Report: E-commerce fraud is set to explode
Fraudsters are giving retailers another issue to contend with — and many aren’t prepared.
In 2017, there was a 200% increase in credit card testing, a tactic used by fraudsters where they test stolen credit card numbers with small incremental purchases before making large-dollar purchases on the card. This was an increase compared to the same quarter in 2016, according to new data from Radial.
Fraud also is up 30% year over year, proving to already struggling retailers that this is just the beginning of online fraud in the post-EMV world.
For many retailers, managing fraud continues to be a double-edged sword. Many either apply tools that over-reject orders, which decreases their customer transaction approvals and lose valuable revenue in return. Or, retailers build their fraud teams in-house, a move that often lacks the historical data and rules needed to catch subtle card testing tactics.
"Our data adds another alarming statistic for retailers who may be unprepared to manage fraud activity in e-commerce,” said Stefan Weitz, chief product and strategy officer at Radial.
“We know fraudsters won't stop looking for opportunities to monetize their stolen data and will even automate this process once they have a card that appears to be working,” said Weitz. "This results in quick, large volume purchases that leave retailers vulnerable. When retailers miss card testing, they're contributing to future card attacks. Fighting card testing is complicated, but can stop millions of unanticipated fraud attacks if tracked and managed efficiently."
As the fraud landscape rapidly changes, it presents pervasive and growing threats for e-commerce merchants. Since August 2016, the market segments of electronics, entertainment, jewelry, and sporting goods experienced the highest increases in online fraud during the 2016 peak season, data revealed.
"Increasing revenue has never been more important for retailers. They cannot afford to be slammed with fees that stem from missing fraud activity and must count on each good order getting approved," said Weitz. "More retailers claim they are combatting fraud, but underestimate the other areas they're endangering – like revenue and customer loyalty – when they don't use the types of data sets Radial has to increase transaction approval and take on full liability of combatting fraud.”
The Future is Unified — and You Should Be Too
Customer experience is everything. In fact, Accenture found that 45% of customers are willing to pay more for a better customer experience. It’s also what gets customers into the physical store. With more consumers turning to the ease of online ordering and straight-to-door shipping, retailers are in a bigger crunch than ever before to not only increase footfall, but to keep customers coming back.
So what can retailers do to turn first time visitors into loyal customers? Get unified.
Build the Digital Experience
Smart homes, autonomous cars, the internet of everything. The digital age is not only all around us, it’s advancing rapidly. And retailers are taking notice.
To get shoppers through the doors, retailers should be committed to bringing the digital experience in-store. For example, connected dressing rooms with interactive touchscreens can create customer convenience, comfort and the ability to reach sales associates without ever having to leave the fitting room. Arming sales associates with mobile devices give them instant access to point-of-sale data, customer loyalty programs and even inventory visibility, allowing them to provide insights to customers accurately and immediately. And beacon technology gives retailers the ability to push meaningful promotions to customers in-the-moment, as soon as they walk in the door.
Bringing the digital experience in-store, however, doesn’t mean ignoring your online presence. Far from it. In fact, shoppers are already accustomed to getting a personalized experience online. Whether its recommendations for products that match your shopper’s buying preferences or complement items they already own, digital platforms and physical stores must create a parallel environment that enhances the customer experience.
Bridge the Connection Gap
Today’s shoppers browse in store, look at websites, and scroll through apps on their phone. They expect retailers to be everywhere they are, and they want every channel they touch to be inter-connected. For example, if a customer buys online, they want the option to receive anywhere and return anywhere. And if the shopper goes into a store to purchase a product and finds out it’s out of stock, they want a sales associate to be able to order it for them online and have it shipped to their door.
Additionally, shoppers expect accurate inventory when shopping in-store and online. And it should be available across all of the retailer’s locations and be consistent across channels. Whether shopping in-store, online, on a mobile app, kiosk or even across social channels, product descriptions must be consistent, and personalized recommendations must be relevant and timely.
While this level of retailer knowledge and customer experience can be difficult to achieve, technology advancements are helping retailers stand out from the crowd.
The key is applying technology that is both unified and flexible. Every customer journey is unique. It can be simple or demanding. And it can change with every interaction and purchase a customer makes. So creating a technology infrastructure that gets to “know” your customers and can react in real time to behaviors is important.
One way to do this is through unified commerce (UC) solutions. UC can centralize inventory management, streamline order management, integrate CRM capabilities and provide real-time data reporting, analysis and predictive analytics. But most importantly, UC platforms provide visibility into the complete customer journey by eliminating siloes and disconnected systems and unifying all interaction and information channels under a single technology platform.
UC also empowers sales associates and managers with behavioral insights – not just purchase data. Giving retail associates access to a customer’s interactions across channels provides them with the knowledge of past purchases, browsing history and even promotions that have already been sent. In turn, this empowers sales associates to make even more informed sales decisions, cross-sell and upsell confidently and provide personalized attention. Additionally, providing consistent information across channels improves communication between retailer and customer. This becomes especially important when making purchases across channels, and ensuring returns are hassle-free.
Today’s brands live or die by their customers’ experiences. And retailers that want to make a splash must get unified. Connecting channels allows retailers to create more meaningful connections with customers, tailor the shopping experience to the way of the future, and cater to every customer’s needs and expectations – all without any extra effort.
Brad Fick is president of Direct Source, a nationwide technology solutions provider that offers hardware and software solutions designed to help retailers maintain a competitive edge, while improving productivity and customer service.
NAFTA, TPP, and Trump
In his 1987 book "The Art of the Deal," then developer Donald Trump wrote about the value of starting a negotiation with a dramatic and even unrealistic proposal. That makes one ponder how much of President Trump’s strong language is just bluster and how much might be indicative of a true departure from policy orthodoxy.
That, of course, remains to be seen. What isn’t up for debate, however, is the potential for Trump’s politico-economic brinksmanship to have a potentially profound impact on the retail industry. Will that impact ultimately be beneficial, catastrophic, or somewhere in between? And what can retailers do to prepare and protect themselves in the meantime?
One of the issues that has gotten a great deal of press is President Trump’s decision to take the U.S. out of the 12-nation Trans-Pacific Partnership (TPP) trade agreement. While this is certainly a high-profile move, I think the practical impact for retailers is going to be fairly limited. To a large extent, the U.S. withdrawal from the agreement is largely symbolic. It states that when it comes to negotiating trade agreements, the U.S. plan is to operate alone rather than as part of a coalition.
What happens next should be of more concert to retailers and center developers. Free trade agreements like the TPP help keep prices down for a wide range of goods that would be significantly more expensive if they were produced in the U.S. The Trump administration has not just withdrawn the U.S. from the TPP, President Trump has very publicly threatened a 35% increase in tariffs. The economic impact of such a move – or anything remotely close to it–would be something between devastating and catastrophic. American consumers get a high percentage of goods from China and other Asian markets (97% of U.S. clothing comes from China). The global marketplace is truly integrated, and if a large increase in tariffs were to occur, retailers that ship from Asian countries would be in real trouble.
The biggest concern would be the impact on consumers. Such an increase would ultimately lead to dramatically higher prices on goods that consumers buy and use everyday, and they would be the ones bearing the brunt of that price increase. Of course, that would put a crimp in retail sales that would be felt by retailers, as well. In theory, this kind of tit-for-tat tariff would require retailers to radically restructure their manufacturing facilities, processes and supply chains as they shift operations in an attempt to keep their products affordable.
In reality, however, this would be close to impossible. While shifting some large manufacturing processes out of Asia would be a formidable – but doable – proposition, retail is a very different animal. Retail has a much longer lead time (warehouses are jammed months in advance of the holiday shopping rush, for example), and the expense and logistical complexity of turning the ocean liner of retail production and supply chains around would be enormous. It’s highly questionable whether the U.S. even has the structural capacity to make such a shift. In other words, we literally don’t have the physical bodies able/willing to step in and satisfy the labor requirements.
While it may seem like a similar dynamic exists with the North American Free Trade Agreement (NAFTA) – another international agreement Trump has publicly derided and intends to renegotiate – there are some important differences that retailers should be aware of. So far at least, the retail impact of Trump’s very public criticisms of NAFTA has been negligible. No duty rates have changed, and no shipping patterns have changed. I honestly don’t foresee anything happening in the near future that would be particularly damaging to the retail space. Trump’s newly released “A Better Way” tax plan – which proposes a 20% border tax – does have the potential to be a significant economic blow to U.S. retailers. The fact that our North American trade relationships feature more large-item manufacturing, means that adjustments would be a more feasible form of action, and the overall retail impact would ultimately be less dramatic than similarly confrontational tariffs in Asia.
The bottom line is that we as Americans have high expectations: we like (and expect) the best product for the lowest amount of money. Implementing the kind of tariffs that President Trump has discussed would raise brick-and-mortar retail prices in a way that just doesn’t make sense for Americans. Actually following through on this kind of tough talk would be simply shooting ourselves in the foot. Now, that said, Trump’s saber-rattling could have some beneficial impact – and potentially put us in a better trading position. He is correct in the sense that it isn’t an even playing field right now. President Trump’s bellicose language about currency manipulation and other extracurricular behavior by international players does have some basis in authenticity. Some tough talk could end up leading to renegotiations that could put the U.S. in the better position going forward.
In the meantime, the unfortunate conclusion is that options for retailers are somewhat limited. Modest supply chain shifts make sense as a kind of proactive diversification of production. However, the reality is that the scale, scope and structure of the current global retail production and supply network would make any substantive change logistically impractical and prohibitively expensive. Until President Trump actually does pursue a policy of trade reciprocity, U.S. retailers are really just in a wait-and-see mode. That uncertainty obviously isn’t ideal, but without some dramatic shift from the Oval Office (and the caveats about the potential impact of a major international crisis), it’s likely that the usual cyclical nature of the retail industry is likely to persist in the months and years ahead.
Brandon Stallard is CEO of Troy, Michigan based TPS Logistics, a non-asset based, third-party logistics management provider with operations across the globe. Contact Brandon at [email protected].