Don't Let These Peak Season Ecommerce Fraud Myths Wreck Your CX (and Revenue)

Retailers are already thinking about the 2021 winter holidays and how they’ll serve customers while preventing fraud. After last year’s big shift to ecommerce and so many changes in customer behavior, it’s important to take a fresh look at some of the common myths about peak season fraud prevention and learn what works now to stop fraudsters and delight your customers. 

Myth 1: Holiday shopping season starts in November. 

The reality is that your store should be ready for holiday shoppers by October. In 2020, the National Retail Federation found 59% of U.S. shoppers had already shopped for the holidays by early November, and on average they’d already made a quarter of their holiday purchases by that time. 

Myth 2: You should decline all risky orders to avoid fraud losses. 

In reality, this approach can cost your business much more in lost customers and wasted marketing spend than fraud would. It’s true that fraud is costly. In 2020 LexisNexis found that businesses lost $3.36 per dollar of fraud because of chargeback fees, lost inventory and other expenses. 

However, many if not most declined orders are actually good. A 2019 Aite Group survey of merchants  commissioned by ClearSale found that among 65% of those merchants, more than 60% of orders flagged as risky were approved after review by a fraud analyst. That’s revenue those merchants would have lost with automatic rejections. What’s more, many declined customers will never return. A March 2020 five-country consumer survey for ClearSale by Sapio Research found that 39% of shoppers will never return to a merchant after even one false decline, and 28% will post about it on social media. 

So, automated order rejections can drive down customer lifetime value and drive up the cost to acquire customers while also depriving your store of revenue during peak sales seasons. A better solution is to add in-house or outsourced manual review, especially during busy sales peaks, to protect your revenue and your customer relationships.

Myth 3: Certain categories of orders should always be rejected.

Orders from first-time online shoppers and cross-border orders typically raise fraud flags, but that doesn’t mean these kinds of orders should be rejected automatically, even during sales peaks. Why not? 

Consider first-time shoppers. A brand-new email address and customer information can indicate fraud, but it can also be a sign of the times. We found that the number of first-time online buyers grew rapidly last year—up 12% across North America, Argentina and Australia in April 2020. As online shopping gets even easier and more popular, more new buyers may opt in, especially in developing markets like Mexico where ecommerce isn’t yet as common as it is in the U.S. 

There’s a similar shift when it comes to cross-border orders. Many retailers avoided selling globally for years due to concerns about fraud. In 2018, just half of the U.S. companies in the Internet Retailer Top 1000 sold across borders. But pandemic-related shortages and supply-chain issues pushed cross-border ecommerce sales up by 21% in H1 2020, with big increases in orders, especially for luxury goods, coming from Western Europe, the Gulf Region and the ANZ region. Automatically declining these orders risks revenue losses and can shut off avenues for growth.

The reality here is that manual review can help you sort fraud from good orders so that you can keep those first-time shoppers and cross-border customers happy and ready to buy from you again.

Myth 4: Ask your customers for a lot of information at checkout to prevent fraud.

While there’s some customer data you must have to process an order, like billing and shipping addresses, CVV numbers and customer contact information, requiring your customers to key in lots of information at checkout will cause many of them to leave. The 2020 Sapio study of consumers in North America, Mexico and Australia found that 44% had abandoned online purchases because the checkout process was too complicated or took too long. And 34% had ditched online carts because the merchant required them to create an account before they could check out.

Especially during holiday sales seasons, anything that creates friction for your customers or slows down the purchasing process can push them to simply go to another merchant’s website for an easier experience. Instead of putting the data-entry burden on your customers, use technology to simplify the process. For example, you can pull billing and shipping information from the customer’s digital wallet if that’s how they want to pay. You can allow single sign on via Google or social media to get customer identity information without asking your customers to create another account during the busiest shopping time of year. And you can use AI and machine-learning tools behind the scenes to analyze the customer’s data, payment method, behavioral biometrics and shopping history to evaluate their orders for fraud without creating a poor customer experience. 

Making peak season success a reality

Merchants who get ready for holiday shoppers before November, manually review flagged orders to avoid fraud and false declines and streamline the checkout process for customers will be positioned to make the most of holiday season opportunities while avoiding fraud losses. Seeing past the peak season myths also creates a better customer experience that can encourage those shoppers to return during the rest of the year. 

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