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Retailers using databases to rein in sub-optimal customers

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Retailers using databases to rein in sub-optimal customers

Old 11-07-04, 06:18 PM
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Retailers using databases to rein in sub-optimal customers

Eeenteresting:

http://www.sfgate.com/cgi-bin/articl...GP89NDF118.DTL


Retailers turning to databases to rein in customer returns

Ariana Eunjung Cha, Washington Post
Sunday, November 7, 2004

Washington -- Darlene Salerno considers herself a loyal customer of the Express clothing chain, shelling out roughly $2,000 for its trendy outfits each year. On a recent shopping trip, she bought a tank top, a button-down shirt and some khaki pants, but realized when she got home that she had similar items in her closet. So a few days later, she took them back to the store. She presented the items, the receipt and waited for her money.

Instead, the saleswoman handed her a slip of paper that said "RETURN DECLINED" and told her to call the toll-free number at the bottom for more information. She phoned and was informed her account showed "excessive" returns.

As the holiday shopping season gets into full swing, a number of major retailers -- including KB Toys and Sports Authority, according to store personnel -- are rolling out electronic systems that weigh the number of returns and exchanges a person has made, the dollar value of the items, and the dates of the transactions to decide whether a consumer should be granted another. The systems are designed to catch shoplifters and those who "wardrobe, " wearing clothes and then returning them for a full refund.

But Salerno, a receptionist at a Manhattan financial firm, said she falls under neither category. She returns things often because she buys things often. She said she feels she has done nothing wrong -- the clothes were never worn, and the tags were still attached -- but that she was treated like a criminal.

"I'm embarrassed to go into the store," said Salerno, 26. "I love their clothes, but I'm afraid to shop there now."

As more personal information is collected into databases, computers have been handed increasing power to make decisions about our everyday lives. The technological systems intend to solve costly and important business problems, but the proliferation of these so-called electronic blacklists has alarmed consumer and privacy advocacy groups who say many databases have incomplete, incorrect or misleading information.

"Technology has made it cheap to do all kinds of surveillance and watch over people and make sure they obey the rules. But when a system makes a mistake, what can you do?" said Richard Smith, an Internet security and privacy consultant.

The Fair Credit Reporting Act of 1970 gives consumers rights concerning information used to make decisions about credit, insurance, employment or other services. Other federal laws impose disclosure requirements on information collected by the medical establishment or the financial services industry. But increasingly, companies are creating databases not envisioned by such regulations, and there is debate about which laws, if any, apply.

Among the databases being created is one for landlords that purports to list renters who have been evicted. Others claim to identify "known" spammers. St. Louis-based Talx Corp., meanwhile, has compiled more than 100 million employee records that contain names of companies, dates of employment and job titles. More than 1,000 firms make use of the service to speed along the screening process for potential new hires.

But workers worry that some companies, for instance, use the word "inactive" to refer to people who have left the company for any reason; other companies use "terminated."

Another company, DoctorsKnowUs.com, created a database of people who have filed malpractice claims as a resource for doctors. John S. Jones, a radiologist from Kaufman, Texas, who spent seven years compiling the information for the site, said he took it offline after some patients complained that it was impossible to differentiate between those with legitimate claims and those with frivolous ones, and that all could be denied care by those using the list. Since then, however, Jones has received hundreds of e-mails and phone calls from doctors who want the site back online.

"It was public information. ... I was simply aggregating it," he said. "The site was mischaracterized as a blacklist."

A spokesman for Limited Brands Inc., which owns the Express stores, declined to answer questions about its computerized return authorization system. Mark Hilinski, a co-founder of Return Exchange Inc. in Irvine (Orange County), a company that provides technology for the retail chain, said the computer denies returns to 1 to 2 percent of customers at most stores. He said even though the database is not subject to the requirements of the Fair Credit Act, his company provides consumers a free copy of their report when they ask, and it gives them an opportunity to correct inaccurate data. He added that very few have disputed the information.

Return fraud has been a major drain on retailers' coffers. Richard Hollinger, a professor of criminology at the University of Florida in Gainesville, said that retailers in 2003 lost nearly $30 billion, or 1.7 percent of sales, because of fraud and that roughly half of that may be related to bad returns. In recent years, scammers have used the Internet to launder the money -- people steal merchandise, return it for credit slips at stores, then turn those credit slips into cash by selling them at a discount on EBay or other online auction sites.

Retailers like the Limited are fighting back. Sometime in the spring, consumers and Express workers say, the store began replacing the placards denoting its return policy with new signs saying the company uses an "industrywide" system to authorize returns and that "under certain circumstances we reserve the right to deny returns."

Some consumer and privacy rights advocates say they sympathize with retailers' desire to root out fraud but said they are worried that disclosure about the electronic tracking system has been inadequate. Jordana Beebe, a spokeswoman for the Privacy Rights Clearinghouse in San Diego, said consumers should be told exactly why their return is denied and warned before they hit that point.


This is only the tip of a much larger iceberg. That is for certain.
Old 11-07-04, 06:20 PM
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Wow, if barring people from making returns based on questionable returns in the past, this entire forum would be blacklisted.
Old 11-07-04, 06:25 PM
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Did they eventually take the items back? Did they admit their mistake and accept the return in the end? Sure this new system is a PITA, but how are mistakes handled?
Old 11-07-04, 07:04 PM
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This practive won't last long. Only "stupid" retailers would adopt policies that actually drive customers away. There's so much competition for the consumer's dollar between stores....that a slight shift in percentage either way would have major implications on their bottom line.
Old 11-07-04, 07:13 PM
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Originally posted by BigPete
Did they eventually take the items back? Did they admit their mistake and accept the return in the end? Sure this new system is a PITA, but how are mistakes handled?
The article doesn't suggest that they made a mistake.
Old 11-07-04, 07:21 PM
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Originally posted by wabio
This practive won't last long. Only "stupid" retailers would adopt policies that actually drive customers away. There's so much competition for the consumer's dollar between stores....that a slight shift in percentage either way would have major implications on their bottom line.
On the contrary, I believe the practice will flourish. According to the corporate numbers posted in the article, the policy only effects 1 to 2 percent of customers. Of those, I would guess that people like Darlene Salerno constitute a minority. Your statement also assumes that any otherwise honest customer who is denied a return would not shop there anymore (or at a substantially reduced rate).

The fact of the matter is that profit margins in retail are often fairly thin. Not all "customers" actually contribute to profits. Even someone like Salerno (assuming she is as honest as she claims to be) can cause a net loss by returning too many items that she purchases.

I can definitely see retailers leveraging technology trying to maintain the 80% of customers who help their bottom line while at the same time trying to shed or hinder the 3-4% who do not, especially in this environment of decreased shopper anonymity.

Of course, she can avoid the Db's wrath simply by paying cash and lying when they ask for a phone number.
Old 11-07-04, 07:26 PM
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anandtech had a big post about this the other day.

I for one have no problem with this. People that abuse the system cause stuff like this to happen.
Old 11-07-04, 07:44 PM
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Originally posted by Groucho
Wow, if barring people from making returns based on questionable returns in the past, this entire forum would be blacklisted.
Funny but not too far off the mark.
Old 11-07-04, 07:51 PM
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I'm not worried as I'll just call my credit card company and deny the charge if this BS ever happens to me! I don't return many items anyway.

Sonic
Old 11-07-04, 07:51 PM
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i think this policy is only for the tiny majority of people that believe every retailer should have costco's return policy. the person in the story is the type that buys up a ton of stuff, takes them home and then returns them after she changes her mind. Only reason the retailers don't like it is because it costs them a lot of money.
Old 11-07-04, 07:53 PM
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Originally posted by JustinS

Of course, she can avoid the Db's wrath simply by paying cash and lying when they ask for a phone number.
I believe that they require a drivers license as a form of ID for returns.

Sonic
Old 11-07-04, 07:56 PM
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Originally posted by Sonicflood
I'm not worried as I'll just call my credit card company and deny the charge if this BS ever happens to me!
In other words, you'd commit fraud?
Old 11-07-04, 07:57 PM
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If this can lead to lower costs, I'm all for this
Old 11-07-04, 07:58 PM
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I thought that you have a right to a return within 30 days in New York State, no?
Old 11-07-04, 08:13 PM
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I never return stuff anyways. I make up my mind first...
Old 11-07-04, 08:21 PM
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Originally posted by TomOpus
If this can lead to lower costs, I'm all for this
My guess would be that lower costs would not mean lower prices but higher margins.
Old 11-07-04, 08:37 PM
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Originally posted by Sonicflood
I'm not worried as I'll just call my credit card company and deny the charge if this BS ever happens to me! I don't return many items anyway.

Sonic
and a retailer will simply furnish the cc company with a receipt with your signature. a lot of them are going to all electronic receipts and signatures making recall very easy.
Old 11-07-04, 08:41 PM
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Originally posted by Bushdog
Funny but not too far off the mark.
Hey now. Watch your mouth.
Old 11-07-04, 08:56 PM
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Limiting returns with a receipt [as long as all the other conditions are met, ie, time frame, new condition, etc.] sounds like a load of crap. I can see limiting no-receipt returns.
And yes, if this does lead to lower costs, it'll assuredly be higher profit, not lower prices. Just like the atms and the self-checkout counters [ironically, the one grocery near me that has that has prices that are 5-20% higher than anywhere else.]
I don't return stuff a lot, but when i do [with receipt and in new condition], I expect them to take it back. The first time this happens to me, will be the last time I buy from that store.
Old 11-07-04, 09:06 PM
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The reason places avoid returning things without recipets is refund fraud. People pick up an item from the store, walk to the counter, then ask for the money back. Employees will also do it in some stores to their own stock (this is why you normally have to fill out paper work to make a return, so there's proof someone was actually there and returning something) it's not like many retail stores pay wages that attract responsible people.
Old 11-07-04, 09:44 PM
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This policy seems pointless to me--if someone has a receipt and is returning in new condition within a reasonable amount of time, they ought to get a refund. Making a convoluted return policy could just end up as a legal battle. I wouldn't sue over this (I'd just never shop there again)--but I could see someone suing if they felt singled out as someone who wasn't allowed to make returns. For this to work, I think they'd need to post their policy and be explicit about how many returns they allow.
Old 11-07-04, 09:46 PM
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Interesting.
Old 11-07-04, 10:15 PM
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I've got no problem with this particular policy, but I don't think a generic sign like what's described in the article is adequate prior notification. I think that customers that are flagged in this manner should be notified verbally by the clerk at time of checkout as well as having a special notice printed on the receipt.
Old 11-07-04, 10:45 PM
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Been hearing about stuff like this for a while.... mainly it's supposed to address fraud and PITA customers... PITA customers are ones who 'wardrobe' (as per article) or make frequent purchases and returns taking up employee time and store resources for very little profit to the store. The customer who has a valid reason for a return and only does so occasionaly should not be affected by these policies.
Old 11-07-04, 11:32 PM
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My parents got blacklisted because they kept trying to return me to the local black market.

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