Area of Law: Criminal Law
Answer # 1812
Retail fraudRegion: Ontario Answer # 1812
What is retail fraud?
Retail fraud refers to theft of property or money from a retail business, such as a grocery store, department store, discount store, or specialty and small retailers. While most people think of shoplifting or buying something with a stolen credit card as the most common type of retail theft, there are actually many ways individuals can steal from retailers and commit fraud.
Common types of retail fraud
The most common type of retail fraud is the fraudulent return of goods. It refers to the practice of defrauding a retailer using their return policy. There are various scams used by fraudsters to commit return fraud:
- Shoplifting with a receipt: This type of fraud occurs when the fraudster buys something and leaves the store with the item. They immediately return to the store without the item but with the receipt. They then take another of the same item off the shelf and ask for a refund claiming that they’ve changed their mind about the purchase.
- Shoplisting (shoplifting with a found receipt): It is called shoplisting, because in this type of fraud the thief uses a discarded or stolen valid receipt as a shopping list to find items in a retail store and return them for a refund.
- Renting or Wardrobing: When someone buys an item specifically on a short-term basis with the intent to return it, this is known as renting or wardrobing. An example is buying a dress for a special occasion and returning it after it has been worn.
- Tender liquidation: This refers to the purchase of an item with counterfeit money or a stolen credit card, and then returning the item and receiving store credit, which then is sold on an online marketplace.
- Price arbitrage / switch fraud: This occurs when a new, working item is bought and then replaced with an old, broken item. The old, broken item is returned, disguised as the new, working item.
- Price switching: This occurs when a fraudster places lower priced labels on merchandise before buying them in order to purchase them at the lower fake price and return them later for their original price.
- Brick-in-box: This type of retail fraud occurs when someone purchases merchandise, then places random, cheap objects in the original packaging, and returns the package with the fake merchandise for a refund.
Online retail fraud
A great deal of retail fraud now occurs online as online shopping continues to grow in popularity. There are a number of ways online retail fraud can occur:
- Retailers sell and ship goods without requiring that the customer sign to confirm receipt of the item. The customer receives the goods, but says that they did not, and the store gives the customer a refund.
- Online purchases are made using stolen credit or debit cards, either to keep the stolen merchandise for themselves, or to re-sell it.
- Fraudster purchases downloadable gift cards then resells the card or quickly spends it and keeps or sells the merchandise.
- Chargeback or friendly fraud occurs when a consumer makes an online shopping purchase with their own credit card, and then requests a chargeback from the issuing bank after receiving the purchased goods or services.
Credit card fraud
This type of fraud occurs when merchandise is bought with a stolen credit card.
Internal or employee retail fraud
Retail fraud is often committed by employees of the retailer.
The following are three common scams:
- Employee discount abuse
Employees who are entitled to an employee discount without limits, or any type of monitoring of their purchases, buy merchandise and then re-sell it to their friends at lower-than-retail prices and keep the profit for themselves. For retailers who have two or more stores, this can also happen when an employee buys discounted items at one location and someone else returns it without a receipt to another location for a full refund.
This type of internal retail fraud is also known as sweet-hearting, and happens when an employee rings in a purchase for less than the actual price. They might do this for a purchase they are making for themselves or someone they know.
- Employee refund fraud
Retail employees can commit refund fraud when the store policy does not require receipts for refunds to be given. The employee can take the item off the shelf and pretend to ‘return it’ on behalf of a fictitious customer.
If you discover you are a victim of fraud, it is a good idea to contact a fraud recovery expert for advice.
If you have been charged with a fraud or any criminal offence, contact our preferred criminal law experts, The Criminal Law Team
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