Signifyd Chief Marketing Officer, leading our marketing and partnership efforts.
Among the accelerating retail trends that I’ve talked about during the pandemic, two of the biggest have been:
• The likelihood that consumer abuse will one day outstrip payments fraud.
• The dizzying increase in the sales of home goods and their place in the commerce hierarchy of needs.
What’s interesting now is the way these two pandemic trends are intersecting — and not always for the better.
Trend No. 1: Increase In Consumer Abuse
In early 2020, I wrote about the types of consumer abuse I’ve seen at Signifyd — like online shoppers falsely claiming they ordered goods that never arrived, that they didn’t purchase something they did purchase or that their item was damaged or otherwise unsatisfactory when that wasn’t the case. I saw consumers gaming the system when it came to returns and refunds, too.
The trend was evident in our data and consumer surveys. One 2020 survey found that one-third of U.S. respondents had falsely claimed an order never made it to their home or that a product wasn’t satisfactory. I believe the increase was fueled in part by the financial strain many have experienced. Some call this trend “ethical fading,” the human impulse to focus on other aspects of a decision (like extenuating circumstances) to downplay misdeeds.
Trend No. 2: Home Goods And The Commerce-Needs Hierarchy
As the pandemic wore on, I noted that purchases were following an e-commerce version of Maslow’s hierarchy of needs. Home goods sales were a big segment of the pandemic-commerce pyramid that resulted, as Statista data illustrates. I believe the demand for big-ticket items during the lockdown had three basic causes:
• People shifted their spending patterns and began spending more disposable income furnishing their homes: Comscore found that online spending in the furniture, appliances and equipment category increased to $12.1 billion in the second quarter of 2020.
• Many Americans were literally spending more time in their homes. We needed upgraded home offices and home classrooms, and we wanted to make home a nicer place to be.
• Single-family home sales increased in many U.S. markets, according to the National Association of Realtors, likely because people were seeking more space.
The upshot was growth in e-commerce spending on the home. According to Signifyd’s data, monthly year-over-year sales in home goods more than doubled in 10 out of the last 12 months. (Signifyd’s data is derived from online transactions completed on its Commerce Network, a global sample of thousands of merchants selling in more than 100 countries and serving more than 250 million shoppers.)
Where The Two Trends Intersected
While higher sales mean good news for home goods retailers, there is a downside to this. Anecdotally, our merchant customers told us that consumer abuse was turning into a major online challenge.
Instances of consumer abuse began rising at the onset of the pandemic and finished 2020 up 280% over the pre-pandemic level, according to Signifyd’s Consumer Abuse Index. The index charts the number of disputed charges due to consumer complaints my company won. Winnable claims are highly likely to be consumer abuse.
How Bad Is It?
Signifyd saw many people filing phony damage and missing order claims. Scammers were discovering loopholes in company return policies for bulky goods with merchants more apt to write off the cost of an item and offer a refund than incur the shipping costs involved in taking back a large, heavy product.
Three Strikes And You’re Out?
Unfortunately, catching bad behavior isn’t a perfect science. Some merchants adopt a “strikes-based” system. They note return behavior in a customer’s account and watch for a pattern of abuse.
But what if a bad customer uses a different payment method the second time around or changes their email address, delivery address or billing address? They might not even look like the same customer.
And the truth is that sometimes items don’t make it to their destinations, and sometimes they are damaged in transit. Accusing a customer with a legitimate complaint of being dishonest is a customer experience disaster.
Every major retailer I know is pushing hard on this issue, some with task forces and initiatives to better triangulate all the factors that would help them distinguish between legitimate returns and abuse.
Combating Consumer Abuse Without Abusing Good Consumers
If you’re a retailer, chances are you’ve deployed or are in the process of deploying a customer data platform.
Why not consider your CDP as more than a marketing platform? Why not use it to establish a baseline for return behavior and to spot when a customer is deviating from the norm?
Again, this is not foolproof. Furniture and appliance purchases tend to be few and far between. It could be months or years before a home goods merchant has sufficient data to spot an abuser. Retailers may need to rely on more than limited signals from their own narrow universes.
Relying on a wider network with more data from more sources can enhance what your CDP “sees” and help you detect bad shoppers sooner. Spotting return-abuse behavior requires an identity-centric approach. Cast the widest net possible, whether that means partnering with brands under a corporate umbrella or non-competitive retailers who stand to benefit from widening their own net.
The idea of joining with other retailers to fight fraud might seem far-fetched, but e-commerce and online fraud are both evolving at breakneck speed. It’s a time for innovative ideas. One way to reassure the participating brands would be to turn to a trade organization such as the National Retail Federation or the Merchant Risk Council (of which my company is a member) to act as a conduit for building the consortium.
Retailers might also consider turning to one of the several companies that gather identity-centric data. The field is exploding, and it would be a good time for merchants to work with those in the industry to encourage them to tailor their tools to provide the sort of insights needed to protect their enterprises.
It’s about harnessing your data to know enough about your customer to detect the signs that indicate bad behavior. Otherwise, consumer abuse may one day overshadow payments fraud.