By John Sharman, Commercial Director, Transactis
Online technology continues to transform the retail space, as the way consumers buy goods evolves further with each new digital development, providing a whole new set of consumer behaviours for both sellers and carriers to handle. One pressure point that has emerged as a result of the ecommerce revolution is the spread of ‘digital shoplifting’ – and delivery companies need to face up to this challenge.
Digital shoplifting is a false Goods Lost in Transit (GLIT) claim – when a buyer fraudulently reports either that a purchase was never delivered or that it was returned in order to get extra goods or an undeserved refund. There seems to be a growing number of opportunities, making it a clear and present threat to any company involved in the selling and distribution of goods ordered on the internet.
According to a recent research report carried out by Transactis in conjunction with Retail Knowledge, an already overwhelming majority of 93% of the loss prevention professionals questioned agreed that fraudulent GLIT claims pose a serious threat to the sector, yet most retailers have no strategy in place to handle the problem and companies handling the logistics and fulfilment of orders often have to deal with extra pressure on their side. According to the research, with an estimated operational cost per claim of over £40, GLIT fraud is gaining momentum in the delivery and retail arena.
The British Retail Consortium recently reported that the overall cost of retail crime has risen by nearly 16% to £1.6 billion in 2012, with home shopping fraud a big component of that – indicating that it is a problem that etailers and carriers can no longer afford to ignore.
GLIT claims are costing UK retailers around £405 million each year, according to the research – a figure that could be considerably lower if we had means to successfully curtail the activities of digital shoplifters. It must be noted that the problem is a growing source of friction between retailers and their delivery partners.
It is time for online retailers and their distribution partners to start working together to tackle this growing threat to both. It is especially important not only because of the cost associated with false claims processing, but also because of the possible negative implications for retailer-carrier relationships. But what exactly can be done to address the situation?
The only viable solution is implementing a comprehensive screening system, which can enable retailers to use consumer data to assess claimants for potential fraud risk at the first point of contact, where costs are still relatively low. This data has to be gathered both on the retailer and carrier sides and cross-checked for any suspicious occurrences.
To be able to do this, companies must have access to full up-to-date information on both the customer and the delivery destination – including a clear view of the transaction and fulfilment history for each, including if possible data from other retailers and carriers. This will enable etailers and their delivery companies to work together to identify dubious claims and warn one another against possible fraudsters in order to treat suspicious cases with extra precautions – such as asking additional security questions of customers flagged up as fraud risks or requiring a signature for redeliveries to questionable addresses – while cases determined to be genuine can be processed without delays. The key is to strike a balance between challenging potentially dishonest claims and providing the best possible customer experience at the same time.
Today’s retailers and carriers operate in a tough and competitive market. They cannot afford to give away large amounts of revenue to hardened criminals and opportunistic amateurs. All indications are that British companies are losing continuously growing chunks of profit to GLIT fraud every year. As first party fraud is driven by attitude, morals and opportunism – the only true predictor is past behaviour. Credit, financial and demographic data is not enough to accurately identify perpetrators of what is often an opportunist crime. Therefore, historical data about individuals’ past behaviour is required and needs to be sourced across as wide a field of view as possible. Hopefully in the light of such developments, retailers and delivery companies will increasingly recognise the importance of cooperating and contributing to solutions that can save them time and money.