Customer fraud costs retailers £3.4bn a year, finds counter fraud services provider

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One in 10 (5m) UK adults have admitted to committing a fraudulent retail offence, according to research from desktop counter fraud services provider, VFM Services.

Questioning consumers on their retail habits, 2.5m (one in 20) adults admitted to buying clothing from a shop, then keeping the tags on to wear to an occasion, then taking it back to a shop for a refund or exchange. Similarly, almost the same amount at 2m admitted to deliberately damaging an item so that they could get a refund or exchange.

Young adults under the age of 35 were twice as likely to admit to fraudulent behaviours, with almost a quarter (22%) admitting to deliberately defrauding a retailer, with just over one in 20 even admitting to falsely claiming that an item hadn’t been delivered in order to get a refund, or replacement.

Sally Griffiths, director VFM Services, said: “Fraud in the retail industry is a huge problem, and ranges from offences such as falsely claiming a refund, to fraudulently obtaining (and subsequently spending on) a store card. On their own, the amount of money claimed from a retailer may seem insignificant but the frequency is steadily rising, making for an increasing problem, costing the industry an estimated £3.4bn in 2012. It’s time that retailers increased their efforts in stamping out this problem, and looked towards counter fraud methods to help do this.”

Worryingly, there seems to be a significant proportion of people that don’t think they have done anything wrong or illegal in defrauding a company in this manner, said researchers. For example, of those that had admitted to deliberately leaving tags on an item in order to return it after wearing it, over four in 10 (43%) did not believe they were doing anything wrong. Similarly, of those that admitted to damaging an item to get a refund, over a quarter (28%) didn’t think there was anything fraudulent about their actions.

Griffiths said: “Evidence has shown that people will undertake fraudulent activity and are more likely to consider it acceptable if they think that they can ‘get away with it’ with no consequences for their actions. If people can justify it to themselves, such as ‘the company is earning millions, so what’s £50 to them?’ or ‘I spend thousands in this store, so why shouldn’t I get a freebie every now and again’, then they are more likely to commit a fraudulent act.

“Retail staff on the shop floor and in call centres can be trained to use psychological techniques to help identify fraudulent behaviour in customers, which could not only help to reduce fraud, but also to help change the perception amongst shoppers so they realise that it absolutely isn’t acceptable to defraud a retailer, and that actions won’t go unpunished.”

VFM Services said it was amongst the first desk-top based counter fraud detection and prevention specialists in the UK. Its management team pioneered the innovative conversation management technique that is now widely used across several industries to cost effectively detect fraudulent activity over the phone.