Is your business keeping tabs on customers' merchandise returns? If so, your company could potentially be vulnerable to a lawsuit.
A number of major brands -- including Best Buy, J.C. Penney, Victoria's Secret, Home Depot and Nike -- are tracking customer returns as a security measure. Recently, however, Best Buy was slapped with a privacy lawsuit for engaging in the practice.
But do the security benefits outweigh the lawsuit risks? Here are some potential pros and cons of tracking customer returns:
Pros
- Third-party responsibility. Third-party companies like The Retail Equation offer return tracking services, which means a company doesn't need to develop a strategy all by its lonesome, reports The Associated Press. By farming the work out, the company can have one less thing to worry about.
- Protecting the bottom line. The third-party company can create a "return profile" that can catalog and analyze a customer's history of returns. The system can help give a company a holistic view of customers' shopping habits and shape its return policy accordingly.
- Preventing retail crime. The retail industry says tracking customer returns is a useful tool to fight against the large-scale theft of merchandise (moreso than low-level shoplifting), according to the AP. Customers with suspicious return/exchange patterns can be prohibited from making returns or exchanges for a period of time (like 90 days).
Cons
- Potential invasion of privacy. A major problem with tracking customer returns is disclosure, or lack thereof. Some retailers are open about their tracking policies, but others aren't conspicuous at all. The lack of uniformity among retailers could potentially spell legal trouble for companies that lack transparency.
- Potential third-party vulnerability. Tracking companies like The Retail Equation handle the tracking, but if something goes wrong, your company could be on the hook. Potential concerns include sharing customer "return profiles" with outside parties or with other stores, failing to protect against security breaches, and retaining customer data for too long.
- Potential lawsuit liability. In 2011, a customer sued Best Buy after the magnetic strip on his driver's license was swiped against his wishes, reports the AP. Eventually, the lawsuit was thrown out. Still, the lawsuit is a good reminder that there's always a fair amount of risk involved when it comes to collecting customers' personal information.
If you have more legal questions about tracking customer returns, you may want to speak with an experienced business attorney in your area.
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Related Resources:
- Retailers Are Watching You With New Tracking Program (Jezebel)
- Calif. Merchants Can't Ask for Customers' Zips (FindLaw's Free Enterprise)
- Subscription Business Model May Impact Customer Privacy (FindLaw's Free Enterprise)
- Online Protection for Your Company's Confidential Information (FindLaw's Free Enterprise)
