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E-retailers ignore false ‘lost goods’ claims

By Retail Technology | Monday April 22 2013

New research finds most online retailers see fraud associated with ‘goods lost in transit’ as threat but don’t have strategy to deal with problem

The vast majority of online retailers believe that fraudsters are siphoning off profits, but firms have yet to confront the issue, according to research from Retail Knowledge and database and fraud management services provider, Transactis.

Nearly all (93%) of the UK’s leading retailers believe ‘goods lost in transit’ (GLIT) fraud is a serious threat, yet most say that home shopping firms don’t have strategies or processes in place for thwarting false claims, according to research undertaken by event organiser Retail Knowledge for consumer data and insight firm Transactis. 

From the findings, the report calculated that fraudulent GLIT claims cost UK retailers roughly £405 million last year, with the average operational cost per claim estimated to be more than £40. The research report, entitled The Digital Shoplifting Survey, was based on interviews with a cross-section of leading retailers attending a recent Retail Knowledge anti-fraud conference.

Almost two thirds (64%) of respondents said most home shopping retailers did not have a strategy in place for preventing false GLIT claims from succeeding. Even more (82%) thought most retailers were unable to distinguish between legitimate and fraudulent GLIT claims without alienating honest customers. And 75% said most retailers had no process for recording and tracking all GLIT claims, while 71% believed most also had no suspicious GLIT claims investigation process.

Lack of insight on returns issue

The survey also revealed that few of the retailers interviewed see organisations in the sector carrying out much investigation into potentially fraudulent GLIT claims, as three-quarters said fewer than 10% of cases of reported lost goods were actually scrutinised by home shopping firms. This finding comes after recent analysis by Transactis (of data provided by companies sharing information on orders, delivery and GLIT claims, with its ClaimsID system) indicated that some brands may be seeing a much higher proportion of potentially fraudulent claims.

A false GLIT claim occurs when a customer alleges a product they have ordered has not arrived – when, in fact, it has. Or they might falsely claim that not all the goods in an order arrived with the delivery. Similarly, customers may claim an item has been returned for a refund but must have gone missing en route to the retailer – even though it was never actually sent.

John Sharman, Transactis’ commercial director, commented: “Clearly, goods lost in transit fraud is an emerging concern within the industry, and yet it remains very much under the radar at many retail firms. Most UK businesses would not normally tolerate unnecessary expense, but all too often the cost of GLIT fraud is shrugged off as a necessary evil that retailers can’t really do anything about – just the cost of doing business. In reality, as we can see from The Digital Shoplifting Survey, the vast majority of people in the industry see most retail players taking too few steps to address or even assess the problem. Too many home shopping firms simply don’t see the full scope of GLIT fraud.”

Treading a fine efficiency line 

Sharman admitted: “Certainly, tackling false GLIT claims can be a double-edged sword: be too accepting of the customer’s word and fraudulent claims slip through the net; be too aggressive and honest customers with legitimate complaints feel treated like criminals and take their business elsewhere. 

“What is essential to enable home shopping firms to eliminate GLIT fraud and ensure that legitimate claims are dealt with promptly and efficiently is having the necessary consumer data to hand to allow them to take an informed and appropriate approach to each customer on a case-by-case basis – that is, giving frontline claims management staff information that enables them to identify which claims are potential cases of fraud and which are likely genuine instances of goods gone missing.

“This approach is most effective if the retailer implements a system that enables it to screen claimants for potential risk and fraudulent activity at the first point of contact, where costs are still relatively low. This solution requires that claims management staff have access to full up-to-date information on both the customer and the delivery destination – a clear view of the transaction and fulfilment history for each, including data from other retailers if possible. That way, cases of potential fraud can be identified and extra security precautions put in place, while the complaints of honest customers can be expedited. The result is cost savings and a better customer experience.”

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