Guest guest Posted December 4, 2004 Report Share Posted December 4, 2004 If you think 's privacy wasn't bad enough. From another list. Dale - By STEPHANIE KANG > Staff Reporter of THE WALL STREET JOURNAL > November 29, 2004; Page B1 > > As the holiday shopping season begins, retailers are deploying new > technology designed to crack down on one of the industry's biggest > frustrations -- customers who abuse return and exchange policies. > > Retailers such as Guess Inc., Staples Inc., Sports Authority Inc., > and Limited Brands Inc. are among those using software called > Verify-1, a product of Irvine, Calif.-based Return Exchange. The > closely held company helps retailers decide whether to deny returns or > exchanges using a program that monitors a shopper's track record of > bringing items back. > > Such tactics are raising the ire of shoppers and privacy-rights > groups who say the new technology is often an unnecessary and > intrusive violation of consumer rights. > > Retailers say they are on the lookout for various forms of fraud, > including " serial wardrobers " who buy an outfit, wear it once or twice > and return it; shoplifters who return stolen merchandise; employees > who steal items and return them for cash; price switchers, who change > price tags on items, then return one item for the higher amount; and > shoppers who use fake or old receipts when making a return. > > Return Exchange's Verify-1 system works like this: When a customer > wants to return an item, the sales clerk asks for his or her driver's > license or other form of state-issued identification, and swipes it > into a machine much like those used to make credit card or ATM > purchases. The shopper's name, address and birthdate is logged into a > database. The program records details about the transaction, such as > the store number, the amount of the return, the date, time and item > description. > > All that information is stored on the Return Exchange's server in > Santa Ana, Calif. Most transactions end there. But if a customer's > " return behavior " seems out of the ordinary, the transaction is > rejected and the consumer is given a receipt that instructs him or her > to call the company's toll-free number for a copy of a report > detailing their return activity. Shoppers can also request that Return > Exchange investigate the rejected return. The program keeps tallies of > the type of transactions, the total amount of the returns and the > number of exchanges. > > The company says the data are available only to Return Exchange, the > customer and executives at the retailer. Other personal information, > such as a shopper's physical characteristics, is not recorded. > > Return Exchange was co-founded by executives who previously worked at > companies that tried to prevent credit-card and check fraud. Verify- 1 > first went on the market in March 1999, and its latest version is the > result of a $20 million development project that culled the efforts of > software engineers, statisticians and Arthur Andersen consultants. > Since its inception, company executives say Return Exchange has grown > to an estimated $10 million a year business -- with its software used > in at least one store in every mall in America. > > " It's the last big hole retailers need to fill, " says company senior > vice president of sales and marketing Mark Hilinski. > > The use of Verify-1 is just the latest move by retailers intent on > curtailing return fraud, says University of Florida criminology > professor Richard C. Hollinger. According to the 2003 National Retail > Security Survey, compiled by Prof. Hollinger, the retail industry lost > about $16 billion to fraudulent behavior. > > Until now, retailers have focused on tracking fraud at the time of > purchase. New technology monitors unusual activities like price > overrides -- the purchase costs $75 but the customer is charged $25, > for example. Camera surveillance also pinpoints questionable behavior. > Verify-1 tracks customers, however, only when they return or exchange > items. > > " Retailers have been either ignorant of the extent to which return > systems have been abused or lacked the technology to be able to > develop databases that were easily retrievable, " Prof. Hollinger says. > > According to retail consulting firm KingRogers International, in > 2003, the return rate for specialty retailers was 10.6% of total > sales, higher than the industry average of 8.58%. About 9% of all > returns are estimated to be fraudulent. > > There's a delicate balance, however, between aggressively catching > crooks and alienating honest customers. " They want something that is > customer-friendly, " says Dan Butler, vice president of retail > operations at the National Retail Federation, a trade association. " At > the same time they want to isolate dishonest behavior. " > Verify-1 > The program has come under fire from consumers. Beth Givens, director > of the nonprofit Privacy Rights Clearinghouse, says one initial > concern was that Return Exchange might aggregate data, meaning that > data about a customer's returns to one retailer could affect his > returns at a second retailer that also uses the monitoring software. > Return Exchange says it doesn't aggregate data. > > Ms. Givens, who has met with company executives, says she thinks the > company generally has a " robust " privacy policy. Still, she's > encouraging the company to be more transparent about how it pinpoints > fraudulent behavior. (No group or individual has seriously challenged > the right to return purchases under this program.) " By not sharing the > rules of the game, the companies are playing a game of gotcha and I > don't think that's fair, " she says. > > Mark Hammond, co-founder and chief executive of Return Exchange, says > the software looks at a variety of factors when determining denials > but he declined to give specifics of the process. He says he doesn't > want to give " the bad guys " clues on beating the system. > > Concern that honest customers might be hurt by the technology was an > issue for Joseph Toth, senior vice president of Los Angeles-based > specialty apparel retailer Guess. Since Aug. 30, the Return Exchange > has been monitoring -- but not enforcing -- returns at 16 of its > stores in an effort to glean information about its return rate. Mr. > Toth won't see the data until the pilot program is finished at the end > of the year, but he says Guess hasn't received any official complaints > when customers were asked to swipe their driver's license. > > " There have been some conversations at the register, but no incident > where someone went nuts and said 'I won't give my driver's license, > he says. However, about 10 customers didn't go through with the return > once they were informed of the policy, Mr. Toth says, evidence that > Verify-1 may work as a deterrent. > > Using the technology means store employees, many of whom are in their > late teens and early 20s, are not deciding whether to permit returns. > " There is no arguing with this, " he says. Mr. Toth says Guess will > decide early next year if it will use the software full time. > > Return Exchange executives say they decline about 1% of returns for > each retail client, a much smaller percentage than what retailers > reject on their own. Still, two out of every 100,000 transactions have > been challenged this year and 10% to 15% of those challenges resulted > in the Return Exchange changing the information in a customer's > report. Retailers then decide whether to refund the item. > > The more frequent occurrence may be from customers unaware of the ID > requirement. Carmen Wolf says she refused to hand over her driver's > license when she tried to return pants and shirts from the Express > store in the Glendale Galleria mall in California. Ms. Wolf says no > signs about the policy were posted at the store or detailed on her > receipt. An Express employee " made me feel like some sort of > criminal, " she says. She was denied the return even though she had her > receipt and the tags were still on the clothes. Express couldn't be > reached to comment. > > With help from the Better Business Bureau, Ms. Wolf six weeks later > received a refund for $267. " It just seemed so wrong to impose on me > something that I never agreed to and was never informed about, " she > says. " I will never shop there again. " > > Write to Stephanie Kang at stephanie.kang@w... Quote Link to comment Share on other sites More sharing options...
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