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In this photo of July 31, 2013, back-to school fashions are displayed at JC Penney's in New York's Times Square. (AP Photo/Mark Lennihan)
Retailers keeping tabs on consumers’ return habits
Shopping » Companies cite security and fraud issues; consumer advocates raise concerns over transparency and profiling.
First Published Aug 14 2013 09:24 am • Last Updated Feb 14 2014 11:32 pm

WASHINGTON • It’s not just the government that might be keeping tabs on you. Many retailers are tracking you, too — or at least your merchandise returns.

The companies say it’s all in the name of security and fighting fraud. They want to be able to identify chronic returners or gangs of thieves trying to make off with high-end products that are returned later for store credit.

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Consumer advocates are raising transparency issues about the practice of having companies collect information on consumers and create "return profiles" of customers at big-name stores such as Best Buy, J.C. Penney, Victoria’s Secret, Home Depot and Nike.

The practice led to a privacy lawsuit against Best Buy that eventually was tossed out.

Each year, consumers return about $264 billion worth of merchandise, or almost 9 percent of total sales, according to industry estimates.

Many buyers aren’t aware that some returns, with and without receipts, are being monitored at stores that outsource that information to a third-party company, which creates a "return profile" that catalogs and analyzes the customer’s returns at the store.

"I had absolutely no idea they were doing that," said Mari Torres of Springfield, Va., during a shopping trip with her daughter at the Pentagon City Mall in Arlington, Va. "I honestly think it’s an invasion of privacy."

Torres, 39, says she’s a responsible shopper and she’d like to know what kind of information retailers keep on her, with whom they may be sharing it, and how long they keep it.

One company that offers return tracking services, The Retail Equation (TRE) in Irvine, Calif., says it doesn’t share information in the profiles it creates with outside parties or with other stores.

For example, if TRE logs and analyzes returns from a Victoria’s Secret customer, TRE only reports back to Victoria’s Secret about the return activity. It does not then also share that information with J.C. Penney or other retailers that use TRE.


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Even so, consumer advocates don’t like it.

"There should be no secret databases. That’s a basic rule of privacy practices," says Ed Mierzwinski, consumer program director at the U.S. Public Interest Research Group. "Consumers should know that information is being collected about them."

The retail industry says it’s not about monitoring the majority of its shoppers, but fighting theft.

Lisa LaBruno, senior vice president of retail operations at the Retail Industry Leaders Association, says organized retail crime is costing retailers tens of billions of dollars each year.

LaBruno says the problem goes way beyond the small-time shoplifter and involves organized groups of criminals that make a living from the large-scale theft of merchandise. For example, they might switch the UPC code on a $600 faucet with a lower-cost code that rings up at $50. They buy the faucet, then replace the fake UPC tag with the original, higher-priced code, and return the faucet to the store without the receipt for a $600 store credit, which can later be sold online.

"It’s not to invade the privacy of legitimate customers at all," LaBruno said in an interview. "It’s one of many, many, creative solutions out there to help combat a really big problem that affects retailers, honest customers, the entire industry and the public at-large."

The problem, says government privacy experts, is disclosure, or lack of it in many cases.

People need to be aware when they make a purchase that if they return it, some information from the transaction may be stored, according to the experts.

"Most people think when they hand over a driver’s license that it’s just to confirm identity and not to be kept to be used for future transactions," says the Federal Trade Commission’s Bob Schoshinski, assistant director at the agency’s division of privacy and identity protection. "It shouldn’t be that a third party is keeping a profile on someone without them being informed what’s going to happen when they hand over their driver’s license or some other information to a retailer."

In some cases, the disclosure by retailers is conspicuous. In others, not so much.

At Best Buy, a sign at each cash register states the return policy, and it’s also on the back of the receipt, telling consumers that returns are tracked and an ID is required. The disclosure adds: "Based on return/exchange patterns, some customers will be warned that subsequent returns and exchanges will not be eligible for returns or exchanges for 90 days. Customers who are warned or have been denied an exchange/return may request a copy of their ‘Return Activity Report’" from The Retail Equation by contacting the company.

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