Retailers are Potentially Losing out on Profit Protecting Against Fraud…New Report Provides Insight

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The pandemic ushered many long-time in-person shoppers online. In 2020, eCommerce exceeded $4.3 trillion, a volume originally forecasted for 2025. Due to the rapid growth, businesses have been increasingly interacting with first-time customers.

Unfortunately, retailers are 5-7x more likely to decline transactions from these new customers compared to returning consumers in an effort to protect against fraud. What is known as, “false declines,” these transactions represent millions of dollars of lost revenue for these organizations.

Forter recently released its Annual eCommerce Revenue Optimization (AERO) reports for the food and beverage, apparel and accessories, home and garden, and beauty and health industries which showcase the opportunity cost of falsely declining eCommerce transactions from new customers.

When retailers falsely decline a new consumer, the report reveals that 40% of those customers state that they will never shop at that particular business again. These inaccurate decisions can come at a high cost; Forter terms this challenge in the report as New User Missed Opportunity (NUMO).

The research breaks down how much gross merchandise revenue new users represent in each of the above categories. Below is a breakdown:

  • Food and Beverage: 6%

  • Apparel and Accessories: 4%

  • Home and Garden: 16%

  • Beauty and Health: 3%

While these numbers may at first appear small, they can have devastating consequences for retailers in each industry. We break down what the dollar figure amount would correlate to using Forter’s NUMO calculations below.

Food and Beverage

Forter’s calculations show a direct loss of $750,000 in revenue for every $500 million in transactions processed in the food and beverage industry. If these new customers were to complete nine more transactions within one year and remain loyal customers for an average of four years, the total impact would be up to $6.75 million in lost revenue.

Apparel and Accessories

Forter’s calculations show a direct loss of $500,000 in revenue for every $500 million in transactions processed in the apparel and accessories industry. If these new customers were to complete five more transactions within one year and remain loyal customers for an average of four years, the total impact would be up to $10 million in lost revenue.

Home and Garden

Forter’s calculations show a direct loss of $2 million in revenue for every $500 million in transactions processed in the home and garden industry. If these new customers were to complete three more transactions within one year and remain loyal customers for an average of four years, the total impact would be up to $24 million in lost revenue.

Beauty and Health

Forter’s calculations show a direct loss of $375,000 in revenue for every $500 million in transactions processed in the beauty and health industry. If these new customers were to complete three more transactions within a year and remain loyal customers for an average of four years, the total impact would be up to $4.5 million in lost revenue.

The statistics make a compelling case for retailers to invest in solutions that optimize genuine customer experience and lifetime value. Luckily, there are ways to more accurately assess the trustworthiness of a new customer — especially when an individual consumer lacks historical context. For example, Forter has amassed a Persona Graph that includes more than 1 billion online personas. When retailers interact with a persona for the first time, Forter can help determine whether or not they have seen that persona elsewhere across its global network.

The history and context can inform a decision on whether or not the retailer should accept or reject the transaction in a matter of a second. When the persona hasn’t been seen, the software can use probabilistic linking as pattern-matching, a means to make decisions based on similar personas. The result is a faster and more accurate result than rules-based solutions or scores and scales.

Fraudsters aren’t going anywhere anytime soon. Retailers should not have to compromise on potential revenue by protecting against cybercriminals. With the right solutions in place, these organizations can capitalize on the value or new customers while protecting themselves.

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