New survey: 53% of consumers lack confidence in direct sales purchases
The accelerated adoption of e-commerce in the last several years pushed more businesses — and customers — online than ever. That mass web migration exposed businesses to new customers, new demands, and, unfortunately, new e-commerce fraud risks, especially in the $55 billion direct sales industry.
Once upon a time, customers relied primarily on person-to-person connections to purchase direct sales products. Today, they’re buying new product lines over social networks and online from these companies directly.
At Kount, we wanted to learn more about how consumers feel when buying products and services online directly from network marketing companies. So we reached out to 800 consumers in the United States, Canada, and the United Kingdom for the “Customer Confidence in Direct Sales and Network Marketing” survey.*
In it, 53% of consumers revealed they feel only somewhat confident or not confident at all when making online purchases from direct sales companies compared to major online retailers. But they also revealed the top reasons for that lack of confidence and how companies can raise it.
70% of consumers made up to five purchases directly from network marketing companies last year
In the U.S., affiliate marketing reached record-high sales in 2020, according to a Direct Selling Association (DSA) report, experiencing a 13.9% spike in growth from the previous year.
Among Kount’s survey respondents, almost three-quarters (70%) have made between one and five online purchases directly from a network marketing company within the last year. 14% say they’ve made more than 10. Most respondents purchased beauty products, followed by skin care or hair care products and home goods.
Younger male and female respondents show similar interest in direct sales products
The DSA report revealed that 75% of affiliate marketing sellers and buyers in 2020 were female. It also showed that 42.2% of sellers and buyers were between the ages of 25 and 44. And 5.9% were under 25.
Of the respondents in Kount’s survey, 58% identified as female and 42% as male. In addition, almost 60% of consumers surveyed were between the ages of 25 and 44. And 17% were aged 18 to 24.
The top three highest-selling direct sales industries worldwide in 2020 were wellness, cosmetics and personal care, and household goods. In addition, wellness products alone accounted for almost 35% of affiliate marketing global sales during that year.
This trend seems to remain strong in 2022. Beauty and cosmetics products made up the majority of purchases among male and female respondents between 18 and 34.
30% have disputed an online purchase from a direct sales company
Almost a third of consumers surveyed have disputed an online purchase from a direct sales company with their bank or the company itself. Of those disputes, 56% cited legitimate disputes. 21% cited instances of friendly fraud, and 14% cited criminal fraud.
The top reasons for legitimate disputes included products arriving broken or damaged, products not arriving at all, the company sending the wrong product, and purchases not meeting expectations. Meanwhile, friendly fraud disputes resulted from customers not understanding what they purchased, not intending to buy a subscription, and wanting a refund.
To reduce disputes, direct sales companies look closely at their dispute reasons or start tracking them if they don’t already. The survey suggests many disputes are preventable with improved practices for order processing and dispute management on the back end.
If unchecked, disputes can become a serious problem for merchants, especially those classified as “high risk” among credit card companies. When a customer disputes a charge with their bank, merchants are vulnerable to the direct and hidden cost of chargebacks.
The No. 1 reason why consumers would stop purchasing from direct sales companies: Fraudulent purchases
Consumers revealed that too many fraudulent purchases would most significantly prevent them from making online purchases directly from direct sales companies in the future. And given that 14% of consumers surveyed reported disputing a direct sales purchase due to criminal fraud, merchants stand to lose significantly to the resulting chargebacks and poor brand experiences.
Unfortunately, Kount’s 2021 chargeback statistics revealed that almost a third of merchants across industries said a lack of experience in chargeback prevention was their top chargeback challenge. Another 22% said a lack of chargeback prevention strategies was their top challenge. And 17% said not having the resources to dispute chargebacks was their top challenge.
Best ways to increase customer confidence: Free shipping, better buying experiences, less friction
Surveyed consumers revealed that free shipping and returns were the top ways direct sales companies could increase their confidence in online purchases. After that, they ranked better buying experiences and greater protection of personal information highly.
Results like these show that consumers are just as concerned about their digital journeys as merchants should be. The holistic customer experience isn’t just about preventing fraud. It also includes ensuring customers see ads relevant to their interests and that merchants meet the demand for flexible, transparent policies.
Almost 67% of customers say direct sales ads are only somewhat or not relevant at all to their interests
Consumers cited ad relevancy as a top way to increase their confidence. But almost 63% of respondents “sometimes” or “never” see online or social media ads for products and services from direct sales companies.
Among respondents who say they see direct sales ads only sometimes, the majority say their ads were only somewhat or not relevant to their interests. However, with social media and online sales driving revenue, merchants must deliver ads and experiences that inspire confidence and promote repeat purchases.
A digital enablement solution can increase consumer confidence, deliver hyper-personalized experiences
A digital enablement solution can increase customer confidence by providing digital payments fraud protection and safeguarding consumers’ personal information. For example, Kount’s Engage fraud solutions deliver accurate identity trust decisions in milliseconds to stop fraudulent purchases while providing frictionless experiences for good customers.
Meanwhile, its dispute and chargeback management tools can integrate with tools from major card brands to provide real-time chargeback alerts and stop friendly fraud. In addition, merchants can relay transaction details that can help customers recognize purchases and relay the status of a refund before a dispute becomes a chargeback.
Getting a handle on criminal and friendly fraud can give direct sales merchants more time to address shipping, manufacturing, and fulfillment issues that lead to legitimate disputes.
Finally, Kount’s solutions combine digital and physical identity attributes to better identify good customers. And once the solution recognizes a good customer, direct sales merchants can use consumer insights like browsing patterns, tastes, past purchases, and propensity to spend to deliver personalized ads and experiences. This actionable data can help improve marketing campaigns by providing the right offers to the best customers at the right times.
*Methodology: Kount, an Equifax Company, commissioned Pollfish in March 2022 to survey 800 male and female adults ages 18 and up in the United States, Canada, and the United Kingdom about their confidence levels when shopping online directly with a direct sales or network marketing company. Distribution of this data is permitted under the Creative Commons with proper attribution to Kount, an Equifax Company (www.kount.com).