By Khadeeja Safdar 

More consumers are finding out that stores are using a third-party service to monitor their shopping behavior and limit the amount of merchandise they can return.

Best Buy Co. has been the target of a large share of consumer complaints on Facebook, Twitter, Yelp and other online forums about its efforts to police returns with the help of a firm called Retail Equation. But the same service is used by a variety of other retailers, including J.C. Penney Co., Sephora, CVS Health Corp., Advance Auto Parts Inc., Dick's Sporting Goods Inc., Home Depot Inc. and Victoria's Secret. Some only penalize shoppers if they bring back merchandise without a receipt, while others also ding them for receipted returns.

The Wall Street Journal previously reported that Retail Equation develops a "risk score" on each customer based on their shopping behavior, then sometimes issues warnings and denials. The firm, based in Irvine, Calif., receives information about shoppers when they provide a form of identification to retailers.

The actions that hurt a shopper's score and the thresholds for getting declined from making future returns vary by retailer and often aren't disclosed in their policies. Behaviors that can harm a score include returning a large percentage of purchases in a short period and bringing back items that tend to get stolen at that retailer.

Retail Equation said its system is designed to identify 1% of shoppers whose behaviors resemble return fraud or abuse, which occurs when customers exploit the return process, such as requesting a refund for items they have used, stolen or bought somewhere else. The firm said it doesn't share a person's data from one retailer with another.

U.S. retailers lost more than $351 billion in sales last year due to merchandise returns, and an estimated $22.8 billion of that came from fraudulent and abusive returns, according to a report by Appriss Inc., a Louisville, Ky., data analytics firm that acquired Retail Equation in 2015. The company said it used a recent survey conducted by the National Retail Federation to determine the losses. The rise of Amazon.com Inc. has compounded the problem because more shoppers expect to be able to send back online orders with little resistance.

Sue Tillman, 55 years old, of Guilderland, N.Y., said she buys clothes in different styles and sizes online and brings back the extra items at the retailer's physical store. Over the years, she said she has made dozens of returns at J.C. Penney, but has also spent thousands of dollars there. "They are the ones that encourage you to buy online and return in the store," she said.

Ms. Tillman, a social worker, said she received a warning in August from Retail Equation when she tried to return men's shirts at the Penney store in nearby Albany. She said she had a receipt and was following the store's guidelines. After returning one, she said a salesperson told her she would be denied from making returns for 60 days and advised her to contact Retail Equation to request her so-called return activity report, a history of her transactions.

Her report reveals the firm has been keeping track of her shopping behavior for at least seven years. Since the start of 2017, Ms. Tillman returned 10 other items at Penney, each with a receipt, according to the August report, which was reviewed by the Journal.

At J.C. Penney, returning too many items or bringing back products that tend to get stolen such as cosmetics can hurt a shopper's score. Penney uses Retail Equation to help prevent fraudulent or abusive returns, but the system doesn't "impact the vast majority of day-to-day transactions, " said spokesman Joseph Thomas.

While most retailers don't publicize their relationship with Retail Equation, many disclose in the their return policies that they work with a third party.

"When we identify excessive return patterns, we notify those customers that we may limit future returns or exchanges if no proof of purchase is provided," said a Sephora spokeswoman.

Victoria's Secret reveals the thresholds for returns on its website. At the lingerie retailer, owned by L Brands Inc., shoppers can make up to seven returns in a 90-day period and bring back $250 of merchandise over the same time frame without a receipt.

Home Depot said it only uses Retail Equation to track returns with no receipt.

CVS started using Retail Equation last year, and about one-third of 1% of returns have been declined at its stores since, said CVS spokesman Mike DeAngelis. "Similar to other major retailers, we reserve the right to decline to accept a return even if accompanied by a receipt if it does not pass our third-party verification," he said.

Robert Berardino, 43, a technology manager from Millersville, Md., said he learned about Retail Equation for the first time in February when he went to Dick's Sporting Goods in Gambrills, Md., and tried to return three items his wife had purchased online.

He said he brought a receipt but he received a warning notice after the first return, a pair of shoes. Dick's Sporting Goods didn't respond to requests for comment.

"It was insulting," he said.

Write to Khadeeja Safdar at khadeeja.safdar@wsj.com

 

(END) Dow Jones Newswires

April 04, 2018 08:14 ET (12:14 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.
Best Buy (NYSE:BBY)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more Best Buy Charts.
Best Buy (NYSE:BBY)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more Best Buy Charts.