Edition 59
Staying on Top of Data a Key Weapon in the Fight Against Fraud
by John Sharman, Transactic

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For generations, retailers have been taught to put customers first and to never question their word, but the results of a recent study are alarming. More than 92 per cent of respondents believe that digital shoplifting poses a serious threat to the online retail industry, yet efficient use of data can help resolve the issue.

According to the study by Retail Knowledge and Transactis, false Goods Lost in Transit (GLIT) claims are the biggest issue for retailers, with the average cost of handling a single claim as high as £40. What’s more, 82 per cent of Loss Prevention professionals are certain that most etailers cannot accurately distinguish between genuine and fraudulent claims. However, etailers need to face up to more threats than digital shoplifting alone: major losses to the industry can also be attributed to customers taking advantage of companies’ mistakes.


If filing a false GLIT claim is easy and may tempt even an otherwise lawful individual (in other words, an opportunistic amateur rather than a regular criminal), it requires next to no effort just to keep something one is not entitled to. This issue became the subject of a special report by Transactis and was proved to be a viable scenario, with 49 per cent of polled consumers confessing they would keep an extra item if two were delivered instead of one. More than 60 per cent admitted they would use a discount voucher they were not entitled to, and even more would keep a loyalty reward bonus they had not earned. In all of these cases, the retailer would appear to them to be failing to use their data effectively and therefore to be incapable of tracking their needs, behaviour, entitlements and experience. Not only would a dishonest customer feel that it was easy to get away with taking advantage of the company’s mistake, but also that a company which couldn’t use their data effectively, wasn’t worth their respect or cooperation. Although the most common victims of such behaviour are big brands and supermarkets, smaller businesses and even charities are not safe either; 24 per cent of consumers admitted they would keep a charity gift sent in error.

The good news is that there are ways of engendering respect for companies’ processes that require cooperation on the customer’s side. If an organisation can demonstrate secure and efficient use of personal data to ascertain customers’ preferences and is continually striving to strengthen its relationship with them, then on the rare occasion it makes a mistake, as much as 70 per cent state they would be unlikely to take advantage. This means that returns would run smoother, allowing companies to reclaim the lost value. Knowing that an organisation is capable of actively tracking both outbound and inbound logistics processes, consumers are much less likely to fraudulently claim GLITs including returns, whereby an individual may claim that an item returned for a refund has gone missing en route to the retailer – while in fact it was never sent back.

Staying ‘on the ball’ with consumers’ data has two-sided benefits. Not only can these companies trust their customers, but customers can also trust them: this is the basis of a genuine, ongoing relationship that directly translates to higher revenues for retailers. It is not trust, however, that generates higher revenues – timely and pertinent offers do. 59 per cent of respondents stated they would spend more money with a company that uses their data to create relevant offers and good service, and 63 per cent would buy more regularly from that brand. They would also happily accept a timely offer, rather than shop around.

It has been estimated that GLIT claims cost UK retailers around £405 million a year. How much of this is lost due to fraudulent claims and how much is down to inbound logistics is unclear, but what is certain is that customers have few qualms about taking the opportunity to keep something they are not entitled to if the company they are dealing with does not present itself as competent with their data. They are also likely to turn to competitors with their future business.

Operating in a tough and competitive market, retailers need to make good use of consumers’ information and cannot afford to give away revenue to digital shoplifters. GLIT fraud in general and returns fraud in particular will continue to beset online retailers until they put an end-to-end claims management system in place, incorporating a comprehensive overview both of the consumer and of the returns handling process. Marketing and sales have utilised customer data to their benefits for a long while; now it is time for logistics to catch up with the trend.
John Sharman is Commercial Director of Transactis’ fast growing fraud solutions business. Transactis, the database marketing and consumer insight company, aims to make fraud prevention – which has become increasingly important to firms in the internet age – one of the central planks of its business, which is based on consumer data, analysis, and the implementation of commercial solutions that make use of this information to improve profitability. Sharman, previously of Fraudscreen and Experian, is responsible for building Transactis’ data-driven anti-fraud business, including its Claims ID solution, to help companies identify fraudsters and take action to prevent them from succeeding. He also explores new partnerships with firms who could provide key support in the battle against fraud. For more information, please visit www.transactis.co.uk.

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