Monday, February 3, 2014

Shopping ethics

"Sly shoppers' bag of tricks"

Some money-saving moves are outright fraud, but others are technically allowed. Much of the retail industry has been hesitant to push back.


Tiffany Hsu and Andrea Chang

February 2nd, 2014

Nordstrom is famously forgiving when shoppers change their minds about purchases.

Customers love it — especially those whose motives may be questionable. The Seattle retailer has been known to take back well-worn clothing, shoes bought years earlier and jars of half-used moisturizer.

When Elana Pruitt was a Nordstrom sales employee years ago, she recalled, shoppers would make purchases with gift cards and then quickly return the items for cash. Technically it's allowed, said Pruitt, 33, now a social media coordinator and fashion blogger in Eagle Rock. But she considers it "a bit tacky."

"We had a lot of really great, loyal customers," Pruitt said, "but because the store was so generous with its policies, it was totally taken advantage of."

These days, shoppers are playing faster and looser, experts say. Serial returners have been conditioned by a culture of retail discounting and tight economic times. And the Internet has opened up new opportunities for testing the limits of retail return policies.

At times, the activity amounts to flat-out fraud. Sham returns involving stolen merchandise, items bought with fake money and doctored e-receipts cost the industry $8.8 billion last year, affecting nearly 95% of retailers, according to the National Retail Federation.

But there's also a mushrooming undergrowth of not-quite scams and ethically hazy work-arounds — tricks that regular customers pull to save some money. Spending a minimum of $50 to get a freebie and then returning everything but the gift. Scouring aggregator websites for online coupon codes intended only for a retailer's email subscribers. When buying discounted items that are final sale, asking for a gift receipt just in case — that way, the product can be exchanged later for store credit.

"To me, it's stealing and it's unethical, but it's a gray area," Pruitt said. "I hate thinking that people next to me in line have agendas, but I'm sure they do."

Some consumers justify their tricky tactics as a necessity in a shaky economy or simply as smart shopping. Others call it a form of retail Robin Hooding — retailers, they say, overcharge for products, and those bloated corporations wouldn't miss a few extra dollars, right? And there are those for whom wriggling through the loopholes in a return policy heightens the thrill of a bargain hunt.

And shopping with subterfuge is getting easier as more consumers go online.

In the wilderness of e-commerce, which sprawls across computers, smartphones and tablets, shoppers have birthed new ways to game the retail system. They can namelessly swap deal-hunting tips on shopper forums and plug in multiple dates to repeatedly tap birthday promotions, among other ploys.

"Consumers are savvier and smarter than they've ever been before," said Matthew Ong, senior retail analyst at online personal finance company NerdWallet Inc. "There's so much more information available — they're talking to hundreds, thousands of other people."

Retailers are playing directly into some of the schemes.

Many offer special deals to first-time shoppers or customers who sign up for email lists, hoping to establish a database of information to help with targeted advertising. But anyone with multiple throwaway email accounts can take advantage of such promotions more than once.

Stores also are flinging deals at shoppers to encourage more digital purchasing. Buy one, get one free! Spend $25, get shipping on the house! Freeloaders will exceed the minimum spending threshold online, get hold of the giveaways and then mail back the rest of the haul, never showing their faces.

"The Internet provides anonymity," Ong said. "You can hide behind your purchases in a way you can't at the checkout counter at the store."

But some retailers are finding ways to block sly shoppers.

Online coupon aggregator RetailMeNot said it monitors coupon redemption from users and is in constant contact with retailers such as Macy's and Best Buy. The company said it tightened the rules for what kinds of codes can be listed by users, whose submissions make up a third of the roughly 500,000 codes in the RetailMeNot database.

Nearly three-quarters of retailers now require customers returning items with no receipt to show identification; 12.3% mandate ID even with a receipt — both up from 2012, according to the National Retail Federation.

Starting last year, dresses priced at $150 or more at Bloomingdale's are tagged with visible black plastic markers that, once removed, prevent the item from being returned.

REI plans to begin applying an updated return policy in June, requiring customers to bring back merchandise within a year of purchase instead of allowing them the lifetime of the product to change their minds.

The sporting goods chain said it's making the switch because of a rising rate of returns that "stretched beyond the original intent of the policy, financial impact to REI and the policies of leading retailers."

Increasingly, retailers are also profiling their customers, training extra eyes and employing algorithms to identify problem customers, email addresses or devices, said Avivah Litan, an analyst with Gartner.

"If you aren't investing in security and anti-fraud, you're not going to be successful; your entire profit margin would be eaten away," Litan said. "It can be a make-or-break situation."

Retailers are turning to services that track returns made without a receipt, then forbidding flagged customers from making receipt-free returns for a probationary period. Home Depot spokesman Stephen Holmes said that doing so enables the retailer to "identify patterns, connecting returns to store credits and building out a pattern of abuse and then taking action on that."

The practice, dubbed blacklisting, has become more common in recent years, said Edgar Dworsky, who runs the Consumer World informational service.

More companies are also "slicing and dicing" their return policies, Dworsky said. Instead of a single deadline, stores such as Sears, Wal-Mart and Target now have different return cutoff dates for various product categories — 90 days for clothing returns but only 30 for appliances, for example.

Among online retailers, particularly smaller companies, fees for restocking non-defective returns are popular. Traditional stores do it too. Home Depot employs a restocking fee for certain big-ticket items. Holmes said customers have been known to buy generators before major storms and then try to return them after the bad weather passes.

But much of the retail industry has been hesitant to fight back.

Cracking down on customers would suggest mistrust, a dangerous implication for the cutthroat industry. Besides, many merchants reason, questionable behavior isn't severe enough to be prosecuted. Companies don't mind dealing with a few retail ruffians in order to appear accommodating to the majority of shoppers.

"We deal fairly with our customers and believe they are fair with us," Nordstrom spokesman John Bailey said. "It's about creating a relationship with a customer for the long term."

Many chains keep their return policies loose, and some are even relaxing them.

Best Buy scrapped its 10% to 15% restocking fee on most products in 2010. Macy's used to have a 180-day limit on returns; now it's unlimited with a receipt. And even without proof of purchase, Macy's will give store credit for the item's lowest selling price within the last six months.

Others accept behavior such as "wardrobing" — in which customers buy an item, use it and then return it — as a hazard of doing business. Some 62% of retailers told the National Retail Federation that they experienced that switcheroo last year. Online, as many as one-third of items purchased are returned, according to retail consultancy Kurt Salmon.

"It's an overall benefit for retailers — they'd rather allow customers to treat their homes as a dressing room if it means people will buy more," Kurt Salmon analyst Michelle Bogan said.

Savvy shoppers say that so long as there are generous policies or loopholes, they'll continue to look for ways to take advantage of them.

Paul Weiskel, 24, a political science student at the University of Massachusetts Boston, bought a pair of hiking boots from L.L.Bean about six years ago. He wore them regularly until last summer, when "they basically just disintegrated on my feet." Rather than toss them in the trash, he said, he took the boots back to the store without a receipt and got a $100 gift certificate.

Another trick: When doesn't deliver two-day-shipping purchases on time, he calls the online giant for a $15 credit.

"I think it's perfectly, perfectly fine," Weiskel said. "Most corporations, they have no problems taking advantage of consumers or workers for profit, so whenever a consumer can get a little more bang for their buck, I'm 100% for that."

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