Fraud Management

Jun 1, 2023

How Millennial Consumer Behavior Is Shaping Ecommerce

If your current ecommerce strategy doesn’t focus on millennial consumers, stop what you’re doing right now. Not only are millennials the most online-friendly generation, they’re also enthusiastic about ecommerce shopping.

However, that enthusiasm can go both ways. Millennials have the potential to be your loyal customers if their experience is great — or your worst nightmare if they are subject to false declines. Ecommerce businesses need to understand millennial consumer behavior and create experiences that keep them engaged.

Millennial Consumers Are Avid Ecommerce Shoppers

The pandemic may have been difficult for older consumers who were forced online, but millennial shoppers didn’t need much of a learning curve. Ecommerce was and continues to be familiar territory for this generation. And that isn’t expected to change. Over 70% of millennials plan to spend “the same or more” online in 2023. Only 15% intend to decrease their spending.

This creates a tremendous opportunity for ecommerce businesses in a variety of industries.

What millennials buy online

Millennials have very distinct preferences for the types of products they buy online. Most notably, this generation is known for making purchases in high-risk industries such as:

Why are these industries considered high risk? Mostly because they have a high price tag and an even greater resale value. Fraudsters target retailers selling products in these industries because they offer the most profit for the least amount of effort.

Millennials want omnichannel experiences

Another factor to consider is your selection of channels.

Millennials were raised in the age of ecommerce and mobile adoption, giving them a natural understanding of the variety of shopping channels. Ecommerce businesses need to have a strong web, mobile and app presence if they want to appeal to this generation.

Social commerce is also quite popular with millennials, with over 90% using some form of social media and over half of millennials regularly making purchases on social media. They follow brands and influencers on Instagram, SnapChat and other social platforms, responding to marketing campaigns that appeal to FOMO (fear of missing out).

Millennials want a range of payment methods

Many millennials are now reaching midpoint in their career trajectory … but, they’ve had the economic rug pulled out from underneath them too many times to be complacent. Overall, 38% of consumers say they are concerned about overspending, leading many of them to shop with debit cards.

But they’re not only choosing debit. Millennials grew up alongside the payment revolution, watching their parents pay for shopping with checks and cash, then relying heavily on debit cards, and now embracing digital wallets and even cryptocurrency. “Buy Now, Pay Later” payment options are also popular with this generation.

The takeaway? Ecommerce retailers need to be flexible and offer a variety of payment options. Millennials want it their way and won’t hesitate to bounce away from a site that doesn’t offer their preferred payment method.

Customer Experience Is a Top Priority for Millennials

For millennials, shopping is a social activity. In fact, this generation relies heavily on product reviews and community feedback to determine whether they will choose one product over another. You can provide a great customer experience by making it easy for customers to find out what other customers think of your brand and products. And, if you’re targeting younger millennials, think about how to leverage the influencer impact of TikTok and Instagram to help grow your brand awareness.

Other ways to provide a superior customer experience for millennials include:

Communicate your values

Millennials like to shop with socially responsible companies that make an impact on the environment, social justice and other values-based priorities. Ecommerce businesses that display their values and purpose will resonate with millennials.

Make navigation easy

Focus on navigation that is easy to use and think about how to leverage both search and filter functionality. Search options are great, but customers can still get lost on your site. Side or top filters help customers identify where they are and find the products they want quickly.

Create a simple checkout

A business can create a superior ecommerce customer experience … and ruin it with a poor checkout experience. In fact, 61% of customers say they abandon their carts due to problems with the checkout process.

The ease, friendliness, and personalization in the online store needs to extend right through to checkout – and beyond. Offer digital wallets with links to PayPal, Amazon Pay, GooglePay, and other payment processing partners. Also include payment options that appeal to older customers, such as traditional credit cards.

Clearly identify return policies

Don’t forget to clearly spell out return policies and provide multiple ways for customers to ask questions and report issues. This not only helps create a better checkout, it also reduces the likelihood of friendly fraud and chargebacks.

Leverage chatbot technology

If you want customers to stay on your site and make a purchase, you’ll have to provide a way for them to get their questions answered. Chatbots can do that by using natural language processing to answer customer questions in a natural manner. The chatbot market is expected to grow nearly 25% through 2028 as a result of businesses looking for ways to engage customers more efficiently. And it’s a big win with millennial shoppers.

In short, millennials aren’t that hard to please: They want a great customer experience and to feel good about the company they shop with. This should be a straightforward task, but the checkout process is where the entire experience can fall apart.

Millennials Have No Patience for False Declines

One of the worst thing online businesses can do with their millennial customers is to decline their orders.

False declines — sometimes called “false positives” — happen when a customer’s valid order is declined because the business mistakes it as fraudulent. Approximately 58% of declined transactions are actually legitimate orders.

Unfortunately, false declines are quite common among millennial shoppers, according to our research: In 2022, 33% of millennials experienced a decline of at least one online order, compared to 24% of Gen X and 15% of Baby Boomer customers.

How millennials feel about false declines

When millennial customers experience false declines, their reactions are mixed, according to our 2022 Consumer Behavior Survey data:

68% of millennial consumers will attempt to make their purchase again – they may assume the mistake was theirs.
64% will reach out to customer support in an effort to resolve the issue.

But not every millennial customer will be so understanding.

44% of millennial consumers will never shop with your store again after experiencing just one false decline.
41% will take their complaint to social media.

That’s where false declines can get expensive.

False declines are costly

Think about the customer who won’t re-attempt to make their purchase and will never shop on your site again.

That customer has a lifetime value for your business.

Let’s say the customer spends an average of $100 per month online. A false decline doesn’t just cost you $100. That customer, alone, costs your company $1,200 each year, for every year they would have been shopping with you.

A millennial customer likely will be shopping for another 30-40 years, multiplied by that $1,200. That’s up to $48,000 your company will never see.

To make matters even worse, if that customer tells their friends and/or posts on social media, your business is now at risk to lose the lifetime value of even more customers.

That’s why a safe assumption is that every $1 in false declines equals a loss of $13.

What can businesses do?

How to Reduce False Declines

To avoid driving away millennial customers, make sure your company has a solid strategy to prevent false declines. At ClearSale, we have developed a global lens and large database that allows us to help clients approve more orders, faster.

Our insight into fraud patterns and trends comes from working with businesses around the world in some of the most high-risk regions. We maintain a massive transaction database that is constantly learning as more orders are processed, and we can see the impact fraud has on diverse markets. This makes it easier for us to identify fraud trends as soon as they emerge and then use those insights to make more accurate decisions.

Machine learning/AI

All transactions are screened using artificial intelligence and machine learning to process transactions and fine tune fraud models based on customer behavior. Transactions that pass with flying colors are automatically approved, and questionable or suspicious transactions are flagged for further review.

Contextual fraud review

Our data scientists and fraud analysts can help with secondary reviews of potentially fraudulent orders. They use their expertise and understanding of fraud trends – while sharing that information with your team – to determine if a transaction is valid or not. And, if a company so chooses, our analysts can pleasantly and very diplomatically reach out directly to customers to confirm they made the purchase —all the while, training your team to do the same.

Post-processing audit

Machine learning/AI can also be used post-processing to validate decisions and help find patterns to be aware of moving forward. For instance, our auditing program offers a safe, test environment where we analyze random sets of declined transactions to see what would have happened if we had approved the orders. This enables us to measure the accuracy of our client’s automated rules and fine-tune them as needed.