Virtually all South African retailers offer their customers a period within which the customer may return items purchased. Whilst the Consumer Protection Act prescribes flexibility to consumers wishing to return goods that meet the conditions set out in the Act, it is also considered good practice by retailers to accept customer returns. As much as retailers’ customer returns mindset is geared at building lasting relationships with consumers, it is regrettably also an area where shrinkage is unavoidable. (Shrinkage is the term used for any financial loss the retailer incurs during the items returned and refund process.)
Retailers are at times placed in the position of having to transact a return or refund merely to retain a customer, despite the reasons or circumstances of the return or refund being border line acceptable. It is also an area of employee fraud risk. In this article, we unpack how risk enters the client services space and offer a solution to greater visibility of this risk.
Understanding the risk
It is estimated that in South Africa, shrinkage is as high as 5-7% of turnover. Shrinkage includes administrative errors, theft (by shoppers or employees) and fraud.
In the customer returns and refunds space, a collusive relationship between a customer and an employee can have staggering financial implications for the retailer if the employee is in the position to approve returns or refunds in favour of their colluding partner. Where collusion occurs between a customer and an employee, it can be virtually impossible to identify as the collusive relationship is by its very nature surreptitious.
Mitigating risk with Ecentric
This data provides an accurate source for data analysts to extract insights that could signify potential business exposures that warrant further investigation. Because workplace fraud is usually performed in a manner that includes concealment, the interrogation of the data is a critical internal control discipline to ensure concerns such as a greater frequency of refund or return approvals for particular employees, are identified and assessed.
The purpose of ReconAssistTM
- Bank cards
- Value-add services
- Cash reconciliation
- Mobile payments
- Corporate payments
- In-house cards (including charge- and gift cards)
- Bank statements
Ecentric Payment Systems delivers leading technology, expertise and infrastructure to support omnichannel payments.
