Hi Nico,
My customer service team got a call today from a cordial customer claiming that he never received wireless headphones that I know left the warehouse four weeks ago. Deliveries slowed down around the holidays creating all kinds of issues, but we’re back to normal now. Still, it seems like we’ve been getting more calls like that these days. What should we do about it?
-- Lost in the Mail
Dear Lost,
You and other online retailers are facing a growing problem with consumer fraud, unfortunately. It seems to be a combination of people gaming the system and outright trying to bilk the system.
In the case of this missing package, it could be that the item was stolen after it was delivered. Or it could be that the customer received the headphones but that the package was misplaced. That probably doesn’t happen often, but I have heard of a case in which another person in the house brought in a package and set it aside, where it was found after the company replaced it.
And then there is the unfortunate possibility that the customer did receive the headphones and wants another pair without paying for it.
Now, it’s true that theft is up along with the number of deliveries. In fact, porch pirates have hit 1 in five Americans amid the coronavirus, according to a ValuePenguin survey. That’s why more companies are asking for a signature on delivery and why delivery companies started taking photos after dropping off packages.
But let’s look at what else can go wrong.
Consumer Fraud
As you probably know, regulations allow consumers to file claims for refunds from their credit card company when a merchant doesn’t send an item. This results in a chargeback - we all know how that goes. The challenge is that the merchant has the burden to show that the item was sent. And here’s a sobering stat - 8.1 percent of consumers admit to filing a claim with their credit card company stating that an item wasn’t delivered when in fact it was. That doesn’t include customers who go straight to the company with a claim.
This along with other false claims -- friendly fraud chargebacks -- are up, and cost retailers more than $15 billion, according to Signifyd.
That hits smaller retailers hard as most don’t have the large revenues to absorb the cost. But it’s not just about the money. Higher chargeback percentages create a laundry list of other issues that are easily avoidable. Excessive fees, funding delays, and potential holds are all things that slow you down. In more extreme cases, you could get terminated and face troubles getting a new account.
This puts merchants like you who want to provide great customer service in a tough spot.
Managing Consumer Fraud
Of course, you want your customers to get the items you send and be happy so your inclination is to replace the item without a hassle. And yes, this practice builds loyalty with customers that have a legitimate issue. It’s an industry standard set with the belief that customers will respect companies that take care of them. So what do you do?
You could write off the losses from illegitimate claims as the cost of doing business. Some large companies do. They expect a certain amount of fraud and roll that into the cost of the product. They would rather take the financial hit than have to deal with a negative firestorm on social media. But that’s not feasible for smaller businesses and encourages more fraud.
Fraudsters target companies big companies with generous replacement and return policies and other companies that they think aren’t paying attention, won’t follow up, or don’t have the resources to protect themselves. So, let's look at how you can avoid being that company,
How often are you reviewing your customer data? If you don’t have one, can you set up a system to red flag complaints like this? Look for trends or patterns that stand out. Have any of your customers filed multiple claims? If yes, how many and in what time frame? That could be a sign of a habitual offender. Unfortunately, there are plenty of people who consistently buy products for the sole purpose of defrauding business owners by way of false claims. It’s much easier for them to get away with this when sales and customer service aren’t connected.
Keeping an eye on claims can also help detect and prevent larger cells - groups of people working together to accomplish the same thing, on a much bigger scale. Signs of this type of systematic fraud include a number of complaints from one particular area or a similar product type or price point.
Tracking this info helps make better decisions overall about whether to replace items or take actions to avoid future attacks.
You also want to review your delivery system. Look at what you have in place for tracking packages and communicating with customers. Do you need a better system? There’s new technology available to streamline the communication process with your customers and notify them of the status of their packages, or your delivery service may have options. This not only helps create further visibility for your customers but also comes in handy for reference deciding how to handle claims.
Another thing you can do is to refine or create policies for these types of claims. A recent poll shows most businesses don’t have the proper procedures in place to effectively handle these types of issues. You want to take care of your honest customers, which is most of them, without getting taken advantage of. Policies give your customer service team tools to handle claims. If the reps feel it is a legitimate claim, they can provide a replacement. But if this is a repeated offender or there is something about it that raises concern, it helps to have a plan in place for another layer of review with the capacity to approve or deny the claim.
And on a final note, don’t stop with just setting up the policy. If you really want to take control, set up a systematic review of how it works out. Look at the number of claims and the decisions made around them. Remember, you’re only as strong as your data.
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