Revenue Optimization 1: Authorization rates, fraud and some things you should know about risk management
This blog was originally published in January 2018. We have updated it to reflect changes in data.
Customer returns can be a headache at any time of year. But our data shows that it's also seasonal. At a stressful time and at a point of potential conflict between you and your customer, it’s important that you get it right. In this blog we’ll look at a couple of easy ways to do that.
The graph below shows the volume of returns in 2017 and 2018 on both ecommerce and point of sale platforms, based on our data. The largest spikes are in January, where return rates increase by more than double thanks to all those rejected Christmas gifts. The smaller spike is in summer - a direct result of summer sales.
Data taken from a selection of European online and POS retailers on the Adyen platform.
Interestingly, Europe has a higher rate of returns than other markets. The UK, France, the Netherlands, and Germany, for example, have return rates of around 8%.
This is likely thanks to the ease of returning online purchases. Shoppers can buy multiple options online, try them at home and then return the rejects.
So, you're probably in the midst of your peak return season.
There are two types of refund: referenced and unreferenced. Referenced refunds are connected to the original purchase. While unreferenced refunds need to be manually reconciled afterward.
Generally, ecommerce refunds are referenced, since there’s a digital record of the customer and their purchase.
But it’s difficult to process referenced refunds in store. Here the card is usually refunded, and the refund reconciled manually later. This can be a huge waste of time and resources.
Fortunately, it’s now possible to reference your in-store returns as well. Adyen automatically connects the customer card to the purchased item, so the return can be reconciled easily. The customer doesn't even need to show their card.
Returning items is a chore. Make it easy for your shoppers by letting them do so at their convenience. Let your online shoppers return items in store, and let your in-store shoppers return items to your ecommerce warehouse.
Giving them this flexibility provides a better experience. It also removes barriers to initial purchase if they know the return process is straightforward.
To support cross-channel returns, you'll need to have a single view of your shoppers’ purchase history. That way you can reconcile an online purchase in-store and visa versa.
To avoid being vulnerable to retail return fraud you need to be able to reconcile the return claim with your shopper’s history on the spot. This is much easier if your payments are centralized, so you can link shoppers to their purchases regardless of channel. In doing so, you'll tighten your defenses making it difficult for someone to make a fraudulent return claim.
Of course, it's important to remember that returns come with a great opportunity. Whether the shopper visits your site to read your returns policy, or brings unwanted items into the store, you have a precious moment to re-engage with them.
Most important is to ensure a smooth return process. By consolidating your payment data, you can process customer returns quickly and easily.
This isn’t just great for customer satisfaction, it cuts out a lot of manual work for you, and helps you defend against retail return fraud.
And, since you have a complete view of your shopper history, you can target them with relevant offers. Who knows, you might convert the return into a fruitful shopping trip.
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