In the online retail industry, mega-sellers like Amazon and Walmart set the standard for what consumers expect in terms of service, ease of use, fulfillment, shipping and more.
Amazon recently announced free one-day shipping for Prime members, with the service already rolling out on select products. With more than 100 million Prime subscribers in the U.S., buyers will now see free one-day shipping as the bar to surpass to compete with the giant. In response, Walmart is offering free one-day shipping with purchases of $35 or more.
But what about smaller online retailers? How can they remain competitive in this kind of environment?
Fast, reliable delivery and fulfillment is a key competitive advantage in the e-commerce market. According to the National Retail Federation, 40 percent of consumers want orders delivered for free and within two days of purchase. Nearly 30 percent of buyers surveyed claim to have decided against completing a purchase after realizing that two-day shipping wasn’t available.
Keeping up with that level of customer expectation isn’t an easy task, though. In fact, providing fast, low-cost shipping — while still ensuring secure, orderly and efficient fulfillment — is incredibly difficult. Sellers must also maintain sound cybersecurity and payment security measures, which can make order fulfillment a real nightmare.
With this kind of pressure on retailers, it’s tempting to relax those security standards to try and retain as many buyers as possible. However, cutting corners on verification and other best practices is a huge mistake.
Fulfillment Vs. Verification
It’s true that security checks represent friction points in the lifecycle of a transaction. Not only do they slow down order fulfillment, they may also increase the risk of shopping cart abandonment. Online sellers already lose seven out of 10 potential sales to abandonment. The risk of shopping-cart abandonment leads many retailers to view friction as something to eliminate wherever possible.
In addition, faster shipping might also reduce your chargeback rate. The practice known as “friendly fraud” — whereby a buyer completes a purchase, then later files a chargeback without the justification to do so — is a costly and fast-growing problem. In 2018, merchants are believed to have lost more than $20bn to friendly fraud, or $2.94 in revenue for every $1 in transaction value.
Customers claiming to have never received goods ordered is a commonly reported reason for chargebacks. Thus, providing fast shipping with tracking and confirmation can actually minimize your risk of chargebacks.
Minimizing friction can’t come at the price of compromising security, though, or you risk seeing criminal fraud rates spike. So how do you strike the right balance? By distinguishing between what we call “positive” and “negative” friction.
Not All Friction Is Bad
Some degree of friction during the customer experience and fulfillment process can be a good thing. The key is distinguishing between friction points that help and hurt your operations.
Positive friction is that which helps prevent fraudulent activity and other abuse, with little if any impact on the customer experience. Examples of these helpful friction points include:
- Making account creation optional, rather than requiring it before checkout.
- Requiring complex, unique passwords for user accounts.
- Offering 3-D secure technology as an opt-in service.
- Asking buyers to verify an order before completion.
- Asking to verify the user’s CVV during checkout.
- Deploying back-end fraud technologies like geolocation, AVS and IP verification.
All these practices have a minimal impact on the customer experience. However, they go a long way toward helping to mitigate the prospect of fraud, chargebacks, or other fulfillment mistakes. For instance, you know that verifying buyers’ identities is a vitally important parts of process. Asking for something as simple as a CVV code does add friction, but the security it offers drastically outweighs the added burden. Negative friction, on the other hand, places unnecessary obstacles between merchants and consumers. Examples of this can include:
- Complicated or broken site navigation.
- Excessive, redundant fields during checkout.
- Forcing customers to register for additional accounts before purchasing.
- Not displaying shipping information on the product pages and at checkout.
- Limited payment methods.
Save Time and Money Elsewhere
Your supply chain features plenty of points of both positive and negative friction. Learning how to distinguish between the two allows you to move to faster fulfillment, while preserving security measures.
Think about your checkout page, for example. You can design some fields to auto-populate, such as city and state based on ZIP code, or card brand based on the bank identification number based on the bank identification number. However, you still want to ask users to provide a CVV at checkout, and to verify their order before finalizing. That way, you’re getting the benefits of key security protections, while also making checkout a smoother process for buyers.
You can apply this idea to other points in the fulfillment process, too. With shipping, for example, providing delivery confirmation is both a great way to reassure buyers about their goods and generate evidence in the event of a transaction dispute. And, as mentioned before, fast and free shipping has a positive impact on your chargeback total. You can make this more feasible by:
- Incorporating some shipping expenses into the prices of goods.
- Boosting conversion and average transaction totals.
- Storing inventory and fulfilling orders from strategic places in different regions.
- Integrate customer loyalty programs.
- Advertise fast and free shipping as a selling point.
- Audit materials and processes regularly to identify inefficiency and liabilities.
Customer expectations regarding convenience and speed aren’t going to slacken. Over time, they’ll only get more demanding. With the right strategies, however, you can keep up with the Amazons and Walmarts of the world.
Monica Eaton-Cardone is a risk-management and fraud-prevention expert, and is co-founder and chief operating officer of Chargebacks911, a global chargeback-mitigation company.