Lockdowns, social restrictions, business closures and furloughs – every side effect of COVID-19 has impacted retail and it’s not just for the short-term.
Online retailers, or those who were agile and began operating online during lockdown, will be thrilled with the boon to business as customers flocked to the internet to shop. However, the eCommerce industry has also experienced its fair share of issues.
Supply chain disruptions, shipping delays and labour shortages due to isolation and social distancing have all caused problems with orders and deliveries. Adding to these challenges are panicked consumers, who under economic pressure, are turning to their banks to instigate chargebacks to retrieve money spent on previous purchases.
As a result, retailers across the globe are experiencing a spike in chargebacks and friendly fraud, with some industries suffering chargeback losses 10 times higher than before COVID-19.
Preparing for the long-term
As we begin emerging from lockdowns, retailers need to understand the impact that chargebacks have on their business and will continue to have if not managed properly. They are not a cost of doing business. They have grown exponentially since COVID-19 and they can damage a company’s profits beyond repair.
So, the only way forward for retailers is to build chargeback management into their recovery and long-term plans. This will go a long way towards protecting businesses from filing for insolvency, while helping to restore the economy.
What to do now
The worst thing a retailer can do now is accept chargebacks and friendly fraud, believing they’re a side-effect of COVID-19 that will resolve itself. A retailer needs to identify where its chargebacks are coming from (criminal fraud, merchant error, or friendly fraud) and fix it or fight against them. Not challenging fraudulent disputes can make a company look weak and leave it open to future attacks.
Businesses can focus on implementing strategies that will protect revenue in the long-term, such as:
- Optimising payments processes and mending internal errors that cause genuine chargebacks, to help reduce chargeback rates and make clear which are fraudulent and which aren’t. This will include ensuring all product information is accurate online so consumers know exactly what they’re buying and updating websites so they reflect what stock is currently available to customers.
- Keep accurate accounts of purchase information – this will allow businesses build compelling cases against false claims down the line, while speeding up the dispute process, making it easier to handle vast amounts of claims at once.
- Ensuring that customer service teams are well prepared to deal with the influx of customer enquiries – happy customers are less likely to file chargebacks.
- Reducing damages caused by refunds with new and creative strategies will protect revenue. This can include tactics such as offering monthly memberships to customers that file refunds to protect cashflow and revenue streams.
Yet, the most important skill a retailer can learn in our current climate is the ability to distinguish between genuine chargebacks and friendly fraud. For companies that deal with one or two chargebacks a month, it’s possible to review cases individually and compare them against their records to establish whether they are genuine or not. However, this isn’t feasible for most retailers dealing with vast amounts of chargebacks.
The best option for retailers in this situation is to seek assistance from a company specialising in handling disputes. From our own research we found that businesses that use third-party solutions have an overall win rate a fifth greater than those who dispute chargebacks in-house. Yet, it seems that many companies lack this crucial element in their chargeback management.
Not only will adopting such strategies help get retailers back up and running as soon as possible, but it will also help the economy recover faster and encourage customers to start shopping again sooner.
To find out more about Chargebacks911 and the services they provide to the retail industry, click here.
This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.