MCC Codes
5941

Sporting Goods Stores

Comprehensive guide for sporting goods stores covering underwriting, risk assessment, and fraud prevention strategies.
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Table of Contents
Overview
Business Types
Payment Processing Info
Key Risks & Concerns
Common Fraud Signals
Example Scenarios
Common Questions
Ongoing Monitoring
Useful Sources

Underwriting Cheat Sheet

Merchant Category Code 5941 covers retailers selling athletic equipment, apparel, footwear, and sports accessories. This category serves both recreational consumers and serious athletes with products ranging from everyday fitness to specialized competitive equipment.

Key Information

This guide addresses sporting goods retail operations where seasonal demand cycles, product returns, and e-commerce growth create specific merchant challenges.

Typical Business Types

General Sporting Goods Retailers

#1
Stores offering broad selection of equipment and apparel across multiple sports.

Specialty Sports Shops

#2
Retailers focusing on specific activities like running, cycling, golf, or outdoor recreation.

Athletic Footwear and Apparel

#3
Stores specializing in performance shoes and athletic clothing brands.

Payment Processing Information

Transaction Types

1

In-Store Retail Purchases

Traditional point-of-sale transactions for equipment and apparel.
2

Online E-Commerce Orders

Website or app purchases for home delivery or store pickup.
3

Team and Bulk Orders

Large orders for school teams, leagues, or corporate events with deposit or full payment.
4

Equipment Rental Fees

Charges for renting specialized sports equipment like skis, bikes, or camping gear.
5

Service and Repair Payments

Fees for equipment maintenance like ski tuning, bike repair, or racket stringing.

Common Payment Methods

Credit and Debit Cards - Primary payment method for retail transactions
Mobile Payments - Contactless and digital wallet transactions
Buy Now Pay Later - Installment payment options for expensive equipment
Gift Cards - Store-specific cards popular for seasonal gifting
Team Account Billing - Organizational accounts for bulk orders

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Key Risks & Concerns

Fraud Risks

  • Product Return Fraud - Returning used equipment claiming defects or fit issues
  • Showrooming - Customers trying products in-store then purchasing cheaper online
  • Friendly Fraud - Disputing legitimate purchases after using products
  • Card Testing - Small transactions validating stolen card information
  • Serial Number Fraud - Returning different items in original product packaging

Regulatory Challenges

  • Product Safety Standards - CPSC requirements for protective equipment and children's products
  • Sales Tax Collection - Proper tax handling across jurisdictions
  • Warranty Obligations - Manufacturer warranty administration and retail return policies
  • Firearms and Ammunition - Special licensing for stores selling hunting equipment
  • Environmental Regulations - Proper disposal of old equipment and hazardous materials

Common Fraud Signals

Excessive Return Rates

High volume of returns potentially indicating friendly fraud or policy abuse.

Seasonal Purchase Timing

Equipment purchased immediately before season then returned after, suggesting rental fraud.

High-Value Item Targeting

Focus on expensive electronics or premium equipment that may indicate resale fraud.

Example Scenarios and Red Flags

Wardrobing Fraud

A retailer experiences returns of athletic apparel and footwear that were clearly worn, with customers claiming fit issues or defects.

Equipment Rental Abuse

Customers buy expensive seasonal equipment like ski gear, use it for a trip, then return claiming dissatisfaction.

Serial Number Mismatches

High-end electronics or equipment returned with different serial numbers than originally sold, indicating swap fraud.

Team Order Chargebacks

Bulk uniform orders disputed after delivery claiming unauthorized purchases or incorrect items.

Gift Card Fraud Pattern

Criminals using stolen cards to purchase high-value store gift cards for resale.

Common Underwriting Questions

UW Tips Business

  1. Verify business licenses and any required permits for specialized equipment
  2. Confirm product liability insurance coverage for sold equipment
  3. Review vendor relationships with major athletic brands

UW Tips Financial

  1. Analyze seasonal revenue patterns recognizing peak sports seasons
  2. Review profit margins on equipment versus apparel versus services
  3. Assess inventory turnover rates and markdown percentages

UW Tips Risk

  1. Examine return rates and chargeback ratios by product category
  2. Evaluate return policy strictness and abuse prevention measures
  3. Review fraud detection systems for identifying serial returnees

UW Questions Business

  1. What sporting goods categories do you focus on and who is your target customer?
  2. Do you sell primarily in-store, online, or both channels equally?
  3. Do you offer equipment rental or repair services in addition to retail sales?

UW Questions Payments

  1. What percentage of sales are card-present versus online transactions?
  2. Do you offer buy-now-pay-later financing for expensive equipment?
  3. How do you handle team and bulk order billing arrangements?

UW Questions Fraud

  1. What measures prevent return fraud including wardrobing and serial number swaps?
  2. How do you track return patterns by customer to identify abuse?
  3. What procedures verify the condition of returned merchandise?

UW Questions Compliance

  1. Are you compliant with product safety standards for protective equipment?
  2. How do you handle warranty claims and manufacturer warranty administration?
  3. Do you have proper licensing if selling firearms or ammunition?

UW Questions Chargebacks

  1. What is your chargeback ratio and what reasons are most common?
  2. How do you document purchase and return transactions?
  3. What procedures address customer concerns before disputes escalate?

UW Questions Infrastructure

  1. What POS and inventory management systems do you use?
  2. How do you track serial numbers on high-value equipment?
  3. Are your systems integrated across in-store and online channels?

Ongoing Monitoring

Transaction Monitoring

  • Monitor return patterns by customer and product category
  • Track gift card purchase volumes for fraud indicators
  • Review chargeback timing relative to seasonal demand periods

Compliance Checks

  • Maintain product safety compliance for protective equipment
  • Ensure proper warranty and return policy disclosures
  • Stay updated on sales tax collection requirements

Security Updates

  • Implement EMV chip card readers for all transactions
  • Use serial number tracking for high-value equipment
  • Deploy systems flagging excessive return patterns

Risk Assessment

  • Review return policy effectiveness against fraud and abuse
  • Assess seasonal inventory management impacting risk
  • Monitor online versus in-store performance differences

Merchant Communication

Provide guidance on preventing return fraud including wardrobing and serial swaps. Share best practices for managing seasonal inventory and demand cycles. Support retailers in implementing effective fraud detection systems.

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Useful Sources

Visa Merchant Data Standards Manual

PCI DSS Quick Reference

CPSC Product Safety Standards

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