OPERATIONS

Study: E-commerce fraud is declining — but the battle continues

BY Deena M. Amato-McCoy

E-commerce fraud as a percent of sales dollars may be on the decline, however losses still account for billions of dollars.

This was according to the “Q1 2017 Global Fraud Index,” a report from Pymnts.com and Signifyd. The study measures and benchmarks innovations and trends that are reshaping the payments and commerce ecosystem.

E-commerce fraud is on the decline, dropping 34.7% in first quarter 2017, compared to first quarter 2016. One of the main reasons behind the drop is due to the use of machine learning in fraud prevention solutions. Besides raising the bar against a global network of cybercriminals, machine learning surpasses the capabilities of previous solutions that use static rules to distinguish real orders from fraudulent ones, according to the report.

While these tools have contributed to a decline in fraud rates across many retail segments since first quarter 2016, there are exceptions. Specifically, apparel, department stores, and jewelry and precious metals remain targets. In fact, department stores have seen a whopping 146.5% increase in online fraud between first quarter 2016 and first quarter 2017.

Apparel e-commerce merchants were also targeted by fraudsters during 2016. However, retailers that began fighting back saw their efforts pay off. By first quarter 2017, the segment’s fraud rates were only slightly higher than they were a year ago: increasing from 8.78% during first quarter 2016 to 8.89% during this quarter.

Overall, fraud still accounts for billions of lost dollars — and as expected, fraud rates rise significantly as order values increase. In first quarter 2017, orders over $500 had a total fraud rate of 10.93%. This is more than 20-times higher than orders that were under $100, which had a total fraud rate of 0.52%, the study said.

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Kitchenware retailer cooks up delivery service

BY Deena M. Amato-McCoy

A new partnership is helping Sur La Table take the term “farm to table” to a new level.

Sur La Table is the go-to source for all things culinary — from cooking tools and kitchen gadgets to tableware. All it was missing was a way to be at their shoppers’ beck and call — and at a moment’s notice — as they prepared a stellar meal.

The retailer, which operates more than 100 stores, a website and catalog, had no problem connecting with shoppers, and delivering merchandise through its omnichannel operation. But it wanted more.

Eager to provide same-day delivery of its merchandise to its clientele of foodies, the chain began creating a business model to make that happen. It’s top criteria — to digitally align itself with grocers.

The next step was to evaluate the best courier partner. While it explored a variety of options, including programs from FedEx and UPS, the partner that made the most sense was Instacart, a third-party grocery delivery service that uses a team of “personal shoppers” who pick and deliver groceries from local supermarkets.

Sur La Table is the first non-grocery partner that InstaCart has aligned with. However, both companies believe the synergies they share make sense.

“This service solves two issues,” Ben Rosenfeld, the retailer’s senior VP of stores, told Chain Store Age.

“First, we now offer a logistics solution. It is not uncommon for customers to be in the middle of preparing a meal and realizing they are missing an ingredient, tool, roasting pan, or cooking gadget,” he said. “Rather than leaving the house for an item, they can get what they need the same day — even in two hours in some markets.”

Meanwhile, Sur La Table is known for its high-end small appliances, from espresso machines to cast-iron cookware. However, customers visiting stores in urban neighborhoods find it difficult to efficiently bring home cumbersome merchandise purchased in-store.

“The way people enjoy a dining experience is with their senses. Our shoppers experience our stores that same way — it is very tactile and visual,” Rosenfeld said.

“Rather than carry bulky items on a bus, train or Uber, people in participating markets can now go home, order it online, and get it quickly,” he said. “It is a way to ensure we don’t lose that face-to-face connection with our customer, and still create instant gratification during the last mile of delivery.”

All shoppers need to do to use the service is enroll in an Instacart Express membership for $14.99 a month. The subscription entitles members to free deliveries over $35.

Once enrolled, shoppers sign into Instacart online or via mobile app. By entering their ZIP code, the app’s geo-location technology serves up different grocers in the shopper’s region. Participating La Sur Table stores within the proximity will also be displayed.

Here, shoppers can browse virtual aisles, add merchandise to their shopping cart, pay, and select a delivery window. These include one- or two-hour, or same-day options.

Sur La Table launched their Instacart deliveries on April 26, in three markets: San Francisco, Portland and Chicago. By June, the company plans to expand the service to cover 70% of its store portfolio.

While the service is still new, the value of average orders are already double those purchased in-store. “When customers shop, they shop big,” Rosenfeld said.

“Even though the service has only been available a short time, we are happy with the program,” he added. “As it progresses, we hope to learn from our shoppers’ behavior, optimize the visit and push merchandise to shoppers in less clicks.”

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OPERATIONS

Washington Spotlight: Big Wins for Retailers

BY Joe Kefauver

As retail operators return to work this week after what was hopefully a busy Memorial Day weekend for them, they should be encouraged by some rare good news out of Washington, D.C. The industry had some big wins last week on very important issues. Republican House leaders wisely decided to remove language from the popular CHOICE Act that would have repealed the debit card swipe fee reforms the industry fought hard to pass in 2010.

Since the election in November and the subsequent announcement that Trump intended to seek repeal of the Dodd-Frank law, the banks and credit card companies began to salivate at the prospect of gutting it, including its hated caps on debit card fees they could charge retailers. The retail industry mobilized quickly and effectively. Republicans in Congress came to their senses knowing they faced a repeat of the bloody fight from seven years ago. Having little stomach for that battle and an unwillingness to face the wrath of Main Street retailers back home, leadership simply removed the language that would have repealed those caps. Finally, a win for the good guys.

If that wasn’t enough, after hearings in the US House last week, it appears that support has significantly eroded for the Border Adjustment Tax (BAT) that would put levies of up to 20% on thousands of imported consumer items. This was a tactic to raise revenues to offset other tax cuts during the corporate tax reform process. Even though this is the favored approach of Speaker Paul Ryan and other House leaders, many Republicans have backed off of their support and Treasury Secretary Mnuchin voiced the administration's opposition again this week. It is hard to see how the proposal, in its current form, could move forward, which is good news for retail operators.

All in all, last week was a pretty good one for the retail Industry and this newfound momentum will be important if the industry is going to protect its interests during the healthcare reform and tax reform battles to come.


Joe Kefauver is managing partner of Align Public Strategies, a full-service public affairs and creative firm that helps corporate brands, governments and nonprofits navigate the outside world and inform their internal decision-making.

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