The global spread of the novel coronavirus has tested retailers’ ability to adopt, adapt and reimagine what it means to meet consumers where they are.
For the past 20 years, retail has been an exercise in transformation—keeping a step ahead of changing consumer preferences while catching up with new technologies, new business models and new competitive pressures.
But this is unprecedented: closed stores, dispersed workforces, supply chain pressures.
And yet, one thing has remained constant amid the chaos: Consumers expect a superfast, seamless shopping experience, even during widespread disruption. Ecommerce is what consumers have turned to, to get the products they need—and increasingly the product they want. Signifyd data indicated ecommerce sales had increased 85% the first six weeks of the pandemic’s U.S. presence.
Yes, consumers are forgiving in a time of crisis, but no matter what it feels like, we won’t be in crisis forever. And when retail and consumers emerge from living with COVID to living after COVID, retailers will need to be ready to greet them with a customer experience that is every bit as good—or better—than what they were offering at the start of 2020.
Living in Amazon’s world of one-click ordering and same-day delivery, consumers expect to be able to buy anywhere, at any time, all while being able to pick up or return orders where they please. Retailers not named Amazon scramble to compete by offering ultra-fast delivery and buy-online-pick-up-in-store. And when they do, they find themselves facing new logistics and fraud challenges.
The new challenges and the fear of fraud can lead to friction in the buying process. And friction leads to lost sales all along the buying journey. There are problems with the user experience and payment gateways that drive good customers away. Shoppers can become frustrated with two-factor-authentication requirements. And they can give up when orders are delayed. Or they can be lost for good when those delays mean the ordered item is no longer in stock—the result: Sales slip and revenue leaks.
Remove fear from your retail equation
It turns out that most sales lost through friction are within the retailer’s control. And while retailers are aware of lost sales and the importance of good customer relations, the issues don’t always get the attention they should.
The main culprit? Teams across the enterprise work within their silos and with their own data. It’s hard for any one team to see all the rough patches in the buying journey. The answer is for tighter collaboration and better communication among marketing, payments, fraud management, customer support, operations and finance.
Based on conversations with a broad range of retailers, we’ve come up with a pretty good picture of how revenue leakage occurs. Consider this scenario: Marketing attracts consumers to the website and a fraction of those go on to click “buy.” But, because of the way payment gateways, e-commerce platforms and fraud reviews often work, 10% or more of those orders are declined in the authorization and fraud-review stages. Unfortunately, legitimate customers placed a sizable number of those orders.
Some of the orders that make it through the first gauntlet are subject to lengthy manual fraud reviews. They end up never shipping because, by the time the orders are approved, the items are out of stock. That costs roughly another 1% of orders. Then, of course, there are returned items—which can easily reach 20% of orders or higher, depending on the vertical. On top of that are chargebacks related to customer disputes. Before you know it, the initial set of customers that marketing acquired has shrunk by more than 30% in some of the hardest-hit verticals—and revenue has leaked.
Steps to staunch revenue leaks
So what should retailers do? Start by breaking down the internal silos that obstruct a clear view of the buying funnel. Make sure different teams are talking and collaborating. Once they destroy silos, retailers need to build a dashboard that gives a clear view of the buyer’s journey and the trouble spots along the way.
That allows retailers to see where they stand in comparison to others in the same space, taking factors like their vertical, basket size and brand maturity into consideration. The question then becomes: Is the retailer suffering from an unreasonably high percentage of declines from payment partners. Accessing benchmark data from the likes of Visa can help here.
From there, retailers can identify where the leakage is the most severe and take steps to strengthen that weakness. Next comes measuring the result of the repair and testing its effectiveness. Once a retailer has tackled the first problem area, it’s time to move on to the next one to repeat the process.
As I said, one key area where revenue normally leaks is at the payment phase. This is a rich hunting ground for additional revenue. Retailers should trust their fraud professionals to drive the relationship with payment gateways in their favor. Typically payment gateways try to dictate how risk management operates. In-house fraud experts should make sure they’re steering the strategy.
Retailers also need to make sure their own fraud processes are the best available. Internal fraud experts need the confidence to review and disable some rules and filters activated by payment gateways, e-commerce platforms and card processors to see what legitimate orders are not getting through.
Eliminating overly cautious risk management allows e-commerce retailers to staunch revenue leakage. In an age when data breaches and cyber theft are prolific, the temptation for retailers to erect barriers between themselves and customers is understandable. But, treating customers like criminals when it comes to fraud management only leads to shoppers penalizing retailers in return.
Instead, retailers can build a comprehensive view of the buying journey and identify the pressure points where revenue is leaking. That will improve profit margins and preserve customer lifetime value.
And better than all that, it allows retailers to serve their legitimate customers in the way those customers want to be served.
Signifyd provides ecommerce security and fraud prevention services.Favorite