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"Hello, I'm an ecommerce site."

Loss Prevention is a topic near and dear to my heart.  It’s unclear to me if that’s because I believe in right vs. wrong or because I’m a capitalist at heart, but lets say I believe in right vs. wrong.

Knowledge really is power and when evaluating an eCommerce solution, please consider the availability of the following functionality and corresponding data.

1. User security.  Ensure your eCommerce solution supports the configuration of appropriate security for each system User and ensure there is an audit trail for all system changes that impact your bottom line (e.g. refunds, exchanges, discounts, inventory counts, price changes).

2. Refunds and exchanges.  Ensure your eCommerce solution can provide an audit trail for refunds and exchanges not only from the customer perspective, but also from the employee perspective.  Know who is processing refunds and exchanges and what is being refunded and exchanged.

3. Discounts.  Ensure your eCommerce solution can provide an audit trail of applied discounts not only from the customer perspective, but also from the employee perspective.  Know who is discounting your merchandise and what merchandise is being discounted. 

4. Inventory Counts and Pricing. Ensure your eCommerce solution can provide an accurate inventory count, the location of your inventory and an audit trail of changes to both your inventory count and your merchandise pricing not only from the customer perspective, but also from the employee perspective. 

5. Sales trends.  Ensure your eCommerce solution can provide you with sales trend data (e.g. high, low, seasonal).  Know what your sales trends are and when exceptions are occurring.

6. Payment Security.  Ensure your eCommerce solution provides payment security not only to your customers, but to your organization.  This includes credit card verification options, gift certificate verification options, etc.  Consider solution providers that are Payment Card Industry (PCI) certified.

7. Loss Prevention Tools.  Third Party Loss Prevention systems are fairly common, but can also be quite expensive and difficult to integrate.  Consider eCommerce solutions that offer Loss Prevention tools as part of their core solution.  They may not offer all of the functionality of a dedicated Loss Prevention system, but they can definitely assist in the reduction of fraud.  The ability to configure the following should be considered an asset:

·          Billing Address vs. Shipping Address validation

·          The reporting of Cancelled Order

·          The ability to assign points to certain anomalies and report Orders with points above a specific threshold

·          The reporting of Orders with specific Reason Codes attached

As a side note, recent studies have found that approximately 47% to 50% of loss are a result of employee theft.  That being said, there are reputable organizations that will perform employee background checks for a nominal fee.

Below are some recommendations from the Merchant Risk Council (MRC):

1.      Create metrics for your business and report these to management.

2.      Have a fraud rate, based on chargeback’s, of less than 0.2%

3.      Review less than 10% of your orders for fraud.

4.      Use a variety of fraud prevention tools. The top five fraud prevention tools are Address Verification Systems (used by 83% of online merchants), customer follow up (81%), the use of Card Verification Codes (75%), real time authorization on the use of credit cards (67%) and post process fraud management - following up with the consumers when the order looks suspicious - (64%).

5.      Continue to implement new technologies to combat fraud.

More and more retailers are using self-serve kiosks to provide a better, more convenient and of course more efficient purchasing experience.  It's a little impersonal, but people are becoming more comfortable with the concept.  For example, I can't remember the last time I actually spoke to someone at the bank, or was home in time to see a bank actually open.   ATMs (bank machines) are now the defacto way of withdrawing money 24/7.  In fact, while at the bank a few weeks ago, I saw people standing in line and forgot that you can actually pay bills there.

While the banking industry lead the charge out of the gates, retailers have started pulling ahead, way ahead.  Would you believe that Hero Burger has interactive kiosks for you to play with while standing in line waiting to pay?  It was pretty neat, and for the 45 seconds I was standing in line, I actually wasn't bored to tears staring off into space waiting to pay for my burger - my eyes were drawn to the kiosk that exists between the order counter, and the cash register.  It displayed movie trailers and targeted advertising - and had a captive audience!

Home Depot, Loblaws and a few other big retailers have made a leaps into the kiosk business with mixed results.  While I always see people using the self-checkout machines, people seem to prefer a real cashier.  The self-service kiosk seems to make the purchase process slightly longer, as it barks orders at me to place the purchased item in the bag (but I just DID put it in the bag!).  I also struggle to understand the advantage of a kiosk in that type of environment - each machine offsets a single employee, and 4 machines seem to require 1 employee for support.  So it saves 3 front-line employee salaries, but adds capital costs plus technical support, and doesn't really benefit the customer at all - other than a shorter line because no one wants to use them.   hmm...

I think it makes sense (right now) to utilize kiosks to facilitate purchasing when the purchase process is simple and contained.  The movies is a perfect example - high volumes of people make purchases of an essentially electronic product at infrequent times.

Some businesses go half way...  I've recently heard that Tim Hortons will be introducing pay stations at their restaurants to allow for quick Mastercard PayPass transactions.  This makes sense.  Tim Hortons business is based on $2 purchases, so they must go through customers as fast as possible to be profitable.  Introducing a contactless pay station to accept credit cards is ideal - it probably takes less time to swipe/touch a card to a reader than it does to prepare change for a $2 sale.  I am interested in how this affects their profitability.

The message I am trying to send is that an improvement should not be made for the sake of making it, rather it should solve a (fairly) well understood problem.  In Tim Hortons case - it was to accept credit cards, or improve efficiency.  In the movie business, it was to increase overall transaction capacity.

A well understood problem generally starts with the big picture, then focuses in on the bottlenecks - so your bottlenecks or problem areas have context.  Focusing on the bottlenecks alone, i.e. Home Depot or Loblaws, might result in other problems.  Given 'Depots wide range of products, maybe self-checkouts would be better served with RF product tags - so you just cruise your cart up to the self-checkout, it calculates everything magically, including the nails in your pocket, and asks for your credit card.   If it worked, that would be an improvement to both the customer AND the business.

In a previous post about Usability Lessons Through a Cup of Coffee, a small change made a big difference to a much more complicated system.  In fact, my Second Cup around the corner just made the same change and I'm loving them for it.

It’s an age old expression, but somehow it’s the last thing on most marketer’s minds when they think about their ecommerce site and consider upgrading their solution.  I’m fortunate to meet and talk to many ecommerce marketers and merchandisers at trade shows, conferences and during our own sales meetings.  I’m often struck by how many of these marketers (including those working for some of the most respected brands in their industry) forget about walking first when it comes to their own ecommerce solutions. 

There’s no doubt that advanced personalization and recommendation solutions can increase the ROI of an ecommerce site – there’s countless statistics from countless analysts and vendors to support that fact.  But at the same time, when you think about your own ecommerce solution and your plans for it, are these advanced capabilities on your mind, or do you think about the basics – do the nuts and bolts of order processing and shopping work well on your site?  Is it easy for buyers to find the products and services their looking for? 

One company I met with recently is a major world leader in wireless cellular phones and PDA’s.  They’re looking to upgrade their ecommerce site and again, personalization was top of their mind as criteria for selecting a new platform.  But when we looked at their current site, the basics were just not there.  Site layout and design was awkward, product categories were hard to navigate to from their non-commerce information pages and doing simple searches often yielded irrelevant results.  “Battery”, for example, would turn up no results at all (and that’s the most wanted accessory product they sell on their site!).

Clearly this marketer would be better served focusing on the basics and walking first. I guarantee focusing on making sure their site performs well, that the onsite search returns relevant results and that they have good SEO compatibility and have high ranking for natural search on the leading search engines first will do more to increase conversion rate and increase sales than adding a multi-variant near-neighbor recommendation engine ever will.

So the next time you think about your ecommerce site and platform, ask yourself if you’re ready to start running, or should you revisit the basics.