7 Tips to Reduce e-Commerce and Retail Fraud over the Holidays
Holidays are a critical—and fun–time for e-commerce store owners. The holiday season gives merchants a chance to showcase new products and services that can increase their bottom lines. Sales generated during this period also generally contribute to the bulk of a company’s annual revenues.
However, the holidays can also be scary for store owners considering the amount of theft and chargeback disputes that happen during the period. It is estimated that retailers are one and a half times more susceptible to consumer chargeback fraud during the holiday season between Thanksgiving and New Year’s. Any increase in chargebacks can put a significant dent in the net profit margins. Increased chargebacks can also jeopardize the relation with a payment processor; many businesses have found their merchant accounts closed down due to the risk from chargebacks.
To protect profit margins, business operations and overall reputation, merchants should follow these seven simple steps to minimize chargebacks during the holiday season.
Plan for the Big Event:
Running special promotions and discounts during the holidays can lead to an unexpected sales spike. Before the holiday season starts, have an internal meeting well in advance with all departments including marketing, fulfillment, customer service and operations to keep them aware of the promotions and of the company’s sales projections. Ensure every department is prepared to offer the exceptional quality of customer service customers will be expecting. Be realistic about commitments to customers. Poor planning and execution will lead to customer dissatisfaction and could increase chargebacks.
Be Vigilant about Fraud Orders:
The holiday season can increase sales, but it can also make a company more susceptible to fraud. Fraudulent orders will affect the bottom line of a retailer, since they lead to consumer dispute and revenue loss most of the time. Implement a strong fraud management protocol and review all the orders being placed online. It is best practice to assign dedicated resources to analyze order profiles and fraud alerts to ensure the organization is not shipping orders to fraudulent addresses or customers.
Monitor News for Trends that Increase Fraud:
In the US, the trend is towards rapid implementation and adoption of EMV credit cards. The goal is to make card-present fraud at the point of sale in physical brick and mortar stores more difficult. While that goal will likely be achieved, criminals will continue to search for the soft underbelly of commerce to continue their fraud. This means that online Card Not Present (CNP) is expected to increase significantly as fraud shifts online. E-commerce and retail businesses whose livelihood depends solely on online financial transactions may be the most significantly impacted. Small and medium sized businesses lacking sophisticated tools or personnel are at serious risk. Being aware of the overall trend is half the battle, allowing companies to pre-empt the problem before it emerges.
Monitor the Fulfillment Process and Quality Control:
It is important for e-commerce retailers to implement a process to ensure all orders are thoroughly checked before packaging. There is no worse a time than the holidays to have consumers report receiving products that they never ordered, and not receiving the ones they did. This will disappoint customers and will affect future sales and any word of mouth viral marketing. Such scenarios increase chargebacks and affect creditability dramatically. Creating a detailed protocol for order fulfillment and monitoring the fulfillment error rate will reduce chargebacks and customer complaints. Retailers also need to ensure that the fulfillment department monitors incorrect addresses and returned items. Reach out to customers to fix address errors and if not, issue a full refund to avoid chargebacks or customer service issues.
Use Expedited Shipping:
Considering the sheer amount of packages that are shipped during the months of October through January, even private carriers like FedEx and UPS could experience a delay in delivery times. Keep your customers aware of the shipping and delivery dates prior to order placement. Also, it is recommended to have a disclaimer stating that unexpected delays may occur due to weather conditions. Ship all products within 24 hours of purchase and use expedited shipping whenever possible to prevent delays in shipments. Shipment delays commonly lead to customer dissatisfaction and will increase the rate of chargebacks for e-commerce retailers.
Implement a Hassle-Free Refund Policy:
If customers report an issue or are not satisfied with their order, give them an immediate refund without making them return the product for low cost items. The customer can, and will, be fairly upset since they had high expectations for gifting the item. Making them return the product or having a tedious refund process will encourage customers to file a chargeback. Consider that some of the most successful retail companies such as Costco, Nordstrom and Zappos.com have extremely flexible and lenient refund policies. While many companies are fearful that some customers may take advantage of broad refund policies, the increased customer satisfaction should well offset returns and lead to a net gain overall.
Give Customers Multiple Contact Touchpoints:
Different customers prefer different ways of contacting a retailer. Some want to get a live person on the phone to vent. Others prefer to bypass being on hold for emailing support. Other more resourceful folks hit the FAQs and Support databases. More recently, pop up instant messaging with support is a popular channel. Finally, social media allows followers to post or tweet complaints for everyone to see. Offering as many contact touchpoints as possible is never a bad thing. The goal is to reduce the percentage of customers who, out of pure frustration, give up on contacting support and instead call their bank or credit card company to file a chargeback. The retailer loses the immediate and lifetime revenue. Even worse, the disgruntled customer may take to websites such as Ripoff Report or Complaints Board to vent, permanently marring the company’s online reputation.
By implementing these seven easy steps, retailers can ensure the hectic holiday season is a fun and profitable one.
Suresh Dakshina is the Co-Founder of Chargeback Gurus, the premier online chargeback and fraud prevention service. Chargeback Gurus understand why chargebacks occur, how to prevent ecommerce fraud, how to respond to chargebacks and recover clients’ lost revenue.
Image source: WikiMedia Commons -by ZioDave
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