Fraud And Its Impact On Retail Industry

Fraudulent activities have been increasing year over year ever since retail stores started retailing, and this growing industry have seen multiple frauds over years which have affected the profits and their bottom line. Whether frauds have happened through cash payments or counterfeit payments (charge backs) or credit cards frauds or return receipt frauds or in-store credit application fraud or the stock frauds retailers have been a target of fraudsters for decades.In India, thefts are normally directed on small, expensive, and branded items that have considerable market value and can be sold quickly such as mobile phones, wallets, iPods, clothing, cosmetics, perfumes, and alcohol. The designer products are other products which are targeted by shop lifters and fraudsters.

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Retail stores which are limited in size and branches, can easily have their profits wiped out by fraud. Stores can experience counterfeit transactions including fake currency or fraud credit card payment sand other modes of payments such as cashier’s check, gift coupons or traveller’s cheques. Many such transactions are small value fraudulent transactions that are overlooked but can add up to cumulative losses for the store. Moreover, companies should not think them as “cost of doing business” and allow fraudsters and criminals to steal from them and should initiate fraud risk assessments and fraud prevention activities to prevent frauds. In India identity verification is not considered vital at retail stores as they do not sell any restricted products. However, towards sales of alcohol and tobacco which require age verification that too is not diligently and regularly done because the industry is divided by two thoughts. However, government regulations clearly define the fines and legal complications apart from losing liquor license. Sales of over-the-counter cough medicines require compliance which at a minimum means that the retailer, must review the prescription or identification document of person in case seller observes a suspicious purchases.

Merchandise retailers and some of the common fraud issues that they face is receiving counterfeit money or counterfeit card payments (i.e., credit or debit cards). Fraud prevention professionals in the retail industry can enhance clothing loss prevention and detect and deter financial crimes & counterfeit money instantly. Apart from that these merchandise retailers face theft and lack of electronic surveillance monitoring adds to their worries and losses. Upcoming convenience stores also face similar issues related to counterfeit money, debit/credit card, & shop lifting frauds, convenience store retailers need to protect against fraud and need to reduce their exposure towards liability from any regulatory violations and proactively show improved community responsibility.

Department stores need to protect against fraud now more than ever as criminals are increasingly using technology against them. Department stores also experiences losses from shop lifting, employee frauds, theft. These losses affect the bottom line in an industry that is already struggling from a difficult economy and low levels of consumer confidence. Such losses make it hard for these retailers to increase or even maintain their profits. Counterfeit currency detectors are the first line of defence for retail industry which helps them to reduce counterfeit related theft while simultaneously training and upgrading its staff with easy to use, inexpensive and reliable protection controls that stop frauds.

Retailers are particularly vulnerable against fraud related crimes now more than ever because criminals are using readily available, off–the–shelf technologies that help them to achieve their criminal intentions. Fraud is a problem that costs losses in billions worldwide and is getting worse. Most of the large retailers saw upsurges in credit card fraud and theft over the last couple of years. Unfortunately for retailers, as fraud rises so does other regulatory pressures further aggravates the situation towards other white-collar frauds such as financial crimes which adds to their problems.

Retail Industry can add some basic fraud prevention activities and staff training to address these issues but as the size grows so does the frauds which affects the bottom line which is already struggling to recover from post Covid 19. In India staff represents retail companies and if staff is involved in any kind of unethical practices that too can dent the reputation of the brand and retail store.

Disclaimer: This content is meant for information only and should not be considered as an advice or opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

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