Strategy: Best Buy is punishing customers who return too many items — and it’s a disturbing trend sweeping across the retail industry (BBY, HD)

Best Buy is tracking customers' returns.

Best Buy, Home Depot, Victoria's Secret, and other retailers use a third-party company to discreetly track how often shoppers return purchases.

  • Best Buy, Home Depot, Victoria's Secret, and other retailers use a third-party company to discreetly track how often shoppers return purchases.
  • Many shoppers are unaware their returns are being tracked.
  • The third-party company, The Retail Equation, keeps "return activity reports" on customers dating back several years.
  • Best Buy has used The Retail Equation to ban customers from making returns or exchanges.

Best Buy, Home Depot, Victoria's Secret, and a host of other retailers are discreetly tracking how often shoppers return purchases, and in some cases, punishing people who are suspected of abusing their return policies.

Most customers, like Jake Zakhar, don't know their returns are being tracked.

After returning three cell phone cases to a Best Buy store in California, Zakhar was told that Best Buy had banned him from making any returns or exchanges for a year, The Wall Street Journal reports. A Best Buy employee referred him to a company called The Retail Equation for further details.

"I’m being made to feel like I committed a crime," Zakhar told the Journal. "When you say habitual returner, I’m thinking 27 videogames and 14 TVs."

The Retail Equation, which is based in Irvine, California, keeps a running list of customers' returns, called "return activity reports," to help "detect and deter potentially fraudulent consumers, while not impacting any others," the company says on its website.

It says fraud costs retailers up to $17 billion annually in the US.

Some "return activity reports" date back many years. One report obtained by a customer in 2013 turned up returns dating back to 2004, according to the Associated Press.

Other companies that have used The Retail Equation include JCPenney, Sephora, Nike, and Bath and Body Works.

Customers can contact The Retail Equation to obtain their return activity reports.

The company says its services enable retailers to offer more lenient return policies by targeting the 1% of shoppers who abuse return policies.

"Rather than forcing retailers to impose stricter return policies such as 'no receipt, no return' or 14-day limits on returns, the system actually allows retailers to offer the other 99 percent of consumers more lenient and flexible return policies," The Retail Equation says on its website.

But its services have also raised some privacy concerns among customers.

A Best Buy spokesman apologized to anyone "inappropriately affected" by the policy in a statement to the Journal.

"On very rare occasions — less than one tenth of one percent of returns — we stop what we believe is a fraudulent return," Jeff Haydock said. "Fraud is a real problem in retail, but if our systems aren't as good as they can be, we apologize to anyone inappropriately affected."

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