{"id":2475,"date":"2020-04-14T17:06:16","date_gmt":"2020-04-14T11:36:16","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=2475"},"modified":"2020-06-03T13:57:41","modified_gmt":"2020-06-03T08:27:41","slug":"why-your-e-commerce-business-needs-a-fraud-prevention-tool-right-now","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/why-your-e-commerce-business-needs-a-fraud-prevention-tool-right-now\/","title":{"rendered":"Why Your E-Commerce Business Needs a Fraud Prevention Tool Right Now"},"content":{"rendered":"

In the wake of COVID-19, non-essential e-commerce has essentially come to a halt in India, as well as many parts of the world. This has caused a lot of damage to both consumers and businesses. With a nationwide lockdown in place until May 3 2020 (as of April 14 2020), we don\u2019t know how the next month will pan out for Indian e-commerce yet.<\/span><\/p>\n

Many businesses all over the world have introduced a series of relief measures to help support daily wagers and those who live between paychecks. We\u2019re going to look at some effects that the current lockdown has on the e-commerce industry, a projection of what you can expect in the future and optimal ways to keep your business safe for post-lockdown.<\/span><\/p>\n

Assessing the impact of COVID-19 on Indian e-commerce<\/span><\/h2>\n

First up, let\u2019s look at the actual impact of COVID-19 on Indian retailers and the extended impact of it on consumer behaviour. Due to the restrictions imposed by the government, there are several repercussions faced by online sellers. Here are some major takeaways from research conducted by data companies:<\/span><\/p>\n

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  1. Within just one week of \u2018Janta Curfew\u2019, Indian e-commerce lost $400 million in sales<\/span><\/li>\n
  2. If this situation is extended for months, this could mean a $1 billion loss in Gross Merchant Value in the coming weeks<\/span><\/li>\n
  3. E-commerce companies are experiencing difficulties in keeping their warehouses open during this time due to the intervention of authority. This applies to small and big players alike<\/span><\/li>\n
  4. E-commerce operations began gradually picking up after central and state authorities intervened, but e-commerce giants like Flipkart and Amazon are now only taking orders for essential services, as of April 13th<\/span><\/li>\n
  5. Hyperlocal delivery giants such as BigBasket and Grofers are operating at only 30-40 percent capacity due to shortage of staff. However, many e-commerce players and retailers have teamed up with hyperlocal delivery companies like Swiggy, Zomato, etc. to home-deliver groceries and essentials<\/span><\/li>\n
  6. Smartphones and fashion contribute over 50 percent of sales on e-commerce. Both categories, however, have now been hit due to the current lockdown and there\u2019s no denying that the supply chain has also faltered due to the lockdown<\/span><\/li>\n
  7. Groceries are in high demand on online platforms and are expected to grow faster, but the sector contributes only 6 percent to overall GMV. Online grocery sales stood at $2 billion in 2019, as per Forrester\u2019s report<\/span><\/li>\n
  8. The personal care and hygiene segment is also growing, and currently contributes 4.5 percent of total GMV for e-commerce platforms<\/span><\/li>\n<\/ol>\n

    Source<\/span><\/a><\/p>\n

    A look at the silver lining<\/span><\/h2>\n

    We can, however, expect a few good things to happen after this lockdown period is over with. Segments across e-commerce are helping ease peoples\u2019 anxieties by helping bring solutions both virtually as well as to your doorstep. These testing times are bringing to fore the accelerated adoption of online services, according to The <\/span>Economic Times<\/span><\/a>.<\/span><\/p>\n

    The rise of the grocery sector:<\/b><\/p>\n

    One of the most important segments is grocery in e-commerce and is arguably the only sector that has been making progress since the lockdown. The players in this segment includes everyone from supplying groceries and other household essentials, food delivery from your favourite restaurant to delivering documents. These hyperlocal delivery companies are now assisting the country in putting up a strong fight against the virus.<\/span><\/p>\n

    Some noteworthy collaborations:<\/b><\/p>\n

    Over the last week, we also saw transport aggregators such as Uber and Ola team up with food delivery apps like Swiggy, Zomato, BigBasket and Grofers to assist in last-mile delivery. These companies, together, have played a major role in preventing the supply chain from collapsing and have gone a long way in making people stay home at all times.<\/span><\/p>\n

    However, it\u2019s worth noting that the government must take heroic measures and work in tandem with food delivery companies lest we are looking at a higher spread in the near future. The government has already issued an exempt status to e-commerce companies classifying it as an essential service, and it is imperative that the segment is enabled to accelerate helping on the frontlines.<\/span><\/p>\n

    The slow, yet steady comeback of e-commerce:<\/b><\/p>\n

    Apart from this, we can also expect e-commerce businesses to also slowly limp back to business after the lockdown. Even during the lockdown, smooth operations of essentials can be attributed to delivery agents working in the frontline and ensuring smooth delivery of essentials. The heroism of delivery agents is now compared to those of healthcare workers, risking their own lives to provide service to the public.<\/span><\/p>\n

    Some e-commerce companies are expected to resume operations in part, albeit warning customers about high order demand and delayed delivery. Amazon and Flipkart, too, have resumed operations in specific segments and are slowly increasing their operating capacities with caution.<\/span><\/p>\n

    A look at the future of online sellers:<\/b><\/p>\n

    Though there has been a sharp decline in sales all over the world to the tune of billions, we can expect the market to make a powerful comeback with the right contingent plan.<\/span><\/p>\n

    In any case, it can be expected that smaller companies need to resort to omnichannel retail to have an edge over the rest. We can also expect non-essential e-commerce sales to bounce back after the lockdown is lifted. There is no lying, however, that a significant amount of chaos will ensue after the lockdown in terms of purchase and delayed delivery pipelines.\u00a0<\/span><\/p>\n

    Let\u2019s look at why fraud detection will be an important part of the post-lockdown period and how much it will impact the company\u2019s savings.<\/span><\/p>\n

    Why fraud prevention is crucial post-lockdown<\/span><\/h2>\n

    There is no doubt that the post-lockdown phase will bring to light the transformation of societal behaviour as we know it. This will include changing patterns in customer behaviour. Post-lockdown may bring a spike in impulse purchases and may cause a lot more damage to your business than you think. Allow us to explain how so.<\/span><\/p>\n

    The lockdown period has restricted normal life and purchase behaviour due to an abrupt, unpredictable halt. Once the lockdown is lifted, we can expect the newfound \u2018freedom\u2019 to cause a lot of disruption for online sellers. We can also expect online demand to go back up once the lockdown restrictions are lifted.<\/span><\/p>\n

    We have found that a high percentage of these \u2018impulse purchases\u2019 are very likely to result in cancellations. Unsuspecting merchants are hit severely with these returned\/cancelled orders since they end up spending double shipping costs for forward and backward logistics. These orders never actually reach the customer and are also termed as RTO (Return-To-Origin) or Non-Deliverable Returns (NDR) orders. An RTO\/NDR order is a cost that the seller perceives as \u2018inevitable\u2019 and can put a lot of strain on his business.<\/span><\/p>\n

    Due to the gap in business and the high inflow of orders, all merchants aren\u2019t at the liberty of cancelling these suspicious orders. There are also multiple reasons why methods like <\/span>blanket blacklisting<\/span><\/a> won\u2019t work well for the online seller\u2019s business.<\/span><\/p>\n

    Here are a few other trends that we\u2019re expecting to make a comeback after the lockdown period:<\/span><\/p>\n

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    1. High amount of non-deliverable\/incomplete addresses from Tier 3 and Tier 4 cities\u00a0<\/span><\/li>\n
    2. Deep discounting by merchants in order to bring customers back, which can result in a huge number of impulse purchases<\/span><\/li>\n
    3. Since e-commerce companies have their guard down in these tough times, this can also provide chances for habitual fraudsters to return to these fraudulent activities<\/span><\/li>\n
    4. Individual monitoring of orders may not be possible during the post-lockdown phase owing to the high demand of non-essential orders; this can lead to an increased probability of the number of chargebacks filed, and consequently, chargeback fraud itself<\/span><\/li>\n
    5. Shipping and deliverability can be affected if the lockdown is released only in a few places or in a phased manner, this can lead to a lot of cancellations and losses for the merchant<\/span><\/li>\n<\/ol>\n

      To survive losses from new avenues of fraud, RTO and NDR orders, online sellers must employ methods to stay wary to fully understand and stay one step ahead of their user base. Fraud detection in e-commerce happens with the help of robust Machine Learning engines. <\/span><\/p>\n

      Here are some key areas of focus usually employed in fraud detection tools:<\/span><\/p>\n