4 holiday season e-commerce risks — and what you can do about them
Peak seasons like the holidays represent a vital crossroads in e-commerce. So we wanted to learn more about business and consumer priorities during peak seasons.
A survey of over 1,000 U.S. adults revealed the driving factors that motivate or discourage online shopping. And a survey of 501 manager-level employees at mid-to-large online retail and e-commerce businesses revealed major risks and opportunities.
The surveys, featured in Kount’s “Holiday E-Commerce Guide,” found that half of businesses use peak seasons to catch up on sales and recover from economic downturns. Over a third called peak seasons critical for their survival.
And although many businesses expected higher sales in online retail channels, they still said they’d use promotions (free shipping, flash sales, loyalty account perks, and coupons) to entice shoppers.
Regardless of the season, these surveys shed light on ever-present risks and opportunities for e-commerce businesses. Read on for four peak-season e-commerce risks and five e-commerce opportunities.
1. Inventory issues
Most commonly, businesses expect to experience a number of inventory issues during peak seasons. Over half (58%) expect supply-chain disruptions, and 42% expect logistics and transportation bottlenecks. A little over a third (37%) expect cart abandonment to increase.
Among businesses that anticipate inventory problems, 59% said sourcing enough inventory from suppliers is a top concern. 51% said delays in deliveries to brick-and-mortar locations is a top concern.
49% said delays in direct-to-consumer deliveries are a top concern. 45% said moving inventory from warehouse to store is a top concern. Finally, 44% said keeping websites in sync with inventory management systems is a top concern.
Unfortunately, inventory issues don’t just stem from excited buyers. Oftentimes, bad actors will launch botnet attacks to buy up items or manipulate inventory. And businesses know it. 29% said their organizations have dealt with bot attacks or inventory manipulation.
Among them, 54% said they experienced spambot attacks. 52% said they experienced hacker bot attacks. 46% said they experienced social media bot attacks, and 32% said they experienced spider bot attacks.
2. New shipping, delivery, and pickup methods
More than half (53%) of business respondents said they serve customers online and in stores. At the time of the survey, they didn’t anticipate in-store sales volumes to return to pre-pandemic levels. And consumer sentiment followed suit.
30% of consumers said they would avoid shopping in stores as much as possible in the 2020 holiday season. 41% said they would continue to make most purchases online after 2020. Or they would make more purchases online but not as many as they did during the crux of the coronavirus pandemic.
New and expanded delivery and curbside pickup options were essential to evolving consumer needs at the time of the survey. But BOPIS fraud trends saw a 7% fraud attempt rate, compared to an average 4.6% attempt rate in other channels according to data from ACI Worldwide.
Preventing fraud in these channels should continue to be a top priority for businesses, as consumer sentiment indicates reasonable delivery times are a top concern. At the time, 42% of consumers said that longer shipping times make them furious when shopping online.
3. Friendly fraud disputes and promo and return abuse
At the time of the holiday survey, 40% of businesses had noticed an increase in chargebacks. A year later, chargeback risk statistics acquired in 2021 found something similar. 58% of businesses surveyed said their chargeback rate had increased since March 2020.
Among respondents in the 2020 holiday survey, 51% said they expected to experience an increase in chargebacks in that year’s holiday season. When asked to rank their biggest chargeback concerns during the peak season, businesses, on average, ranked the cost of chargebacks highest followed by creating negative customer experiences.
Part of combating post-peak-season chargebacks means fighting friendly fraud, which can include acts of promo abuse and return fraud. Unfortunately, 42% of businesses said they allow customers to abuse promotions. For example, they allow customers to buy extra items to reach the free shipping threshold and return some items later.
And consumers are comfortable taking advantage of lax policies. 39% said they’re comfortable returning something they’ve worn or used, even if it wasn’t defective. 36% of consumers said they typically return five or more items for refunds after the holidays.
4. False declines and negative customer experiences
On average, consumers’ top priorities when shopping in peak seasons include finding the best deals and finding what they want easily. Negative customer experiences and data breaches put those priorities at risk.
More than 1 in 5 businesses said they expect more frequent data breaches to be a significant challenge in peak seasons. 60% of consumers are most concerned about the credibility of an online retailer and how data breaches jeopardize their personal information when shopping online.
And when it comes to how negative experiences affect shoppers, 25% of consumers said they wouldn’t return to a website if it turned away their legitimate transaction. 52% of consumers said high shipping costs would likely give them a reason to abandon their online shopping carts.
Similarly, 40% of consumers said they would abandon their online shopping carts if they experienced long shipping or delivery times. 27% said they’d abandon their online carts if they experienced complicated ordering and checkout processes or if they had to enter their information too many times.
Thankfully, consumers expect some level of friction. 46% of consumers cited longer shipping times as their most prominent online shopping issue. 42% cited stores or websites not having items in stock. 32% cited being unable to find the items they want online. At least 20% cited more difficulty with customer service requests as their most prominent online shopping issue.
Holiday season opportunities for e-commerce businesses
The business risks and consumer trends in the 2020 holiday season revealed five key opportunities that businesses can focus on year-round.
1. Scale e-commerce operations to protect all digital services.
Fraud can occur at more than just checkout and payment. Scaling operations to include customer accounts, loyalty programs, and digital payment methods means establishing identity trust at every step of the customer journey. A digital fraud prevention platform that uses a global data network and machine learning can best detect known and emerging fraud attacks.
2. Adopt new delivery and pickup options like BOPIS and curbside pickup.
Consumer demand has continued to drive the need for BOPIS and curbside pickup, so don’t shy away from these options. In fact, BOPIS purchases increased 554% between May 2019 and May 2020, according to data from KIBO Commerce.
A fraud prevention platform that can account for things like payments fraud, promo abuse, and card testing can keep all your delivery channels protected.
3. Reduce friction to drive conversions and deliver exceptional customer experiences.
Ensuring good customer experiences is essential for peak-season success. Customers can experience friction at account creation, login, checkout, and payment.
An identity trust platform can help you reduce friction by assessing the risk or trust behind every experience. In the end, you can give good customers frictionless experiences and challenge suspicious behavior.
4. Get proactive about stopping fraud before you authorize a transaction.
When you stop fraud or malicious activity before you authorize a transaction, you reduce chargebacks and operational costs down the line. Taking a proactive approach means using tools to identify and stop high-risk transactions.
Meanwhile, fraud policy management experts can help you fine-tune your policies to identify and stop chargebacks from customers who dispute purchases often.
5. Prioritize inventory management to help customers find what they want quickly.
Proper inventory controls ensure you have enough products to meet customer demand. Inventory controls help you accurately assess product availability for customers across channels and maintain promotional agreements with suppliers. So it’s essential to protect it from bot attacks and other malicious activities.