Retailers see more returns, some loosen policy

SAN FRANCISCO (Reuters) - Retailers, already struggling to capture sales in the U.S. economic downturn, are now facing rising rates of returned merchandise that are not expected to abate during the holidays, according to a survey released on Wednesday.

The percentage of sales that are returned are expected to rise in 2008 to 8.7 percent, or $219.1 billion, from 7.3 percent a year earlier, said the National Retail Federation, which polled 82 retailers for its return fraud survey.

For the holiday season, that number is expected to increase to 10.0 percent from 8.8 percent in 2007.

The rise points to consumers being more cautious about their spending habits as the U.S. economy teeters on the brink of recession.

In the past, shoppers may have retained an item that did not fit exactly right or was in the wrong color. But retailers are now seeing a switch, said Joe LaRocca, NRF's vice president of loss prevention.

"We're finding consumers are a bit more thrifty in bringing the item back to the store and buying exactly what they want," said LaRocca, adding that the peak return season, in late December and January, is still to come.

The combination of the global credit crunch, meltdown on Wall Street, lingering housing slump, rising unemployment and food inflation has made Americans cut back on all but the most essential of items, and retailers from Macy's (M.N) to Home Depot (HD.N) have felt the pinch.

One way to make shoppers more amenable to the idea of spending is to loosen return policies. NRF found the number of retailers planning to loosen their return policies this holiday more than tripled, from 3.4 percent in 2007 to 11 percent this year.

That could mean returning items without a receipt or extending the time for returns to be made.

"That, combined with the great sales going on today, certainly make it attractive for consumers to go into the stores to purchase," LaRocca said.

On the other hand, retailers are trying protect themselves from retail fraud. Fraudulent holiday returns -- whether stolen items returned to stores for cash, items purchased on a stolen credit card, or clothing that is worn for an event but later returned -- are expected to add up to $3.54 billion this year, just shy of last year's $3.6 billion, the survey found.

"In our mind, that is a significant number," LaRocca said.

Due to fraud protections, 17.1 percent of retailers surveyed said their policies would tighten, up from 15.3 percent in 2007.

Some 73 percent, meanwhile, said their return policies would stay the same.

(Reporting by Alexandria Sage, editing by Matthew Lewis)