Online Retailers Feel Trapped Between Keeping Loyal Customers and Dwindling Profits: 90% Losing Money to Policy Abuse
14 Setembro 2023 - 10:00AM
Business Wire
90% of online retailers say consumer misuse of
return policies, coupon and loyalty programs is affecting their
bottom line, but 93% say they must maintain generous policies to
keep customers
Riskified (NYSE:RSKD), a leader in ecommerce fraud and risk
intelligence, today published “Policy Abuse and Its Impact on
Merchants: Global Benchmarks 2023,” revealing how consumer misuse
of refunds, returns, and promotional programs, alongside resellers,
is forcing retailers and other merchants to strike a difficult
balance between keeping customers and accepting an inevitable loss
in profits.
The report found that policy abuse–behaviors such as excessive
returns, refund scams such as claiming an item was not received or
returning empty boxes, abusing promotions like coupon codes or
loyalty program rewards, or reselling limited-inventory items–is
soaring: 90% of online merchants believe policy abuse is a
significant problem for their bottom lines.
The Wall Street Journal reported that the cost to process $100
of returned merchandise is about $26.50. Riskified’s survey found
that this number is likely even higher. Two-thirds of retailers
(67%) said they can recoup less than half of the total value of a
returned item. A representative from a leading fitness apparel
brand that Riskified interviewed even said that, depending on item
cost, their company might be better off financially if the customer
broke into their warehouse and stole an item, rather than purchase
and then return it.
Lenient return policies and promotion programs are driving lost
profits, yet merchants feel they must maintain their approach:
93% of retailers said it is “somewhat important” or “very
important” for their organizations to offer generous refund and
return policies to win new customers and retain loyal ones.
90% of respondents said they are reliant on promotions to
drive sales and remain competitive.
Other key findings from the Riskified’s policy abuse benchmark
report include:
- 9 out of 10 online retailers said they face significant
costs due to policy abuse.
- Policy abuse “peaks” at certain times of year. 70% of
online merchants experienced a rise in all forms of policy abuse
during the summer shopping season, and two-thirds (67%) saw more
policy abuse during the post-holiday returns season.
- Losses from policy abuse have increased year-over-year
(YoY). 57% of merchants faced increased costs from INR
(item-not-received) abuse between 2021 and 2022, compared to a 45%
YoY increase for reseller abuse, a 38% YoY increase for promotional
code and loyalty program abuse, and 37% YoY increase for returns
abuse.
Customer-centrism at a tipping point
Amidst the challenging economic climate for ecommerce
enterprises globally, the report identifies the key trends that are
contributing to the rapid rise in policy abuse in 2023.
According to Riskified’s data, the motivation for committing
policy abuse is due to a mix of economic factors (such as inflation
or entering a holiday period during which consumers have stretched
disposable income) and emotional factors (such as a bad customer
experience with a retailer).
Policy abuse is a unique problem for merchants to tackle
because, unlike traditional fraud, it can be committed by people
who are otherwise good customers, and in most cases it requires no
special skills or access to stolen credentials or accounts. An
analysis of Riskified client data, for example, shows that on
average 20% of all refund claims are abusive. Notably, policy abuse
can cost some merchants even more than traditional fraud
chargebacks, resulting in over $100 billion in losses for ecommerce
merchants worldwide.
Merchants are also burdened by the operational impacts of
processing refunds and returns, most of which are handled manually.
62% of merchants said they do not currently have automated systems
(including machine learning) to accurately identify and address
policy abuse, and 65% of respondents use a manual review process
for the majority of refund and return claims. It takes most
retailers (68%) three to four days to process a refund or
return.
“Between Amazon fast and free returns, and popular deep discount
flash sales, it has been a race to the bottom for merchants who
feel that they must offer increasingly lenient programs in order to
remain competitive,” said Jeff Otto, CMO at Riskified. “Although a
wonderful experience for good consumers, a growing spectrum of
hidden policy abusers have tipped the scales — deeply hurting
merchant profitability. The key to solving this challenge is
resolving the true identity of the consumer, extending trust and
frictionless experiences to good customers, while curbing the
abusers, and stopping the fraudsters.”
Click here to download Riskified’s “Policy Abuse and Its Impact
on Merchants: Global Benchmarks 2023.”
Methodology
Riskified commissioned WBR Insights, the custom research
division of Worldwide Business Research, to interview more than 300
leaders from across a variety of online merchant organizations
across the world, including United States, Australia, China, Japan,
United Kingdom, Germany, Austria, Switzerland, Brazil, and Mexico.
The companies represented report at least $500 million in total
annual revenue from a variety of industries including fast fashion,
sporting goods, food delivery, consumer electronics, and travel,
among others. The respondents consist of director-level and above
management personnel who are in charge of fraud & risk,
customer care, ecommerce, digital, asset and loss protection, IT,
and payments and finance functions.
About Riskified
Riskified (NYSE:RSKD) empowers businesses to grow ecommerce
revenues and profit by mitigating risk. An unrivaled network of
merchant brands partner with Riskified for guaranteed protection
against chargebacks, to fight fraud and policy abuse at scale, and
to improve customer retention. Developed and managed by the largest
team of ecommerce risk analysts, data scientists and researchers,
Riskified’s AI-powered fraud and risk intelligence platform
analyzes the individual behind each interaction to provide
real-time decisions and robust identity-based insights. Learn more
at Riskified.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20230914599363/en/
Aileen McNelis PR for Riskified amcnelis@nexttechcomms.com
Cristina Dinozo Sr. Director of Communications
press@riskified.com
Chett Mandel Head of Investor Relations ir@riskified.com
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