The good news for omnichannel and e-commerce retailers is that online sales and revenue have grown exponentially since 2020. The bad news is that retailers with an online presence have also seen an alarming increase in fraud. According to the most recent National Retail Security Survey published by the National Retail Federation, 61.1 percent of respondents indicated that e-commerce fraud has increased during the past year.
While retailers have well-trained loss prevention (LP) teams in place to identify and mitigate fraud and shrink occurring in stores, the same focus is not often applied to e-commerce fraud, particularly fraudulent merchandise claims. It is rare to find a retailer that has an LP team with the intelligence-led technology and tools needed to connect consumer data across all selling channels to effectively manage fraudulent claims.
A Growing Problem
Merchandise claims fraud is particularly concerning for e-commerce retailers. This type of fraud can occur in instances when a consumer asserts that an online purchase was never received, was delivered damaged, or was somehow less than expected. Appriss Retail’s data shows that merchandise claims cost US retailers $21 to $41 billion annually and approximately 90 percent of those claims are legitimate. Even so, the remaining 10 percent of merchandise claims that are fraudulent cost retailers anywhere from $2.1 to $4.2 billion each year.
Customer service personnel at many retailers only have blanket policies to deal with all claims of lost deliveries, broken or missing parts, etc. However, consumers who make fraudulent claims are adept at covering their tracks by using different email addresses, alternative shipping addresses, several credit cards, or even different names. Customer service teams do not have the experience or resources available to the LP team to detect the patterns and make the connections. The result: fraudsters are given free rein to purchase from you, then claim the item was never received or damaged in order to get a replacement or refund, effectively getting the item for free and negatively impacting your bottom line.
Arm Loss Prevention with the Right Data
While online shopping is the ultimate convenience for consumers, it also makes it much easier to create multiple shopper profiles to disguise fraudulent behavior and escape detection. Retailers already capture shopper identifiers and purchase behavior data with each transaction. The key is to use advanced technology incorporating artificial intelligence and machine learning to analyze the existing data to link multiple shopper profiles across all shopping channels—online and in-store. Once the data is linked, LP teams can run the profiles against specific shopper behavior models and your unique company parameters to identify potential or likely fraudulent claims and recommend the appropriate actions that minimize the impact on the retailer’s bottom line.
Empower Your Customer Service Team
Your LP team is well-versed in the types of activities consumers use to commit fraud in your brick-and-mortar locations. They are trained to handle fraud investigations to identify the perpetrators and the root causes. Appriss Retail research shows that the same people committing fraud in your stores are also likely to commit fraud when shopping online. Providing your LP team with omnichannel shopper data will give them a 360-degree view of shopper behaviors to help them identify and stop more instances of fraud. What’s more, the complete shopper profile data will allow the LP team to build better policies to help your customer service team protect your bottom line.
Get the Appriss Retail whitepaper, Order Claims: A Growing Source of Ecommerce Fraud to learn how one retailer is using technology to reduce claims and improve customer service.