E-commerce merchants have long dreaded chargebacks, especially the ones that result from friendly fraud and refund fraud. A customer lies about never having received their shipment, or they claim it arrived damaged, or it wasn’t the right item, and could they please get a replacement?
The best way to combat that kind of friendly fraud is to ask the customer to send back the damaged or incorrect item before replacing it. If they didn’t, then either they didn’t really want to replace it, or you had caught them out.
As far as the lost shipment goes, you can always take that up with the shipping provider or third-party logistics (3PL) provider. If you can show that they lost it, they’ll refund the shipment’s value (up to a certain amount, unless you had insurance). But shipping companies are getting better about confirming shipments and proving delivery. Even Amazon takes photos of your package on your front porch, showing that they delivered it.
Problem solved, right? Except not. Porch piracy, which was uncommon just a few years ago, has now become such a problem that one in five Americans have had a package stolen off their front porch just since the pandemic started.
Now ecommerce merchants are steering right into a perfect storm of increased fraudulent activity.
- Ecommerce is already on the rise because of the pandemic.
- Ecommerce will increase as the number of COVID cases surge even larger than before.
- It’s the holiday shopping season.
A recent article in PYMNTS.com talked about why porch piracy has increased.
Kount’s Chief Customer Experience Officer Rich Stuppy told Karen Webster that porch piracy is one of the easier crimes to commit. A really organized pirate will follow Amazon trucks, mark the houses where larger packages are getting dropped off, and (with the help of an accomplice) make a second pass to run out and snatch a package in about 15 seconds.
. . .
Or, Stuppy said, there are the lazy porch pirates who simply prowl around and steal what looks interesting off the veritable buffet of porches with packages that they encounter in their day-to-day lives.
Regardless of how it happened, you’re either getting a phone call or getting hit with a chargeback. (And if you’re lucky, it’s only the phone call.)
As Stuppy said on PYMNTS.com, “Porch piracy is going to be part of the holiday season for as long as there is holiday shipping,”
The problem for ecommerce merchants is that you’re the one bearing all the costs of porch piracy. You’ve already shipped the product, which you paid for, and now you’re expected to ship out a free replacement, which you have to pay for. Plus, you can’t get any remunerations or refunds yourself. The customer didn’t lie about the shipment, the 3PL didn’t lose it, and nothing got damaged in transit. You’re just out the cost of the replacement, which was probably higher than your margin.
You could always insure the shipment, and depending on the cost and your shipping volume, that may not be a bad idea. Because if your porch piracy rate matches the national trend, 20% of your shipments could be lost to porch piracy.
Beware Refund Fraud, Too
Friendly fraudsters are also getting smarter. They’re getting hip to the “ship the product back first” requirement and are finding workarounds. For example, when the fraudster gets a return label, they’ll stick it to an envelope and stuff it full of junk papers.
When it gets received by the returns department, they scan the label, and mark the “package” as returned and send it to someone else to process, without any indication of what it should be. The refund is granted, but when the envelope is opened, it’s filled with junk papers and gets thrown away without anyone following up on what was supposed to be in there.
Rich Stuppy says it’s almost foolproof.
The best way to combat this might be to create a special returns process where the contents of the box have to be confirmed against the original packing list before it’s approved as being correct. The package would still get scanned into the facility as received, but the final approval must be given once the box is opened.
There are other solutions that you can use, as long as you take a proper “fraud-first mindset,” such as AI-driven solutions that can examine different trust signals within a customer’s history profile.
For example, a customer who has ordered dozens of times from a merchant and reports their first stolen package is probably a legitimate theft. But a customer who has had repeatedly reported thefts of high-ticket items might be worth following up on. If it’s an egregious amount of theft, you might even want to consider calling the local police department and asking them to investigate.
Also, be sure to keep track of addresses in the area as well, and see if there are a high number of thefts occurring in the same localized area.
Thefts are only going to increase as we face this perfect storm of e-commerce growth related to the pandemic and the holiday shopping season. Keep track of your refunds and your chargebacks and start looking for patterns. While you may not have time to implement a solution this late in the year, that doesn’t mean you can’t start thinking about implementing next year’s. And if you can use the data you get from this year’s shopping season, your prevention efforts will be all the better for it.
If you want to learn more about reducing fraud and chargebacks, CB-Alert can help, Please visit the CB Alert website.
Photo credit: Luzie1973 (Pixabay.com, Creative Commons 0)