April this year signalled a fresh start for shop owners as lockdown restrictions on non-essential retailers in the UK were lifted. Retailers now have the chance to forge a new relationship with customers and engage with them as they return to the high street. However, our world is becoming increasingly more digital by the day, and consumer expectations are shifting as a result.
For instance, according to data from IMRG Capgemini, online retail sales in January skyrocketed by 74 per cent year-on-year, marking the highest rate of growth since March 2020. January typically sees subdued sales following the Christmas period, but Covid restrictions have left consumers turning to online shopping.
In fact, many shoppers over the past year will have found eCommerce more convenient and are likely to stick with it even once the pandemic is over. For that reason, retailers should resist focusing solely on their brick and mortar stores and instead consider embracing an omnichannel and online strategy to support the ongoing growth.
Grocery merchants have been seeing high traction with their online channels, as online grocery ordering is becoming the norm rather than the expectation. But with this new foray into the digital world, comes an increased risk for exploitation.
Many supermarkets have only started to offer online shopping in the past year, and are only now starting to look for solutions for fraud. At the same time, they experience an extremely large volume of orders but have little time to review and fulfill them, while screening out fraud. For supermarkets, it’s critical to make lightning quick decisions on whether a transaction is legitimate, while also avoiding any interruptions that disrupt the supply chain.
CNP (card-not-present) grocery fraud isn’t completely different from fraud in other industries. The pace of attacks and the tactics that fraudsters employ to carry them out are changing with technology, with methods including carding, where fraudsters place low amount orders in supermarket websites to test out the validity of credit card details, to promo-code abuse, and more sophisticated ones like account takeovers.
The other that has been especially on the rise due to its appeal to fraudsters – registered accounts with a history of good transactions are more likely to be greenlighted by merchants. Some customer accounts also contain loyalty points or stored payment methods – these are a fraudster’s jackpot, as they require little additional information in order to carry out the fraudulent transaction.
Digital transformation has also given rise to potential avenues for fraud in the grocery sector: contactless shipping and delivery, as well as the option to buy online and pick up at curbside or in-store (BOPIS). This has turned out to be convenient not only for consumers, but to fraudsters as well. BOPIS, in it’s “COVID version” means that a proper physical identification of the consumer is almost impossible to do and needs to be done online, prior to the pick up of the goods. Also, many of these orders have short fulfillment windows and must be approved almost immediately.
To keep the customer experience as smooth as possible while also maintaining the much needed social distancing rules in place, physical identification during pickup is rarely requested and it usually refers to an order number or an online receipt. But, if the fraudster has taken over the account of a legitimate customer, or used his own email while paying with someone else’s credit card for the transaction, they can easily access both and fool the retailer.
Having stated that, the increased demand for online shopping has placed high pressure on retailers’ manual review teams. Offering ‘instant’ service has become a priority, and fraudsters are using even more sophisticated fraud MOs. With all this in hand, manual review teams have to find the right balance between approving orders quickly, maintaining a frictionless customer experience and preventing fraud. This has led to an overcautious approach by merchants who are not well-prepared to attack fraud.
For instance, retailers may cancel orders if they believe they are fraudulent, but cancelling legitimate orders will frustrate customers. Retail is a very competitive market, especially online retail, where consumers can easily take their business elsewhere, as another store is only a webpage away, rather than the other side of town.
So what should merchants do? While many retailers will have focused on reopening their physical stores, they must not neglect their online channels, which are facing huge pressure. Online orders come in thick and fast, and consumers expect their orders to be fulfilled quickly. There is no time to manually check every order for fraud, or at least they cannot do it on their own.
To prevent fraud and maximize sales while maintaining a smooth customer experience, retailers should be aware of fraud patterns, such as which products are high-risk. Currently, pharmaceuticals and liquor are common targets, as they are non-perishable and easier to resell. They should also learn fraudsters’ behavioral patterns, as paying attention to how these tactics shift is crucial to avoiding fallout from fraud.
These are all good tactics, but to address a growing problem, merchants must understand the MOs fraudsters use and adopt fraud prevention strategies that also address the growing problem of ATOs. Fraud prevention technologies that rely on machine learning models for real-time decisions are an excellent match for an industry that prides itself on fast handling. Using the power of strong customer networks and data linking can help merchants prevent fraud and adapt to changing order patterns even when sales skyrocket.
As shopping has shifted online, so too has shoplifting. Today’s retailers must adapt in order to protect themselves against these modern-day threats.
By Emilie Grunzweig, director of Data Insights at Riskified