Retail beyond the customer experience

Amal Ahmed at commerce protection provider Signifyd describes how retailers can innovate to maximise their profits

 

It comes as no surprise that businesses in all sectors are looking for new ways to slash costs. In a landscape of geopolitical tension, sky-high inflation, unprecedented fuel price increases, and persistent labour shortages, 2023 is already looking to be one of the most financially challenging years in recent history, even after the chaos of 2020 and 2021.

 

All of these factors have led to pessimistic sales forecasts globally. Retail sales in the UK decreased 5.1% year-on-year in January 2023, and businesses across the pond are revealing equally gloomy projections – after enjoying average sales growth of 6% for the last five years, Walmart is expecting a growth of just 2 to 2.5% in 2023.

 

Along with the threat of lower sales, retailers are contending with the dramatic change in consumer demand for retail experiences. After the shift to ecommerce during the pandemic, shoppers are looking for more convenient, on-demand services that are completely flexible to their daily lives.

 

With consumers growing more conscious of how they shop as well as how much they spend, retailers need to re-evaluate expenses and look at how they can innovate and invest profits smartly, with solutions that go beyond simply enhancing the customer experience. 

 

Navigating regulatory changes

In Europe, merchants have recently been introduced to the increased enforcement of Strong Customer Authentication (SCA), a payment reform that requires online buyers to prove their identity using a one-time passcode, a mobile device, or a fingerprint. 

 

While SCA has enhanced security, the reform has also made the shopping process far more cumbersome, leading to reduced conversions and increased friction within the payment process.

 

And although it lowers fraud attempts at checkout, it could equally mean that fraudsters simply shift malicious activity to another part of the shopping journey, with activity such as Account Takeover (ATO), return fraud, or delivery abuse on the rise.

 

Despite SCA becoming more widely understood, many retailers feel unprepared and end up acting overcautiously when it comes to regulatory compliance, costing them millions in lost revenue. 

 

Retailers need to balance risk, friction, and experience, all in a way that builds trust with shoppers and drives continued growth. Merchants can look to develop this through authentication and can work with their Payment Service Providers (PSPs) to take on some of the organisational risk for them. Those that deploy high-quality tools and strategies gain the ability to recognize with high precision which orders are legitimate and which are fraudulent. 

 

Meanwhile, successful merchants are optimising their ability to utilise the exemptions provided by SCA, meaning they can validate transactions seamlessly in the background and identify those transactions that do not need to be authenticated. This will help to increase conversions, minimise empty shopping carts, and boost brand loyalty in today’s complex economic landscape.

 

Merchants who are utilising an exemptions strategy still need to ensure they mitigate their exposure to chargebacks and fraud as these exempt orders sit with them in terms of liability.

 

Revolutionising returns 

The returns reckoning is upon us. As consumer preference has shifted toward ecommerce, we’ve seen a dramatic rise in online returns and refunds, with 38% of consumers now more comfortable with returning online purchases than they were before the pandemic. 

 

The returns process is rarely a straightforward one, usually involving submitting a form online, mailing the item in, waiting for it to be received, and then waiting another 5 to 7 business days for the refund. By offering a convoluted returns process, merchants can find themselves deterring customers from buying from them in future.

 

While SCA adds a layer of protection, fraudsters look elsewhere along the buying journey for weaknesses to exploit: returns can be the perfect target for malicious behaviour. Many retailers have been the victim of scams that ship back items other than the original purchase — knockoffs for instance — to receive a quick refund.

 

But beyond fraudsters, regular consumers have also become more comfortable with dodgy returns. Signifyd data shows a 35% increase in false claims of damage and a 68% increase in missing item claims during 2022.

 

With fulfilment costs rising and labour shortages escalating, it’s no surprise that some retailers like New Look and Uniqlo are looking to instigate return fees for online purchases, however this could cause consumers to hesitate to purchase from these brands, complicating the customer experience. 

 

To revolutionise the returns process, retailers can use data to authenticate who should receive instant returns based on previous behaviour, identifying who has returned items incorrectly or fraudulently in the past.

 

By using data points and machine learning models to maintain frictionless experiences for positive customers, and building barriers for those who could take advantage of the system, merchants can support the customer journey and remove risk for the business.

 

This way, consumers are more likely to return, new customers are incentivised not to commit return fraud, and brands are able to build loyalty that supports their growth and continued profitability.

 

With retail and online commerce constantly evolving, and the threat of the recession still looming, innovation will be a key element in helping retailers stay agile and ahead of the competition.

 

By finding the right solution providers to partner with and focusing technology advancement around securing and streamlining processes, retailers will see greater retention that will boost profits in the long term. 

 

---

 

Amal Ahmed Director, Financial Services and EMEA Marketing at Signifyd

 

Main image courtesy of iStockPhoto.com