Retail

Here’s How The Opioid Crisis Is Losing Retailers $9B A Year

Here’s How The Opioid Crisis Is Losing Retailers $9B A Year

Major retailers such as Target, Home Depot, Walmart and Lowe’s have been forced to introduce stricter return, store credit and gift card policies in response to a troubling trend. These seemingly harmless customer services are being used as currency in an unlikely and dangerous economy that is supporting the drug habits of people who suffer from opioid addiction.

They say gift cards are the gift that always fits. According to an in-depth investigation by CNBC, this is especially true if you’re desperate for your next fix.

“I feel like I could’ve found a way around any rule they make,” Ashlee Smith, 24, told CNBC. Smith used drugs for the past decade before starting her recovery journey at Gateway Community Services in Jacksonville, Florida. “As an addict, I just feel like I go to any length.”

Kristin Booth, 23, agreed with her. Booth has been arrested twice for retail return fraud related to gift cards and is now in recovery from heroin and oxycodone addiction at Gateway with Smith.

“When you’re suffering from addiction, any length means any length,” Booth told CNBC. “I would get receipts and take them back in there, and I would go and take things off the shelf. I would make sure I left the store so on camera it looked like I purchased the items, and then come back [and] go to customer service.”

Law enforcement and individuals in recovery say the scam isn’t hard to pull off. Thieves simply walk into Walmart, Target, Home Depot, Lowe’s or another big-name retailer, steal an item — preferably one that is small in size but high in value — return it at a different store without a receipt and receive a gift card in return, which they can then turn around and sell to a pawn shop or secondary store for a lower price.

It’s called return fraud, and unlike the cyber fraud that has become so rampant in the changing retail environment, it requires no technical know-how, other than the knowledge of how the system works and what a person can get away with at major retailers.

Returns can be made without receipts, but stores will check the ID of the person making the return — so, if the person has been making returns at other store locations, the retailer can pick up on the pattern and flag that individual, preventing him or her from gaming the system the next time.

However, people who are desperate for their next fix can find a way around that easily enough. Amber Ross, 27, another Gateway patient, told CNBC that she could avoid using her own ID by asking someone else to cash in the gift card using theirs. Ross said she would give the accomplice a cut of the cash proceeds before calling her dealer and spending the rest on drugs.

Retail return losses total between $9 billion and $15 billion per year, according to a 2017 survey by the National Retail Federation. In addition, the crime cuts into state sales tax revenue: Tennessee loses more than $14 million a year to return fraud.

More than half of companies (57 percent) reported fraudulent gift cards or store credit in one or more locations. That’s down from 66 percent last year, but still a significant number.

Police and retailers are catching on to the issue and are doing their best to curb it with stricter rules, since the sources in recovery have clearly demonstrated that requiring ID for returns and flagging individuals for repeated returns are hardly barriers to a desperate thief.

For instance, Home Depot now only accepts store credit for in-store purchases, not online ones, and requires ID when credits are redeemed, thus limiting the resale value of store credit. Customers cannot use credits to buy gift cards and cannot redeem gift cards for more gift cards, either.

Walmart and Lowe’s also reported that they had upped their standards and procedures surrounding no-receipt returns, with Lowe’s and law enforcement joining forces to hold gift card fraudsters accountable.

Retailers themselves are not alone in pushing for further action. One Florida-based company, Retail Theft Analysis, is pitching its software to law enforcement to help police keep tabs on how many gift cards stores buy, how many individuals sell and the values of those cards.

If somebody is bringing in hundreds of thousands of dollars’ worth of gift cards, that’s a red flag that the individual is probably doing something fraudulent, and is also a sign that the store he’s selling to is not paying enough attention to their sources.

In some cases, law enforcement is now requiring that secondary markets report all cash-for-gift-card transactions, but this is difficult to enforce and there is no penalty for not complying. Now that the connection between gift cards and the opioid crisis is known, regulators and law enforcement plan to get tougher on store return fraud next year.

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