Online fraud continues to grow.

E-commerce has had a huge impact on how fashion merchants market and sell their goods, but it hasn’t changed everything. Customer acquisition still works as a funnel where each stage should be optimized to maximize revenue. Smart companies know that traffic alone doesn’t move the needle.

Merchants can bring more visitors to their site by increasing their advertising spend, but if it doesn’t translate to revenue, then what was the point? One blind spot for a lot of companies — even the successful ones — is the fraud review process. Good customers are being rejected after the acquisition worked. Conversion at the fraud level needs to be monitored carefully to ensure optimal performance.

Looking at referrals is a great way to do that. How shoppers arrive at an e-commerce store can have big implications on merchants’ profitability. Whether they typed in your URL directly, arrived via search engine, or clicked a link on another web site may be correlated with their likely cart size, tendency to complete their purchases and more. Paying attention to their origin and their results can help merchants focus resources on those sources that maximize profits.

My company, Riskified, provides e-commerce fraud protection by using machine learning to analyze billions of orders across thousands of merchants. Using that data, we can track good orders and charge-backs to their source to see where the fraud originates. Let’s start with the good news — nearly every fashion merchant that comes to Riskified is turning away good orders unnecessarily. That means there’s additional revenue to be had. These merchants have already done the hard work; they’ve brought consumers to their store and converted them into customers. If they’re able to increase their rate of approval — and approve the right people — this is easily captured incremental revenue with no incremental costs.

Using data collected from Riskified’s network of fashion merchants, we were able to develop a thorough picture of how fraudsters find fashion merchants. With this data, we can help merchants make informed decisions about which channels deserve their attention and which may be doing more harm than good. This is a particular area where fashion executives should encourage inter-department collaboration. Marketing, finance and the fraud teams should be in regular contact in order to see the full picture and make the right decisions.

Every store is unique. The data and analysis we developed is a good starting point, but your shop may be different. Smart merchants will look at approvals, declines and charge-backs and then trace those purchases back to their referring sites to best understand what happens once a shopper finds their store. In general, though, here’s what merchants can expect when prospective customers visit their site.

Expect good customers to come through referral. Fraudsters know which products they can sell for profit, and they are much more likely to visit your site as direct traffic than via a referring source. Merchants should keep this in mind when they analyze suspect orders. Merchants can safely approve a substantially higher percentage of referral orders than direct traffic. That’s a great start. From there, think like your customers.

For example, YouTube is an excellent source of referrals for fashion merchants. It’s small in terms of volume, but it’s rapidly growing. And the shoppers who come in through YouTube referral are among the safest of any shoppers coming to your site. Riskified is able to safely approve nearly all of these orders, and their rate of fraud is roughly a third of shoppers who come in via Google. This makes sense. Criminals don’t watch styling videos to figure out what to steal, but your shoppers definitely do.

Keeping the customer in mind carries through to other sources as well. Instagram is relatively small as a referral source for most industries, but in fashion it’s the second largest. As with YouTube, Instagram is a logical way for legitimate shoppers to find fashion products, and visitors who come through Instagram tend to be pretty safe. Pinterest and Twitter — while smaller in total volume — work similarly. We see referrals to fashion merchants at a rate two to three times higher than for general e-commerce, and all of these sources are safer than direct traffic.

Finally, e-mail marketing. In short — do it. E-mail outreach brings extremely safe shoppers to merchants’ sites, and the cost is low. The safe approval rate for e-mail newsletter referrals is among the highest of all referral sources. And these are often repeat customers, which means they’re a known entity. Merchants should do everything they can to get customers to sign up for their newsletters and then use those subscriptions to grow their business. It’s safe and cheap.

Fraud is scary stuff, and merchants are right to be careful. But being too careful and turning away good orders can be even more damaging than allowing some fraud in. Most merchants can easily increase their approval rates and drive more revenue by following these three key takeaways:

  1. Think like a customer. If the shopper followed a logical path to get to your site, then he or she is probably there for a good reason.
  2. Trust what you’re doing — your paid advertising and e-mail marketing efforts are working and bringing in good shoppers.
  3. Track your sales, communicate internally and adjust as needed. There is no one-size-fits-all solution. Smart merchants pay attention to what’s working and what needs fixing.
Eyal Raab is vice president of business development at Riskified.
load comments
blog comments powered by Disqus