Breaking Down the True Cost of Coupon Fraud

By John Helmle, EVP & President, Fintech - Inmar Intelligence

$100 million is just the beginning

Saying that coupon fraud costs the retail industry $100 million per year is an oversimplification of the problem. Yes, that is the aggregated face value of mis-redeemed offers, but it doesn’t reflect all of the costs beared by industry players. Let’s break this down by who bears the burden. 

Manufacturers are taking the biggest financial hit

Manufacturers typically absorb the bulk of the aforementioned $100 million, but even that doesn’t capture their full cost. Finance and Accounting teams write-off the losses after spending hours each week investigating retail deductions and disputing claims. Depending on the size of the company, this can equate to 50% of the salary for an FTE (full time equivalent) to 100% of the salaries for a full team of people. 

Retailers can lose shoppers as well as dollars

Retailers are impacted by coupon fraud through lost sales, negative shopper experiences and reduced merchandising budget. Based upon a recent Inmar survey, we saw that 64% of CPG manufacturer respondents apply trade funds to cover the cost of counterfeit coupons. In addition to this hit, merchandising budgets are often used to cover non-deductible losses for categories such as alcohol or tobacco.  

Shoppers ultimately bear the brunt of coupon fraud

The money to cover fraud losses has to come from somewhere. Whether it’s pulled from manufacturer trade funds or retail merchandising budgets, it results in less money for consumer promotions. And given the current state of our economy, we know that many shoppers are relying on promotions to buy the products they need. 

Coupon fraud impacts almost every facet of retail

The general industry benchmark is that merchandising funds should drive a return on investment of about 3:1 ($3 in incremental sales for every $1 of trade funds invested in merchandising).  When the industry neglects to address coupon fraud, the impact is not just a $100 million loss. It’s lost time, lost sales and a lost opportunity to deliver meaningful value to shoppers who need it. 

It takes a unified front to mitigate fraud implications

1. If you’re a retailer, utilize technology to detect and prevent fraudulent coupons at the register. Inmar offers free access to our POS-integrated technology -- CNFRM -- to any retailer or approved vendor but you can also work with others to implement other detection services. 
   
   
2. If you’re a manufacturer, talk to your retail and wholesale partners. Express your concern about how fraud is impacting your business and encourage them to utilize technologies and services that will eliminate coupon fraud.
   
   
3. If you’re a vendor or supplier, integrate fraud mitigation technologies and services into your offerings. Again, Inmar provides free access to our fraud prevention technology, CNFRM, but there are other options available as well. 

At the end of the day, we’re all trying to make wise investments that create better experiences for shoppers and greater profitability for our companies. Coupon fraud is something that we can address through technology and data. Inmar made a commitment to end coupon fraud by 2024. I hope that you’ll join us in the fight.