The pandemic fuelled an explosion of e-commerce adoption, creating unparalleled opportunities for small and medium retailers to reach new customers online. However, with this trend has followed an alarming acceleration in E-commerce fraud - especially the use of stolen credit cards and other payment methods to purchase goods online. Recent data shows a rise in the cost of fraud in APAC by as much as 10-16% on pre-pandemic levels, with emerging tools like buy-now-pay-later (BNPL) accounting for disproportionately higher payment loss rates. Retailers usually aren’t alerted until after the order is shipped, which leaves them carrying the cost of the chargeback, facing a potential escalation in credit card fees, and even loss of their payment facility altogether.
In a ‘double whammy’ to retailers, past data shows that online crime increases during a recession, adding further risks to their bottom line at a time when they are already feeling the pinch of slowing demand and rising costs. And while large retailers can afford to invest in sophisticated tools, insurance and processes, smaller merchants, or those new to ecommerce, are likely to be disproportionately targeted and impacted.
The months leading up to Christmas are the important time of the year for retailers, with events like cyber monday and black friday leading to holiday sales contributing up to 30% of all annual retail spend (source MuchNeeded 2020). In this moment of economic uncertainty, retailers especially need to maximise this season to build a buffer of revenue to carry them into 2023. So how can small and medium businesses stop the risk of e-ecommerce fraud eating into their bottom line?
We talked to a number of industry experts, and here are their words of advice:
“Retailers need to be at the top-of-their-game when it comes to e-commerce,. While gut instinct and teamwork helps reduce the risk from card-present transactions, managing the growing challenge of fraudulent online purchases requires a new layer of analysis and assurance. That's where the help of risk modelling and assessment software needs to be an essential frontline defence in protecting sellers and and their customers.”
Chris Wilkinson is Managing Director at First Retail Group Ltd. First Retail Group is a specialist consultancy based in Wellington, New Zealand, that helps organisations identify opportunity, drive performance and manage risk, with a focus on retail, hospitality and tourism sector.
“During this time of year we start to scale our in store staff and focus on providing them with increased training on what to look out for and how to prevent theft. We have security tags, in store cameras and alert staff. But for our online orders, we simply can’t look at every transaction to spot fraud like we can in store. This is where we rely on smart online tools that can look for these strange shopping behaviours for us, and enable us to make informed decisions about genuine orders."
“Chargebacks hurt. The rise of online fraud is here, we are seeing more “swindlers” getting creative on how fraud is being conducted online, and it does not matter if you sell low or high ticket items.
We recommend that all our clients implement software to automate processes and reduce business overheads with smart tech stacks, as reviewing orders manually is not something business owners have time to do during busy buying periods .”
"We used to only rely on Shopify's inbuilt fraud analysis to alert us to suspicious orders. It's was helpful but at the end of the day was really left to me to investigate and decide if it was a genuine order. We might get 200 orders in 24 hours during our sales period and we simply don’t have time to look at all of them. Before using Spotrisk, I really didn't feel confident fulfilling those orders, but our focus had to be getting the product out of the door and to the customer.”
Benny Castles: Director and Designer at WORLDBrand. WORLD creates New Zealand hand-made fashion collections and haute-couture garments as well as an exclusive range of the finest high-end niche perfume, candle houses and curated cacophony of selected objet d’art.