How Consolidation Affects Enterprise Ecommerce

episode Transcript

Podcast Intro

Hey and welcome back to the Gateway to Ecommerce Podcast. In this episode, host Rafael Lourenco, Executive Vice President at ClearSale, takes a deep dive into the behaviors of new online shoppers that have emerged in 2020 (& 2021). And he talks about how enterprise merchants can accommodate these new consumers.

He considers this year as the year of consolidation. Will these new customers in the absence of the need of going online remain buying online, and what's going to be their actual behavior in the presence of other alternatives and options that emerge?

After listening to this episode, you'll be able to walk away with tangible steps to keep your emergent customers engaged and loyal to your enterprise brands. But before we get into today's episode, I invite you to reclaim our state of consumer behavior analysis to unlock powerful insights about global consumer behavior and attitudes. You can access the report using the link in the show notes or visit us at Clear.Sale.

Now let's dive in.

Rafael Lourenco

2020 was a year of major changes in the digital space, in the digital ecommerce environment due to the pandemic effects and lockdowns in multiple cities. A lot of people in 2020 were exposed to the possibility or forced into the possibility of buying online. People that never bought online because they were just comfortable going to brick and mortar stores and stuff like that. So, what happened in 2020 was that a bunch of new customers were introduced into the online space and that created a bunch of challenges for merchants of any size during the year of 2020. The interesting thing, though, in regards to the enterprise merchants, is that very commonly for the new buyers, for people that never bought online, first time buyers, very common that they choose brands and companies they already know offline or companies they are used to for a long time.

They're afraid, they're just doing this for the first time because they were required, forced to, and now they're invited to do it. They're forced to do it. So, they go online and they will give a preference sometimes even regardless of price, a small price to process, they will choose those larger organizations and those brands that they are more familiar with, which means that enterprise companies are the ones that experienced a nepotistic, a greater uptick into the percentage of people that are buying for the first time in their stores during the year of 2020. Naturally that also brought a lot of challenges, several new challenges with these new customers and the behavior of these new customers. The year of 2021 is going to be, in my opinion, a year of consolidation, of whether or not these new customers, in the absence of the need of going online, will they remain buying online and what's going to be their actual behavior on the presence of other alternatives and options.

It's clear that some of these ecommerce merchants, especially the larger ones, conquered some of these customers forever. Even with fewer places in lockdown and the increasing vaccination, all the numbers on ecommerce show that we are not back to numbers, to the levels and the volumes we were prior to the advent of the pandemic. If you look at the public organizations that obviously report their online sales or at ClearSale’s numbers, we also see that the volumes are not back to what they were. Some of those customers, even now that they can go back to the brick-and-mortar store, they choose to take ecommerce. We conquered them for life.

However, having those customers and having them now experience a little bit more of ecommerce brings us or brings to the enterprise level merchants, a couple of challenges.

Challenge number one is dealing with the expectations of growth. You had the year of 2020. Your corporate goals were probably more than overachieved because you expected X in growth and even some of the largest and the most organized companies in ecommerce faced growth rates above 60% if you compare it year over year in 2020. What happened there is basically you speeded up a digital transformation process. Now the enterprise merchants must deal with their corporate level corporate expectations when it comes to growth in 2021. Can it be as high as 2020? The answer is very likely it cannot. Because we speeded up some processes that usually would take longer, now 2021 versus 2020, the growth rates are not expected to be as high. While in 2020 a company may have grown 60% versus 2019 in 2021, I wouldn't expect in this example growth higher than 10, 15% because part of this potential growth that could have happened in 2021 already happened in 2020

The challenge number two has to do with the actual customer and consumer behavior. Now that you as an enterprise, as a consolidated brand, onboarded the consumer into the ecommerce space the challenge is having him remaining as your customer instead of trying different things. A customer that was not used to ecommerce is now used to ecommerce and is more likely, getting comfortable, to have the willingness to try different and new brands. As an enterprise level organization, you've got to try to keep the customer with you and while keeping them with you, you will see some changes that usually happen when a consumer is a first time buyer versus a heavy user of online merchants.

One of them is a lower average order value. The first transaction someone makes online usually is something very higher AOV, higher average order value because they are just doing this purchase despite the fear, they need it. They're just doing this because of an advantage in pricing or something. Now that they're going to use it, they will buy anything and everything online. They will go with the lower they will try things that they wouldn't try before. They were buying electronics and stuff that is easier. It's easy to compare two products, which is better, is higher?. Now you will see consumers trying clothes, apparel, stuff that may have to be returned and tried in house. On top of that, financial returns. That's also a concern because now these consumers aren't familiar with the processes of an ecommerce store, and now they will explore to know your customer service, your returns policy, and even eventually your chargeback policy or your consumers will eventually be presented with the fact they can ask for their money back. That it's an easier process. So, there might bring a few interesting challenges to different departments of the organization.

Now, as far as fraud and the risk. I guess it's important to start by saying that 2020 was the year with the highest numbers of phishing websites, highest numbers of data leaks, data breaches and the consequences for that will happen and will impact throughout the year of 2021 (& 2022). And why? Because when these major data leaks happen, that means that the personal identifiable information is no longer hard to find. If you're a fraudster, it's no longer a super big issue for you to find some person's personal information and understanding which is the cell phone number, email address, street addresses, stuff like that. The first consequence to that is you can't do fraud prevention just by matching. Chew up two pieces of information, let's say, oh, the email matches with the phone numbers so let me approve this order.

I mean amid so many data leaks, data breaches, it makes no sense because, I as a fraudster could just gather these two data points together and use somebody else's credit card, delivering to their shipping address. That's just a fixed transaction in a way. Simple matchings between these data points are not necessarily enough to prevent fraud in 2021. You need more sophisticated, more complex processes.

On the other side of the same coin, a lot of good clients, good customers had their data compromised. You and I could just have had our data as part of a data breach, and we do not even know about it. Those data points were used in fraudulent transactions in 2020, and now in 2021 I was a victim of this process last year, I may just want to go and buy online myself using my data. The problem is, let's say my phone number and my email address were utilized by a fraudster before. So, if my personal information, if those data points are present on a blacklist, for instance, that will decline each and every order that comes with this data. I come from being a victim, meaning my data was used. I didn't even know about it and now I just cannot buy online just because the merchants are utilizing this old-fashioned concept of blacklists.

In my point of view, when it comes to identity theft, nothing should be understood as black or white, meaning nothing is 100% of fraud or 0% chance of fraud. Everything is a gray area and there are many shades of gray. So, this personal information, this personal data points used in previous fraudulent transactions should not combine. Obviously, if a data point was utilized in fraud before, obviously that means a higher risk. Does it mean you should decline ALL those orders by the way, blocking every order made using some of those data points from happening? Definitely not.

Because as I said, it could be just a victim of a data leak card, identity theft now trying to buy something, using their own data. In the example I gave, I was a victim personally, of a data breach. Now I'm using my email because that's my email address. I cannot be stopped from buying in an online store just because I was a victim

All in all the pitfalls for 2021 are not that different from usual and regular fraud prevention advice that I would provide any other year. The only thing is there are some nuances, some specific things that 2021 brings that no other year would. Getting back to the basics, obviously, it's important to mention, again, some of the common mistakes people make while preventing fraud, especially when they have internal departments and, enterprise-level organizations are not free from the risk of making those same mistakes. The standard approach when it comes to fighting fraud is when in doubt decline the order. That's the number one, the major advice I would give, because it's not a good idea. I mean, it's not a good approach. You got to be focused on the good customers because not only would you be losing sales, but you would be losing the future transactions of the same consumer. These consumers are now getting into the online space, and you need to deal with them in a very positive way.

You need to provide them with a very good user experience. Therefore, this, when in doubt, decline policy is not a good idea. Another common mistake is trying to foresee or to have as a goal zero fraud.

No one will have zero fraud. The only way of having zero fraud is not selling at all. That's not a good idea.

Another common mistake or pitfall, I guess, is to disregard the possibility of being targeted by fraudsters. Meaning, I sell this product that is very riskless so let me not put any fraud prevention policy here because nobody will want to buy these products. Well, we know everything that can be somehow used in a fraud process. If not reselling the product or the service at least. We've seen fraud even in donations. Why? Because fraudsters can tell if you have no fraud prevention policy at all. The fraudster will use your website to test credit cards before going into something somewhere else where they want to make a bigger fraud. So, disregarding the possibility of being targeted by fraud is definitely a mistake you should not commit.

The third is, I guess, choosing a single tool, choosing a single piece of technology and just believing that it's going to be the silver bullet, the solution for all your problems, the one size fits all solution There's no silver bullet, there's no one size fits all. It's always a combination. A decent and effective fraud prevention strategy is always a combination of multiple factors, multiple technologies. One could say I will implement biometry in my website, and now I'm free from fraud. We know how many ways of deceiving a biometry process are out there in the market. Please do not assume you will have a single solution that will solve every problem. In the same light, You shouldn't have a static solution. Those are my rules, those are my policies, this is my strategy. I'm not changing at all. Fraud is a very dynamic phenomenon, and fraud prevention shouldn't be expected to be static at all. It should be always unfolding and adapting to the new trends as always.

Podcast Outro

Rafael offered a lot of insight about how enterprise ecommerce merchants can meet new online shoppers where they are while shopping online, maybe something new and uncertain for them. Merchants can take the measures mentioned to retain shoppers and build their loyalty to shop online over time. If you want to take a deeper dive into this topic, you can visit our website at ClearSale. It's also linked in the description of this podcast along with other resources to get you started. Thanks again for listening to Gateway to Ecommerce. If you like what you heard today, be sure to stay connected and subscribe or follow on all major platforms like Apple, Spotify, or Google Podcasts. And if you have a question or would like for us to cover a topic, email us at podcast@clearsale.com, we would love to hear from you. And to learn how to prevent ecommerce fraud visit our website. We have a ton of resources dedicated to the topic that can help you on your journey to ecommerce. Until next time!

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