusing on a relatively minor problem when compared with other forms of criminal behavior, say some law enforcement officials and retail experts. Shoplifting and employee theft rose 20 percent in 2005 to a record $37.4 billion, for example. Meanwhile, return fraud has been almost unchanged for several years at 9 percent of all returns.

Target's stricter rules also take it in the opposite direction of its primary competitor, Wal-Mart Stores Inc., which has loosened its return policies in recent years.

And tighter return policies could affect Target's customer-friendly reputation at a time when both retailers have shown cracks in their once-stellar growth.

"Target's big differentiating factor with Wal-Mart is its service," said Patricia Edwards, managing director of Wentworth, Hauser and Violich, a Seattle-based money management firm that owns Target shares. "Time and time again, I hear people say that they'd never shop at Wal-Mart but shop at Target all day long, because the floors are cleaner and the service is better ... But this potentially opens the door to people who could go either way."

With so much the same at discount stores, return policies are among the few reliable gauges of customer service, said Stan Pohmer, a Minneapolis retail consultant and a former senior buyer at Target. "If you stake your reputation on strong customer service, then the return policies become very important," he said.

Wrong focus?

Target officials said the new limits affect fewer than 5 percent of its customers. Shoppers who have bought products with credit cards, debit cards or checks can still return them without receipts, without having to worry about the new limits.

"While we expect the changes to ... impact a very small number of guests, our goal is to minimize losses regardless of amount," said Amy von Walter, a Target spokeswoman.

However, some law enforcement officials see Target's focus on return fraud as inconsistent. Last year, retailers lost $4 billion from all forms of financial fraud, including theft through stolen or counterfeit credit cards and checks -- a problem Target has not addressed aggressively, some local law enforcement officials say.

Target's practice of not checking the IDs of credit card holders has made it a target for more sophisticated fraudsters, said Brandon Deshler, an officer with the Edina Police Department and a detective with the Minnesota Financial Crimes Task Force, a state law enforcement agency. "There is a real inconsistency here," he said.

Added Tod Marks, senior editor at Consumer Reports: "Perhaps they could save people at the return counter some angst if they were more rigorous in checking credit cards.... Theft, or shrinkage, however you want to describe it, has many faces, and it seems that Target could exercise more due diligence in certain areas."

Von Walter said the company relies on credit card companies and their electronic authorization systems to detect fraud.

A TV for the Super Bowl

Target officials declined to disclose how much the company loses each year from fraudulent returns, but said fraud of all forms is serious and doesn't always involve the return of stolen merchandise.

In some cases, people will buy up limited-supply items, such as designer handbags, and try to sell them on Internet auction sites for higher prices; if they aren't sold, they will return them for a full refund.

Other shoppers will return merchandise that has been used once but that they never intended to keep. For instance, someone might buy a dress for a special occasion or a big-screen television for the Super Bowl, and then return it. Retail experts call this "free rental" or "wardrobing," and it often doesn't show up in official fraud estimates.

The Return Exchange, a company that sells software to help retailers track returns, estimates that return fraud accounts for about $17 billion a year, or 9 percent of total returns, based on surveys the firm has done with retailers.

Easier returns at Wal-Mart

Yet many national retailers have gotten better at monitoring return behavior. Since 2004, Wal-Mart, for instance, has used a computer tracking system that alerts cashiers to customers who bring back more than three items without receipts within 45 days. Those customers must get a manager to approve their returns.

Wal-Mart's tracking system weeds out the vast majority of fraudulent returns, store officials said. Return fraud costs the average Wal-Mart in the Twin Cities no more than $500 a month, about one-tenth the amount lost from shoplifting, according to Greg Lundell, manager of asset protection for Wal-Mart's 10 stores in the Twin Cities.

"Return fraud used to be a big headache for us," he said. "But these computer systems are so effective that, now, it's barely on our radar screen."

Wal-Mart has one of the most lenient return policies in the nation -- and the return counter to prove it. Even so, there's a perception among many shoppers that Target's return policy is more generous.

In its customer surveys, Target has found that its return policy is routinely cited as one of the top three reasons why people shop at the retailer, Von Walter said.

Chris Serres  612-673-4308  cserres@startribune.com

Ok, am I wrong or was that guy just stupid for buying such a high ticket item and paying cash??? I mean come on, to not have bought it with a credit card, atm card, or check, Target or pretty much anyone now can look up your receipt if you purchased it on any of those things! If you are going to pay cash, you need to do your due diligence of keeping your receipts and keeping them organized. That’s your fault if you don’t!!

That’s just my 2 cents!! Sorry this was such a long one today but I couldn’t resist re-print the article.

Beth Riegger

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