Introduction

2015 was a banner year for eCommerce, and global online purchases are projected to more than double to $3.5 trillion by 2019. With no signs of eCommerce growth slowing down anytime soon, fashion merchants are particularly well-positioned to ride the wave to a dramatic increase in revenues. It is estimated that global eCommerce sales in the fashion vertical amounted to approximately $85 billion in 2015.  Double digit growth between now and 2020 is predicted to push online fashion sales revenues higher with every passing year.

Fashion merchants stand to benefit not only from domestic shopping but also from cross-border eCommerce, as consumers from emerging markets like China increasingly take their new wealth and interest in fashion to global websites. Fashion is the most popular product category for online cross-border shopping, with 61% of cross-border online shoppers having made a clothing purchase in the last year.

But unfortunately, as the eCommerce market grows – so does fraud. Identifying and preventing card-not-present (CNP) fraud is challenging for merchants across verticals. Rapidly changing fraud patterns and fraudster methods mean eCommerce merchants must try to hit a moving target, adding another layer of complexity to accurate fraud prevention. Fashion merchants face unique fraud management challenges, such as contending with the fluctuations in both legitimate and fraudulent buying patterns caused by ever changing fashion trends. Throw the seasonal sales cycles that cause dramatic swings in order volumes throughout the year into the mix, and you can see why a proper fraud prevention strategy requires a complex, multi-faceted approach.

Despite the challenges, it is imperative that executives in online fashion companies work to ensure fraud prevention measures do not hold their business back from achieving revenue goals and penetrating new markets. For example, while consumer validation measures need to be effective, they must not be allowed to add friction to the shopping experience. Similarly, while avoiding chargebacks is important, fraud prevention measures that cause merchants to decline legitimate orders along with fraud result in customer insult and lead to significant losses.

Striking the proper balance between these considerations is especially important for merchants looking to grow their international customer base and capitalize on the estimated $1 trillion global cross-border eCommerce market expected to exist by 2020. Whether you plan to start shipping internationally, or simply want to start accepting international payment methods, it is important to update fraud management systems and processes to properly handle cross- border transactions.

Riskified has been fortunate to partner with some outstanding fashion brands, such as FarFetch, SSense, and Vestiaire Collective. This report contains insights from our work with dozens of merchants in the fashion vertical – including both consumer fashion and luxury fashion sites.

Sharing information about fraudster methodology and collaborating on best practices for managing card-not-present (CNP) transactions is an important way for merchants to protect themselves. Therefore, in presenting the data we explain the rationale behind the conclusions we’ve drawn, and also discuss how merchants can improve their own fraud prevention operations.