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Study: Fraud losses, management eat up more than one-fifth of retailer revenue

BY Deena M. Amato-McCoy

Merchants’ fraud costs are a growing expense — and the pace shows no sign of slowing.

Fraud losses and management eat 8% of the average e-commerce retailer’s revenue, up from 7.6% in 2016, according to “2017 Financial Impact of Fraud Study: Exploring the Financial Impact of Fraud in a Digital World.” The report is from Vesta Corp. and Javelin Strategy & Research.

Merchants who sell only digital goods, like eBooks, eTickets and other instant download items have been the hardest hit. Fraud operations account for 9.7% of revenue, and their fraud spend increased by 42% year over year.

Compared to 2016, chargeback losses — which occur when merchants end up footing the bill for legitimate consumer or fraudster purchases — increased by 60% among digital goods merchants. This jumps to 75% among those merchants selling strictly physical goods.

Meanwhile, false positives — which occur when merchants mistakenly decline legitimate transactions — grew by 25% among digital goods merchants, and 27% among physical goods merchants.

The average e-commerce merchant now devotes 21% of its operational costs to fraud management, up from 18% in 2016. Overall, the average retailer’s fraud management spend increased 17% in 2017.

"Merchants' fraud costs continue to rise year over year," said Javelin Research director Al Pascual. "While some merchants have experimented with new fraud fighting tools and tactics, on the whole, they haven't been able to keep pace with dynamic fraudulent threats.”

Looking ahead to the next 12 months, e-commerce retailers plan to utilize at least 14 different payment security techniques and solutions to combat fraudulent purchase attempts.

"The writing is on the wall," explained Vesta chief marketing officer Tom Byrnes. "If merchants don't modernize their fraud protocols, they won't be focused on growth or innovation; they'll be struggling to stay in business."

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Amazon to embark on Big Apple hiring spree

BY Deena M. Amato-McCoy

Amazon is about to put down some new roots in New York City — and is hunting for new employees to support the operation.

The online giant plans to open a 359,000-sq. ft. office in Manhattan in 2018 that will serve as the home base for its Amazon Advertising business. Amazon will invest $55 million to outfit the office space with equipment that meets energy-efficient standards. To encourage Amazon's expansion in New York State, the company was offered up to $20 million in performance-based taxed credits through Empire State Development's Excelsior Jobs Program.

The expansion will also create 2,000 new jobs in finance, sales, marketing, and information technology — roles that will earn an average of $100,000 annually. These jobs will support Amazon’s advertising business, as well as Amazon Web Services, Amazon Fashion, and other divisions, according to MarketWatch.

Amazon Advertising will complement other operations already entrenched in The Empire State. For example, The Amazon Fashion Photography and Videography Studio in Brooklyn, New York, supports more than 300 jobs. Amazon also has a 350,000-sq.-ft. administrative office in New York City that employs 500 associates.

"We're excited to expand our presence in New York — we have always found great talent here," said Paul Kotas, Amazon's senior VP of worldwide advertising. "Last January, we announced our plans to create 100,000 full-time, full-benefit jobs in the U.S. by mid-2018 — and we are on track to reach that goal."

To help the company reach that goal, Amazon will open a new fulfillment center in Staten Island, New York. A $100 million investment, the 855,000 sq.-ft. facility will employ 2,250 full-time associates working alongside advanced robotics solutions.

The company is also evaluating where it will open its second headquarters, which it is calling HQ2.

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Contact-free payment speeds up checkout at discount grocer

BY Deena M. Amato-McCoy

Aldi is making it easier for customers to pay for purchases.

The fast-growing deep-discount grocer now accepts all forms of contactless payment, including Apple Pay and Android Pay. Both options are available across Aldi’s nearly 1,700 stores nationwide.

Shoppers can pay for their groceries by tapping their contactless-enabled bank card, smartphone or other wearable device on a dedicated payment terminal.

"We're continually innovating to provide our customers a faster, more efficient shopping experience that saves them time and money," said Jason Hart, CEO of Aldi. "We build and run stores customers can shop quickly. Contactless payment makes shopping at Aldi that much faster and more convenient."

This is the latest move the grocer has made to streamline how customers purchase merchandise. In August, Aldi announced a pilot partnership with grocery delivery service Instacart. Shoppers can access the service on Instacart’s website or the Instacart app, and add merchandise to their virtual carts. At checkout, they can choose a delivery window from an hour away, up to a week later.

The service is available in Atlanta, Dallas, and Los Angeles, and the company is already evaluating future expansion.

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