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Product Return Management: Handling a Spike in TV Returns Fraud During Super Bowl Season

After the holidays, you might think Americans are hibernating in budget mode until the end of winter. But according to Google Trends, the next round of sales is just around the corner. Without fail, countless Americans will begin ramping up searches for "Super Bowl TV deals" in the weeks leading up to game day. They'll find no shortage of articles written by major publications from the New York Times to USA Today to Tom's Guide telling them exactly how and where to find big-screen sales.

According to Consumer Reports, savvy shoppers can get better-than-Black-Friday deals by upgrading their TVs in time for the Super Bowl. For example, the 70-Inch JVC 4K Roku TV at Walmart is currently selling for about $50 less than during Black Friday.

It makes sense for retailers to slash prices during Super Bowl season to encourage sales. What football fan doesn't want to snag a 4K-quality smart TV deal when hosting friends and family for the game? With everyone socially distant this year, it’s more critical than ever to have a big, quality screen so guests have a great view no matter where they’re sitting. However, do most buyers really need a new TV, or are many of them simply peacocking with the intent to wardrobe this pre-Super Bowl purchase? In other words, how many consumers are buying TVs to show off, only to neatly repackage and return the devices for a full refund after the game?

Regardless of the motive, many consumers will return their new smart TVs in the weeks after the Super Bowl. Retailers must be prepared to discern between innocent buyers' remorse and straight-up fraud by incorporating a product return management system.


Super Bowl Season’s Trends for TV Sales and Product Return Management

Overall, the Super Bowl season is a great time to be an electronics retailer. Last year's 2020 Super Bowl Survey conducted by the National Retail Federation (NRF) and Prosper Insights & Analytics predicted consumers would spend $1.5 billion on televisions. goTRG’s ecommerce platforms sell 15% of our yearly TV sales in just one month leading up to the big game. Moreover, goTRG’s January sales are nearly 30% higher than the monthly average for TVs. Once the season ends, TV sales drop an average of 25%!

Along with increases in TV purchases, retailers must prepare for the rise in returns and managing returns. Regardless of the product or time of year, retailers can expect consumers to return up to 10% of in-store purchases and nearly 30% of online purchases. A certain amount will also be fraudulent. The National Retail Federation estimates 7% of all returns and exchanges constitute fraud or abuse, costing retailers up to $24 billion annually.  

During Super Bowl season, however, retailers can expect an even higher rate of returns. According to a CBS News report, some organizations can expect the volume TV returns to jump 20% from the 4th quarter to the first quarter of the year. That means, retailers are also likely to see an increase in associated fraud. Why?

Returns Solutions for “Wardrobing” aka Returns Abuse

"Wardrobing," a term initially coined by the NRF, is the act of returning used non-defective products for a full refund. In most cases, wardrobing buyers never intended to keep the product in the first place. In other cases, customers may experience buyers remorse after the fact. People most commonly commit wardrobe returns fraud for shoes and apparel, but expensive electronics are also common victims. In fact, more than 30 percent of retailers reported experiencing this kind of returns abuse.

Unfortunately, wardrobing can be difficult to prevent because customers who abuse the returns system in this way made legitimate purchases. Moreover, they have no legal obligation to prove they never planned to keep the item in the first place. They won't even need to show a receipt to return the used item for a full discount in some cases. These factors make wardrobing an ever-growing problem for retailers who do not have concrete returns management solutions in place that can detect abnormal trends.

During the COVID-19 pandemic, The New York Times called 2020 the year of buyer's remorse. Consumer spending rose 7.2% overall from January to September, but many Americans admitted to the Times they experienced regret upon receiving the item they couldn’t afford.  


Combating Returns Fraud with Effective Returns Service Providers

Along with wardrobing, nearly 80% of retailers report fraud from stolen merchandise, and 60% see returned items that were purchased from stolen money. In some cases, fraudsters return the stolen item in mint condition. In other cases, fraudsters opt for the bait-and-switch model to keep the original TVs and stuff the boxes with old broken ones instead.

The returns management team at goTRG has seen several repeated examples of bait-and-switch in action. goTRG processes millions of returned electronics every year from the world's largest retailers and manufacturers, including Walmart, Lowe's, Home Depot, and Lenovo. TV returns fraud is, by far, the most prevalent occurrence.

A few examples of the more creative and frightening TV returns fraud strategies include:

  1. Boxes containing sandbags filled to the exact weight of the device in question.
  1. Inflatable mattresses stuffed inside TV boxes.
  1. Returns of old or broken TVs disguised as the newer model.
  1. Brand new TVs with critical parts removed.


Leveraging Returns Service Providers to Minimize Profit Loss from Returns Fraud and Abuse

More than one in four retailers told NRF they'd developed stricter returns policies to address organized retail crime. But retailers must delicately balance two major opposing priorities before deciding how far they'll go.

Retailers want to prevent unnecessary profit loss resulting from wardrobing and theft, but they also want to promote a positive consumer experience, which helps increase profits in the long run. If stores make it difficult for customers to return products, they'll undoubtedly reduce fraud. They'll also dissuade legitimate consumers who expect seamless returns from making purchases in the first place. In this context, what are the product return management options to minimize fraud without sacrificing consumer loyalty?

  1. Consumer tracking software is an extreme measure that may not be appropriate for every retailer. But enterprise organizations like Walmart and Target, who experience millions of dollars in returns fraud every year, might consider tracking software to prevent suspicious customers from making returns. The Retail Equation works with companies to warn consumers who make excessive returns that violate the store's policies. In some cases, the returns management software will prevent the retailer from processing the refund to the questionable buyer.
  1. Empowering employees to say no. Retailers generally have a loss prevention team in place to help prevent theft. But what about the customer service representatives who process returns and make refund decisions at the counter? Retailers who take the time to train these employees and even incentivize them to find fraudulent returns may see fewer blow-up mattresses disguised as TVs. Customer service agents are on the front lines and can make a big difference if they're empowered and inspired to do so.
  1. Implementing restocking fees, delayed refunds, and store credit. Retailers don't want to make it difficult for legitimate customers to make returns, but slightly more stringent returns policies may balance that desire with the one to prevent wardrobing. For example, customers who only want TVs for game day might think twice about purchasing if they have to pay a restocking fee or accept store credit due to returning an open-box item. Moreover, customers might think twice about any kind of returns fraud if retailers change their automatic refund policies and implement a fully-integrated returns software to help in managing returns.


The Bottom Line

Super Bowl Season is undoubtedly good for business. Electronics retailers get a much needed post-holiday revenue boost while eliminating year-end inventory to make room for newer smart TV models. With that increase in sales, retailers must also manage the increase in fraudulent returns after the game. Eliminating fraud is simply not possible, especially when dealing with wardrobers, whose intent is difficult to prove. Ultimately, retailers must balance the need to make a seamless shopping experience with the need to prevent profit loss. Each organization must devise a returns management solution that aligns with their customers' expectations and overall business size. Luckily, retailers can take advantage of common-sense practices, policies, and tools to prepare for post-game day returns this Super Bowl season.

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