For many, the spring season brings in a fresh start. Whether it’s seeing the snow melt or cleaning out a closet, the changing of the seasons brings in space for individuals to reflect. For businesses, the spring season brings similar opportunities to reflect on how to solve problems and ensure growth. The bottom line is, now is as good a time as any for businesses to examine where losses occur.
With the pandemic ushering a wave of traditionally brick-and-mortar merchants online since 2020, the chances of being targeted by scammers is at an all-time high. In 2020, retailers lost $17.5B, with a report projecting an 18% increase in losses last year. In 2022, it is no longer an option whether businesses can choose to protect against fraud, but a responsibility. As the risk of fraud grows more year over year, retailers must be aware of some of the most common scams these adversaries conduct and how they can greatly reduce the chances of fraud.
Discount and Coupon Fraud
Throughout all times of the year, retailers use seasonal discounts and special promotions to increase the average purchase size of existing customers and to entice new customers. However, these alluring discounts can also attract fraudsters, resulting in a spike in promotion abuse.
Scammers can use different emails to exploit the same code or find holes in policies to plug in multiple codes and get an item for free. Next, the fraudsters can resell the item at full price on Amazon, eBay or Facebook Marketplace and pull in a profit. The Coupon Information Corporation estimates that this type of scam could cost organizations millions every year.
The best way organizations can protect themselves from this type of scam is to watch out for repeated use of discount codes and predictable email patterns. The right anti-fraud software can detect attempts by single sellers to create many accounts, blocking this behavior.
In addition to discounts, flexible returns are crucial to converting a first-time visitor into a returning customer. The downside is that the more flexible the return policy, the more likely the risk of fraud. Return abuse occurs when a customer returns merchandise in violation of the store’s return policy. This happens when a customer returns stolen merchandise or frequently sends back the same type of item. Other examples include price switching (taking a higher price sticker and placing it on cheaper merchandise) and cross-retailer return (exchanging an item purchased from another store).
Another prominent example of return fraud is an individual claiming that an item was not received when it was delivered successfully. It is imperative that employees are properly trained on when to accept and decline returns. In addition, retailers need to make their return policies clear and direct.
Fraud prevention solutions can identify serial return abusers and enable merchants to adjust their return policies in real time. For example, a great customer is offered a 30-day return window, but a repeat returner is offered the same product as ‘final sale’.
Scalable Order Fulfillment and Automation
Order fulfillment is arguably the most essential component in retaining existing customers and attracting new ones. Any disruption can cause even the most loyal of patrons to shop at the competition.
Dependence on manual fraud review is unscalable and can easily disrupt the supply chain. A spike in orders can result in longer confirmation times and potentially delay order fulfillment long enough for retailers to end up on consumer blacklists. In the state of the world today, consumers are growing impatient enough with supply chain issues, and it is up to businesses to ensure they are promoting best practices to get their customers their packages in a timely manner.
Luckily, automated fraud prevention solutions can eliminate the process of manual reviews and allow for businesses to scale existing offerings and monitor order volume. This proactive approach leverages a global network of fraud data that allows retailers to be one step ahead of fraudsters and deliver more orders on time.
Ultimately, retailers need to be aware of what to look out for to prevent fraudulent activity in the most efficient way possible. The use of a customizable, automated fraud prevention solution can help merchants maximize successful transactions and prevent adversaries from cashing in as well.
Yohanna Andom is a Senior Product Marketer at Forter, where she focuses on multiple product areas and competitive research. Prior to joining, she worked as a product marketer for global players in the software, AdTech and networking industries.