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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.

Posted at 07:40 AM in General | Permalink