Retail Fraud Gravy Train Could Be Derailed

With the new year of 2009 upon us, we're on the tail end of the holiday season and that means those customer service lines are packed with folks trying to return unwanted gifts for cash or store credit. However, what you may not know is that some of those customers are returning goods they never bought-- and cashiers may even be in on the tricks as well.

We blogged a few weeks ago about the growing trend of retail fraud in retail stores nationwide, and as we said, it's as simple as walking into a store, picking up an item and returning it for a full refund. Return fraud will cost retailers an estimated $11.8 billion in 2008 — $3.54 billion during the holiday season alone.

3VR was featured last week in a segment on CBS 5 San Francisco about our proactive approach to eliminating retail fraud with our surveillance software. The piece focused on our unique facial recognition and surveillance technology, which immediately sends alerts to security personnel the moment suspected fraudsters enter the store. Using the 3VR solution, retailers have access to everything they need to apprehend fraudsters before they can make their escape into a crowded mall or parking lot and before employees clock out for the night.

Research is showing that due in large part to the ailing economic conditions we're facing, retail thefts are no longer mostly limited to customers in urban areas. Both customer and employee hands are stickier this holiday season in more rural regions, demonstrated in the spike in crime in states such as Arizona, Colorado and New Mexico. Coupled with smaller budgets that have forced stores to cut prevention costs, retailers are stuck with tremendous financial losses. Organized Retail Crime (ORC), or "sophisticated crime rings that steal and stockpile huge quantities of merchandise that is sold later to unwitting buyers" in flea markets, pawn shop and other outlets, has also increased in these tough times.

"It's not pure need, but times are tough and the economy triggers people making bad decisions," said Joseph LaRocca, vice president of loss prevention for the National Retail Federation (NRF). An October NRF survey revealed 79 percent of retailers polled have experienced an increase in employee theft compared with the same period in the previous year, and according to LaRocca, retailers lost $34.8 billion in 2007 from employee thefts and shoplifting combined.

Ranging from simple shoplifting tricks and cash siphoning from registers to colluding with customers in sweethearting (when the store cashier works with the customer and intentionally undercharges by skipping items when checking out), retailers are fighting an uphill battle against employee fraud this year. As recent statistics and coverage is showing, proactive solutions like 3VR will be ever more critical in 2009 for retailers looking to prevent these criminal acts from both sides of the transaction and survive the slower revenue streams expected in the year ahead.