Credit Card Fraud in Online Fashion Retail and Ecommerce
The worldwide explosion of eCommerce presents huge domestic and cross-border opportunities for merchants in the fashion vertical. It’s estimated that global eCommerce sales of clothing and accessories hit an all time high of $85 billion in 2015. As increasing numbers of shoppers in emerging markets like China come online, both consumer fashion and luxury fashion retailers can take advantage of the increase in demand. By 2020, the value of cross-border eCommerce sales is projected to reach $1 trillion.
Riskified’s work with leading merchants in the fashion vertical – such as FarFetch, Ssense and Vestiaire Collective – provides us with a wealth of information about the eCommerce fraud challenges they face. We recently analyzed our data and compiled the findings into a report on card-not-present (CNP) fraud in the fashion vertical. In this post, we give you a taste of this report by sharing some of the insights included in it.
The Vast Majority of Online Fashion Orders Are Legitimate
When handling orders from new, unfamiliar markets – or after being hit with chargebacks – fashion merchants may err on the side of caution and decline more orders to avoid fraud. However, Riskified’s data shows that the vast majority of online fashion orders are legitimate and can be safely approved. In fact, we safely approve over 90% of the online fashion orders we review for fraud. Although the rate of fraud in luxury fashion orders is more than double than in consumer fashion, Riskified still approves over 97% of consumer fashion orders and nearly 90% of luxury fashion orders. This means that on average, a fashion merchant should be accepting at least 9 out of every 10 orders. If you are declining 10% or more of the orders placed on your site then you are almost certainly rejecting legitimate orders and leaving money on the table.
Understanding the characteristics of legitimate orders is key to ensuring good customers aren’t being rejected due to suspected fraud. We analyzed our data to identify legitimate shopping patterns as well as fraud trends to help inform your fraud management operations.
Take Advantage of Chinese Buying Power
China is an emerging eCommerce powerhouse, and merchants around the world are benefiting from Chinese consumers’ growing demand. According to a PFS Commerce report on cross-border eCommerce, 1/3 of online shoppers in China made an eCommerce purchase from a foreign website in 2015. The potential for revenue from the growing Chinese middle class is especially promising for fashion merchants. Last year, 43% of Chinese eCommerce cross-border shoppers purchased apparel & accessories.
Not only does the Chinese market present a huge opportunity, but Riskified’s data also shows that over 93% of cross-border online fashion orders paid for with Chinese credit cards are legitimate. Luxury fashion merchants especially should be opening their doors to Chinese consumers. Nearly 99% of all high-end fashion purchases made with Chinese credit cards and shipping to the US are safely approved by Riskified.
The numbers indicate that fashion merchants who let a lack of knowledge about the Chinese market keep them from accepting Chinese orders are missing out on a very lucrative market.
Black Friday and Cyber Monday Are Actually Safer
Top shopping days like Black Friday and Cyber Monday present an opportunity for eCommerce merchants to generate a substantial percent of their annual revenue. However, as the holidays approach, consumers and merchants alike are bombarded with media reports and projections about an expected increase in fraud during the holiday season sales.
The reality is that while the number of fraudsters does not suddenly increase come November, the amount of legitimate shoppers looking to make purchases online increases significantly. Our data regarding online fashion orders shows that on an average day, fraud accounts for 2.21% of all orders. On Black Friday and Cyber Monday, however, the rate of fraud in online fashion orders drops to only 0.60%.
Contrary to the fear-mongering tactics of popular media outlets, the influx of legitimate consumers coming online to shop during the holidays results in a lower rate of fraudulent orders as a percentage of total order volume.
The rates of fraud on the biggest online shopping days of the year are actually lower than the fraud rate on an average day. This means that merchants should be accepting a larger percentage of orders during the holiday sales days than they do on a regular day.
Read The Full Report to Learn More
This was just a glimpse of the data and insights included in our special report for eCommerce merchants about CNP fraud in online fashion sales. Download the full report to learn about the rate of fraud in luxury fashion vs consumer fashion orders, to see how fashion trends affect fraudster behavior, and to discover how the number of items in the shopping cart correlates with the risk of fraud.
Click here to read more about Riskified’s solution or contact us directly at [email protected] with any questions.