Mike Spagnola used to give cash back for store-item returns but ran into some troubles.
One person tried to return a T-shirt that Spagnola didn’t even sell in his Underground shop in Galloway Township’s Historic Smithville and Village Greene. Another bought a pair of sunglasses, walked around the Village Greene all day and then tried to return the glasses at night.
Spagnola soon after changed his return policy to store credit.
“As a small-business person, we just can’t afford to do that anymore,” said Spagnola, 53, of Smithville. “For us, it’s just a matter of survival. If the big-box stores can do that, then good for them, but as a small-business owner, we just can’t.”
Stores from mom-and-pops to large chains grapple with how to please their customers while cutting down on fraudulent returns, which will cost retailers $2.2 billion this holiday season, according to a survey from the National Retail Federation.
Nearly 4 percent of all returns are fraudulent, the trade group said, and the issue has prompted many stores to offer only store credit for returns.
Some big-box stores, such as Wal-Mart and Kohl’s, have “no hassle” policies that don’t require receipts. That can lead to problems.
Last week, 13 people from Atlantic and Cape May counties were indicted as members of an alleged shoplifting ring accused of stealing more than $100,000 in clothes from Marshalls and T.J. Maxx stores and returning them for gift cards, according to a statement from state Attorney General John Hoffman.
Authorities said the clothing was returned without receipts.
Small businesses in particular have varying return policies based on principle or past experiences.
Yesse Sanchez, an employee at Celebrity Collectibles in Smithville, said the store only does returns if receipts are present.
“I’ve had one person that was mad that he couldn’t get his money back, but without a receipt there’s not much we can do,” said Sanchez, 22 of Galloway.
Sanchez said she is sure return fraud happens everywhere, but she believes it to be more common at national retailers.
“More people go to Wal-Mart, so obviously there will be more chances of fraud. But here we have more of a customer relationship,” Sanchez said.
Returns represent a large component of retail.
The National Retail Federation estimates total annual returns will reach nearly $261 billion, or 8 percent of total retail sales.
Dianne Luttrell, owner of Santa Fe East in Smithville, said she doesn’t see fraudulent behavior when it comes to holiday returns.
Luttrell said she knows the merchandise, which in itself is unique.
In fact, Luttrell said, if a piece of jewelry is damaged, she will mail it to the artist for repair and then give it back to the customer.
“Most stuff is made by the owners or personally bought by them. The winery bottles some of their own wine, and Little Egg Harbor Soap make their own soap, so we all know the product we are selling,” Luttrell said.
Robert Koch, co-owner of Two Country Ducks in Smithville, specializes in seasonal decor.
He said that during the holiday season, he will accept returns and offer cash back for products, even if they are opened or used. Koch said he has never had a problem with his method of return and credits his customers for not letting him worry.
“The best thing to take care of is the customer, and the best thing you can do is work to help them out,” Koch said.
Spagnola still believes fraud happens everywhere and said he remains cautious.
“We just can’t afford to allow it,” he said.