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8 Ways to Fight Retail Fraud

Retail fraud is a serious problem for businesses. Bad actors target businesses and steal from them in a multitude of ways. While there are few obvious signs of fraud, much of this behavior flies under the radar.

Thanks to new technology and savvier preventative measures, detecting fraud is easier than ever before. Learn more about retail fraud prevention and the various techniques fraudsters use to scam businesses.

Types of Retail Fraud

There are many different ways people commit retail fraud. Here are some of the most common methods they use to scam the system and steal from retail businesses:

Internal Fraud

Internal fraud refers to instances when employees steal or help others steal from their employer. There are various forms of internal fraud, including sliding and sweethearting.

Sliding occurs when a worker obstructs part of a barcode when scanning items to make it appear as though they accounted for merchandise in the transaction when they didn’t. Sweethearting is when a worker gives items a false price adjustment or wrongfully voids a transaction entirely. Another form of internal fraud is point of sale fraud, where workers either steal directly from the register or purposefully give out extra change.

Credit Card Fraud

Payment fraud is a significant problem for retailers. In 2020 alone, it led to over $28 billion in losses worldwide.

Identifying credit card fraud can be challenging for retail workers, but here are some familiar signs:

  1. Hurried or random transactions

  2. Orders with different billing and shipping information

  3. Inconsistency and hesitation regarding personal information

People also commit gift card fraud by using stolen information to load money onto the card or using someone else’s card information to make purchases before the rightful owner can.

Refund Fraud

There are many forms of return fraud in retail. Some people swap price tags before making a transaction to get a lower price for the merchandise. Others do something called buy one, steal one, where they purchase one item and shoplift another, but return both items together to receive profits from the stolen merchandise.

Another style of refund fraud is wardrobing, where someone returns an item after wearing it. They may tuck or re-attach tags to make it seem like they never used the item. Retailers should be aware that their employees can also assist customers with refund fraud.

Vendor Theft

Vendor theft occurs when a third-party vendor steals from a retailer. This type of fraud can happen in transit before a worker delivers the merchandise. It can also happen when they have access to the retail location’s back of house.

Discount Abuse

This type of retail fraud occurs when either a customer or employee purposefully misrepresents themselves or facts about them to receive a discount.

Loyalty fraud is also part of this category. Workers may steal loyalty rewards from shoppers by putting their own loyalty program information in the system when completing a transaction.

8 Ways to Prevent Retail Fraud

There are a few things retailers can do to minimize retail fraud and protect their business. Check out these eight ways to fight fraud:

1. Aim to Fight Fraud Before It Happens

The key to combatting fraud is taking preventative measures to stop it before it happens. Every retail business should have carefully thought out policies to mitigate employee and external fraud.

Training employees to identify and address fraudulent activity can help reduce customer theft. Proper data and surveillance monitoring can help minimize employee fraud before it occurs.

2. Hire the Right People

Because internal fraud is a major concern for retailers, it is essential to hire the right employees. Doing things such as performing background checks and conducting in-depth interviews can help employers choose honest workers who respect the business.

Retailers should also consider implementing strict employee policies like not letting workers execute transactions for friends or family members.

3. Be Wary of Missing Shipping Receipts

Since returns accounted for more than $761 billion in retail losses in 2021, retail workers should be wary of people trying to do a return without a shipping receipt. Returning stolen items is a common way fraudsters make money.

Creating strict return policies requiring customers to bring receipts can help mitigate these scams.

4. Always Verify the Postal Number and Zip Code for Deliveries

Another way retailers can fight fraud is by doing due diligence with every delivery. Businesses should be very particular about where delivery personnel can go within the store. They should also screen every delivery to verify the postal number and zip code. Greater security measures with deliveries are an effective way to fight fraud.

5. Beware of Detached Packaging, Security Scotch Tape and Clips

Along with monitoring deliveries closely, retailers should also consider implementing policies to address suspicious situations such as detached packaging and the presence of security components like tape or clips. These things may indicate theft. You could stop bad actors in their tracks by teaching your team to identify tampering or possible fraudulent packaging.

6. Analyze Data in Your Discounting Program Effectively

A useful way to fight fraud is to analyze the data related to your discounting program. This data will reveal if there is any strange activity regarding sales or loyalty programs. Comparing your inventory data with your transaction data can help identify possible theft. Meticulous data analysis is important for detecting fraudulent patterns early.

7. Use Data to Look for Signs of Fraud

Again, the use of data is very insightful when looking for signs of possible fraudulent activity. Having a system in place is essential for reducing shrinkage and addressing recurring problems.

Data can help retailers identify things like employees that have a history of completing fraudulent transactions or suspicious loyalty program activity.

8. Use Kaseware Technology to Help You Fight Retail Fraud

Retailers can boost their security efforts by utilizing a digital-first approach to mitigating fraud.

Kaseware offers fraud investigation software that utilizes data and analytics to identify trends in your retail business that may indicate fraud. This technology includes intuitive dashboards that make it easy to manage concerns and tips efficiently. Implementing Kaseware software can enhance your fight against retail fraud.

Combat Retail Fraud with Kaseware

Kaseware can help your retail business fight fraud and protect your profits. You can feel good about the level of security you receive when working with our platform because former FBI special agents designed it. We have the tools and offerings to help you get ahead of fraud and minimize its impact on your business. 

Interested in learning more about how Kaseware can help your business fight retail fraud? Schedule a demo today!


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