The Wall Street Journal reports today on Best Buy’s aggressive anti-returns policy. The reason this looks, and is, ugly, is that it appears that the electronics retailer is violating consumer advertising fraud rules. We’ll get into more detail, but at a high level, Best Buy has hired a snoop service, Retail Equation, which apparently also serves other retailers.
Return fraud is a legitimate problem. Customers can and do try to return stolen items, or ones they’ve broken or even merely used. The Journal reports that 11% of items bought at retail are returned, and of that, 11% (no typo) are believed to be fraudulent returns.
However, some online vendors are encouraging customers to view returns as integral to the purchase, and go to great lengths to make returns easy. For instance, many stores that sell shoes will include a UPS return tag. You don’t need to call, you can just give the box to the UPS man if he comes regularly to your building or call to have him pick it up. You will be charged something modest for the return, like $6.95. But it is as close to frictionless as it can be made.
The problem with what Best Buy is doing is that it is advertising a not-very-restrictive returns policy, when in fact if you try returning goods “too often,” even if you are adhering perfectly to Best Buy’s advertised policy. Even though Best Buy is somewhat restrictive, it’s rules are supposedly clear: customers can return products in 15 days if they have a receipt.
But there is the stated policy versus the actual policy. From the Journal:
While other merchants have been tightening their policies (the famously generous LL Bean standard of “lifetime satisfaction” has now been dialed down to a mere “return in a year or less), discriminating by using an unaccountable third party also raises questions of discrimination that ought to raise red flags. It is not hard to imagine that these programs also filter by ZIP code, which is a proxy for general income ranges and also have their ethnic mixes well tracked by companies that specialize in consumer market segmentation. And this is consistent with the fact that the Journal depicts Retail Equation as giving consumers a score. Retail Equation lists some of the that can get you dinged:
Return fraud is a legitimate problem. Customers can and do try to return stolen items, or ones they’ve broken or even merely used. The Journal reports that 11% of items bought at retail are returned, and of that, 11% (no typo) are believed to be fraudulent returns.
However, some online vendors are encouraging customers to view returns as integral to the purchase, and go to great lengths to make returns easy. For instance, many stores that sell shoes will include a UPS return tag. You don’t need to call, you can just give the box to the UPS man if he comes regularly to your building or call to have him pick it up. You will be charged something modest for the return, like $6.95. But it is as close to frictionless as it can be made.The problem with what Best Buy is doing is that it is advertising a not-very-restrictive returns policy, when in fact if you try returning goods “too often,” even if you are adhering perfectly to Best Buy’s advertised policy. Even though Best Buy is somewhat restrictive, it’s rules are supposedly clear: customers can return products in 15 days if they have a receipt.
But there is the stated policy versus the actual policy. From the Journal:
Jake Zakhar recently returned three cellphone cases at a Best Buy store in Mission Viejo, Calif., and a salesperson told him he would be banned from making returns and exchanges for a year. The 41-year-old real-estate agent had bought cases in extra colors as gifts for his sons and assumed he could bring back the unused ones within the 15 days stated in the return policy as long as he had a receipt.
The salesperson told him to contact Retail Equation, based in Irvine, Calif., to request his “return activity report,” a history of his return transactions. The report showed only three items—the cellphone cases—totaling $87.43. He asked the firm to lift the ban, but it declined. When he appealed to Best Buy and tweeted his report, the company referred him back to Retail Equation.
“I’m being made to feel like I committed a crime,” said Mr. Zakhar. “When you say habitual returner, I’m thinking 27 videogames and 14 TVs.”It is not clear that this policy is even remotely legal in light of Best Buy having a published policy that says nothing about limiting returns and that Best Buy is not claiming that Zakhar engaged in any kind of fraud. In fact, if he wanted to make an issue of it, he could pay on a credit card, return the merchandise, and then dispute the charge if Best Buy tried to refuse his attempt to return undamaged goods. He might need a buddy to film or otherwise provide proof of his effort to return goods.
While other merchants have been tightening their policies (the famously generous LL Bean standard of “lifetime satisfaction” has now been dialed down to a mere “return in a year or less), discriminating by using an unaccountable third party also raises questions of discrimination that ought to raise red flags. It is not hard to imagine that these programs also filter by ZIP code, which is a proxy for general income ranges and also have their ethnic mixes well tracked by companies that specialize in consumer market segmentation. And this is consistent with the fact that the Journal depicts Retail Equation as giving consumers a score. Retail Equation lists some of the that can get you dinged:
Returning an item after a certain period
Returning items that tend to get stolen at the retailer
Returning a high dollar amount
Returning an item just when a store closesIn other words, if you are a perfectly upstanding customer making a return that is kosher (goods in fine shape, valid original receipt), you still get dinged simply because someone who is engaging in fraud could engage in a behavior that has an element in common with what you did (return a costly item, show up near closing time).
by Yves Smith, Naked Capitalism | Read more:
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