With less than a month until Black Friday, it’s time to ensure you’re ready to go when the orders start pouring in.
This season, total online spending during the holiday season is expected to reach a record $83 billion — an 11% increase from 2014 — in the US alone. Since November and December combined often bring in over 20% of an e-commerce company’s annual revenue, the opportunity for a sizable revenue bump this season is immense.
Depending on how prepared you are, those numbers can be thrilling or terrifying (or both). With the allure of twice as much profit comes the flip side: twice as many orders to fulfill and twice the stress on your existing processes.
In your rush to accommodate the increase in orders, your review process may suffer. More than likely, you’ll only have time to skim for fulfillment and billing details, skipping a more thorough review that could help you avoid the wrench in your profit dreams: payment fraud, in the form of chargebacks.
Fraud continues to grab a higher and higher share of e-commerce merchants revenue, according toLexis Nexis’ “True Cost of Fraud” report. In 2015 alone, for every $1 of fraud, the ultimate cost to merchants was over twice that, due to fees and time wasted. When you multiply that by thousands or millions, the cost adds up, putting a big dent in your profit.
Fraudsters know that the holiday season is your busiest time, and as a result, it’s their holiday too. For them, it’s an opportunity to attack when you’re already overwhelmed.
In the face of an order deluge, merchant operations face the following three likely scenarios:
1.You decline too many orders out of caution and a lack of time and resources to do a thorough order review. With the hike in orders, you decide to play it safe, and decline orders that don’t fulfill a basic criteria, e.g. the total order must be under $1,000 dollars, shipping and billing must match etc. While you avoid the risk, you also miss out on the reward, leaving money on the table.
You rejoice in the flood of orders, and approve too many while shortcutting the order review process to deliver on time. This gives you a faster turnaround on shipping your product to customers, and maintains their goodwill towards your company. Unfortunately, amid your joy, you leave yourself open to being taken advantage of by fraudsters. The revenue you originally counted on is now at risk of being eaten up by the chargebacks that you can receive up to 90 days after the actual purchase.
You approve the influx of orders while maintaining your commitment to the order review process, overloading your review resources and delaying turnaround. While this helps you defend against fraud, it frustrates your customers as your backlog increases, and your ability to deliver on time suffers. Sure, in the short-term you protect your revenue, but in the long-term, your business suffers from the steep drop in customer satisfaction.
Now that we’ve seen how that peak of orders can stress your existing process, let’s discuss how to address the issue.
Here’s a few options for relieving the order review headache:
1. Hire more people
It’s often the first idea a merchant has, the thought that perhaps some hired help during the holiday season will make life easier. This can absolutely work for the fulfillment part of your business, but likely can’t solve your order review bottleneck issue, where the learning curve is quite steep. It’s no small task to efficiently train a new employee to detect payment fraud in a timely fashion. Plus, expanding your workforce, albeit temporarily, may be your most expensive option.
2. Improve your processes internally with the right order review tool
Invest in a better platform for your team to improve order review, allowing them to review cases faster. Multiple such tools exist at various price and quality levels, and some allow you to get started using their service immediately. Look for a platform that uses machine learning to screen transactions and enriches orders with address details, location and social data, allowing your team to identify sketchy orders quicker.
While this approach helps you weed out a good amount of fraudulent orders, you will still receive some chargebacks, albeit far less, as some smart fraudsters may slip through undetected.
However, if you intend to keep order review in house, it’s a good idea to invest in such a tool to aid your team. Plus, some tools offer the ability to submit selected worrisome orders for an external review, and pair that with a payment guarantee, so you can accept those often pretty large orders without risk to your business.
3. Have a 3rd party handle the whole process
Given the complexity and importance of order review, you can simply use an outside service that reviews these orders for you and accepts the liability for their decisions. Options exist to route all orders directly to your vendor, and even to trigger your fulfillment and shipping processes automatically based on their decisions. This removes the entire review headache, giving you both peace of mind and a guarantee that you’re not liable for fraudulent transactions.
In short, accelerate your holiday season preparation and shore up your defences against fraud. Then after the holiday rush, spend time thinking about your long-term plans—if orders continue to skyrocket, do you want to build out and train an internal team of fraud analysts to handle order review? Or, would you prefer to delegate this complex process to a 3rd party skilled in fraud management and focus on your products and customers instead?
Talk to your team and walk through your processes with fraud experts like SIGNIFYD to assess your current approach and review potential scenarios to strengthen it. Don’t make the mistake and delay this reality check of your existing practice: The peak business of the holiday season is right around the corner and so are the fraudsters waiting to take their share.