By Scott Kreisberg
CEO / Founder, One Step Retail Solutions

On a subject I don't talk much about, I wanted to address a subject that does affect retailers, even with a good POS system. And that's about returns.

Returns is something that can make retailers money however, with poor returns policy it can cost a retailer money. First, I'd like to address how returns can be costly to a retailer.

We can't ignore statistics, and these are showing us some important trends in retail fraud. We're finding that fraudulent returns total $9.6 billion a year, according to figures from the National Retail Federation, and a Return Exchange's Retail Returns Study puts the figure at more than $17 billion annually.

Returns that come through an automated system like your POS can take the burden of granting returns out of the store's hands. The merchandise tag can be scanned at point of sale and, when a customer comes to return an item, the system can verify the purchase and identify the original tender.

Simple enough, except for stores that have instituted a "no question returns" policy, a policy in which criminals have often taken advantage of. With the growth in returns fraud and the money retailers are loosing because of it, this is not a viable policy, and I think many retailers have already discontinued using it if that was in place.

So nowadays, one of the most effective returns policy is "no receipt, no return" and is an approach that appears to be quite effective in deterring fraudulent returns. Requiring proof of purchase would be a mandatory requirement in order to allow an exchange, a store credit, a cash refund, or a merchandise exchange gift card.

Even so, we hear of many cases where customers have tried to return merchandise fraudulently, despite the store having POS technology in place and the customer having receipt at hand. One familiar occurrence is when a customer goes to a retail store to return an item not purchased from that retailer and hands a receipt to the sales clerk. Luckily their POS is tied to a database which promptly informs the clerk that the item had already been returned on that receipt and that they didn't even carry that specific item at this particular store location. In a case like this, the attempted return is without incident.

Having been involved in retail for many years, it has been quite amazing to learn what people will try to do in attempting a return. I once read a story of a woman shopper who brought a dirty shirt to a store to exchange it claiming she purchased it as a gift and that the recipient of it noticed a large stain on the shirt when she opened the package. The gift had been purchased seven months prior and this was obviously a case of return fraud. The store's return policy was vague and they had no choice but to honor all (or most) returns if the customer had a receipt.

Although technology is helping retailers combat returns fraud and minimize losses due to fraud returns, retailers still need to ensure that their returns policies prohibit potential fraudsters.

Well, we have the best POS system, so what else? That is going to be about the parameters you set in your returns policy. To protect yourself further then, there should be a practical time frame in which to return merchandise that is reasonable and the option of receiving credit.

With the right parameters and technology in place, this will make a big difference in a retailer saying "no" to the right people.

On the other hand, knowing when and how to refuse a customer seeking to return an item without a receipt and avoid losing a valued customer relies on the way you manage returns.

Some customers believe that they don't get treated nicely when they try to return unwanted gifts or merchandise. The store should clearly post the store's return policy and be sure employees handle returns in a courteous manner. You can even empower employees who handle customer complaints exceptionally well.

There's a good article "Writing a Return Policy" by Shari Waters of About.com that I recommend for creating a good return policy written.

Now that I've covered how returns can be costly to a retailer without technology and a good returns policy, I'm going to move on to the concept of enabling retailers to make money with returns.

Returns Can Be Good Business

In a "free content" article called ?Profiting From Retail Store Returns? by Stephen Sikes who writes about liquidation auctions and how to make a profit reselling products, he talks about how and why returns are good for your business.

He explains returns as items bought through a store and returned to the retailer by the buyer. Once purchased, that item moves from new to used status and cannot be sold as new. The returns are usually sent to the company's warehouse and accumulate there. Then, after taking up more and more space, they eventually get boxed up and moved out. These generally are sold off in one lot as liquidation items.

Sikes tells how liquidation lots of retail returns are sold at much lower than the wholesale price on the same items, usually 50% cheaper than wholesale price.

He points out that not all liquidation items are good items (in good condition), so there will be some waste included in the lot that you won't be able to sell. That's also why you would want to chose your liquidation sources carefully he says.

Overall, a retailer can make a pretty hefty profit.

So what's returns got to do with it? Well, that depends on what the "it" is and the way I see it, the "it" is doing well in the current economy. I hope this article helps.