The Homa Files

…. and about 1 in 10 of them are fraudulent.
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Recently, I returned an item that I had I bought on Amazon.

That’s a rare event for me, so I was pleasantly surprised that the process was relatively hassle-free … it took a couple of minutes to get Amazon’s return authorization … it was a short drive to a UPS store … the transaction at the UPS store took about a minute … my credit card was credited within a couple of days.

A couple of things struck me during the process:

> Most of the people in the UPS store were making merchandise returns — apparently, that’s become a big business for UPS

> Most of the returns were literally thrown into a big box … unpackaged and without paperwork … what happens to that stuff

Hmm
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With that experience fresh in mind, I happened to come across a CNBC article channeling some data from a National Retail Federation report.

> In 2021, the  US Retail Industry reported just over $1 Trillion in online sales

> Of the $1 Trillion, $218 Billion (20.8%) was returned for credit

> Of the $218 Billion, $23.2 Billion (10.6%)  were fraudulent returns

> The $23.2 Billion of fraudulent returns consisted mostly of:

• “Wardrobing” … wearing or using an item for one occasion and then returning it
• Returning items that had been shoplifted, stolen, purchased from another retailer or purchased fraudulently (e.g. on stolen credit cards)
• Resulting from employee fraud or employee collusion with bad actors

Not surprising, a big issue for Amazon and other retailers is what to do with the returns.

The cost of transporting, receiving, sorting, inspecting, repackaging and restocking returns is a costly logistical nightmare … especially for relatively low value items.

So, except for higher priced merchandise, the returns are simply thrown into a big box (as I experienced at the UPS store) … and the box of miscellaneous stuff is sold to scavenger resellers at pennies on the dollar.

See the CNBC article for the story of one couple who scavenges and resells returns.

Presto: logistical problem solved…

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P.S. Don’t feel too sorry for Amazon and other retailers.  Based on my experience, the retailers just charge the cost of the returns back to the manufacturers who treat it as a cost of doing business.

It used to irk me when retailers would promote their “easy returns – no questions asked” policies, knowing that my company (not the retailer) would be funding the retailer’s largess.

This entry was posted on December 22, 2022 at 5:55 am and is filed under Fraud, Retail returns, Retailing. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.