Colorado Springs Retail Briefs: November 23, 2007

Retailers are bracing for higher returns this holiday season, some of which will be fraudulent.

According to the National Retail Federation's second annual Return Fraud Survey, loss prevention executives anticipate that 8.93 percent of holiday returns will be fraudulent, up slightly from 8.67 percent last year.

"I would say this is a concern for all retailers, and an inherent added risk during the holidays which is our peak season. I do not sense a higher rate of concern this year over years in the past from our retailers," said Jennifer Halloway, general manager at The Promenade Shops at Briargate.

As a result, return fraud will cost retailers an estimated $3.7 billion this holiday season, up from $3.5 billion last year. Retailers will lose $10.8 billion to return fraud during 2007.

Despite the prevalence of fraud, more than a third of retailers (35 percent) have made their return policies more lenient during the holidays to accommodate holiday shoppers. Common practices include retailers extending the amount of time for returns to be made and also being more flexible to customers without a receipt.

"Many retailers offer more lenient return policies during the holiday season to accommodate honest customers," said NRF vice president of loss prevention Joseph LaRocca. "But unfortunately, retailers must constantly balance the desire to take care of their customers with the undisputed fact that criminals are constantly looking to take advantage of return policies."

At The Promenade Shops at Briargate each tenant sets a return policy that stays consistent throughout the year.

"The tenants set one return policy for the store regardless of season," Halloway said. "For insurance and liability reasons, they cannot tighten or make their return policies lenient at different times of the year."

The unethical practice of "wardrobing," the return of non- defective, used merchandise, also is escalating. Nearly two-thirds of retailers (66.1 percent) have been victims of wardrobers during the past year -- up from 56 percent of retailers last year.

According to the survey, consumers will not see a drastic shift in holiday return policies this year with four in five retailers (81.4 percent) implementing the same holiday return policy as last year, while 15.3 percent will tighten their policies (vs. 25 percent in 2006) and 3.4 percent will loosen policies (vs. 4.8 percent last year).

Consumer spending shows restraint ahead of holidays

October retail sales were up, though only slightly, signaling a slowdown in consumer spending.

According to the National Retail Federation, retail industry sales for October (which exclude automobiles, gas stations and restaurants) rose 4.4 percent unadjusted compared to last year and 0.1 percent seasonally adjusted from September.

October figures provided by the U.S. Commerce Department show total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) increased 0.2 percent seasonally adjusted from last month and 6.7 percent unadjusted year-over-year.

"We feel that we are in a unique situation as we have troops returning to the market that have been deployed for 12 plus months and this always translates into favorable sales for our center," said Diane Loschen, marketing manager at The Citadel.

An unseasonably warm October led to many leftover fall and winter apparel items at retail stores. Sales at clothing and clothing accessory stores increased a meek 0.1 percent seasonally adjusted from September but rose 4.9 percent unadjusted year-over-year.

Halloween sales might have helped health and personal care stores because many now sell costumes and accessories; sales increased 0.2 percent seasonally adjusted month-to-month and a solid 5.9 percent unadjusted from last October in those stores.

According to the National Retail Federation's 2007 Holiday Consumer Intentions Survey, conducted by BIGresearch from Oct. 31 through Nov. 7, most consumers (71.4 percent) have less than 10 percent of their holiday shopping completed.

Young adults 18-24 are the least prepared, with three-fourths (76.2 percent) reporting they are less than 10 percent finished.

"While we don't anticipate a feverish holiday, we are trending towards slight increases over last year," Loschen said.

With unending options, the majority of consumers plan to reach for clothing or clothing accessories (57.2 percent) and books, CDs, DVDs, videos or video games (57.1 percent) when purchasing gifts for their loved ones.

Gift cards continue to rank at the top of lists with 56.6 percent of consumers saying they plan to buy gift cards this year.

Other popular items include toys (43.1 percent) and consumer electronic or computer related accessories (29.2 percent).

Joan Johnson covers retail for the Colorado Springs Business Journal.

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