While general shipping and logistics conditions look positive this year, what order fulfilment issues will pop up in the 2023 holiday season? At Justt, we see four primary difficulties:
Return fraud/refund abuse
The average rate of returns in 2022 stayed flat at 16.6 percent of retail sales. But nearly 11 percent of that $212 billion in returns were fraudulent. Such refund abuse only increases during the holiday spike (some research suggests a return rate increase of 2.2 percent in 2023).
Moreover, fraudsters also seem incentivized toward refund abuse. Case in point, there are now guide books that teach consumers how to take advantage of store policies, like Bob’s Refunding eBook. And with 3DS 2.0 implemented widely in Europe as part of PSD2, many fraudsters in European markets moved away from payments from payments fraud to return fraud and refunds abuse. Messing with retailers return and refund policies is currently one of the easiest ways for scammers to make money, especially amid the background noise of the holidays.
Wardrobing
Wardrobing is the unethical practice of using an item with the intention of returning it after use. Such actions hurt product resale value and increase costs through restocking expenses and tie up inventory.
Wardrobing is a form of policy abuse. Lost item value (also known as shrink) accounted for $112.1 billion in losses in 2022, and damage to garments by those engaged in wardrobing may factor into those numbers. It is likely that during this holiday season (and its many gift exchanges) wardrobing will once again occur. It is a holiday issue that needs addressing, as a valuable garment disappears during your best sales opportunity period only to be returned in January.
Lack of adequate inventory management
As demand increases during the holidays, inventory strains. Lack of preparation and incorrect product forecasting often result in missed sales opportunities, customer dissatisfaction, and lost revenue.
But merchants aren’t solely to blame. As already stated, the supply chain for 2023 is still settling. Experts have noted problems with last-mile delivery, cash-strapped small suppliers, strain from multi-channel consumption and geopolitical tensions.
Whatever the proximate cause, shipping volatility threatens the success of your holiday order fulfillment strategy.
Chargebacks
With a simple button-click, a consumer can reverse a legitimate sale. Unfortunately, the spike in card-not-present sales during events such as Black Friday and Cyber Monday also create a spike in payment and friendly fraud. That often results in a subsequent jump in chargebacks as the post-holiday blues set in.
Moreover, consumers appear more open to the use of a chargeback in 2023. Seventy-eight percent of American respondents admitted filing at least one chargeback over the last year, according to a May survey sponsored by Justt. That response share reflects a 12 percent increase over 2022 (66 percent). In addition, 29 percent of Americans engaged in 3 or more chargebacks over the past year, showing greater willingness to use chargebacks by the consumer.
The efficacy of your order fulfillment process directly impacts your chargeback volume. Twenty-seven percent of Americans will wait just 2-3 days for product delivery before filing a chargeback. And only 10 percent will wait more than 15 days. Timely shipments are important to consumers.
And yet, 24 percent of consumers listed “goods or services not received” as the primary reason for filing a chargeback. In addition, thirty-nine percent of stores with both online and in-store presence said “goods not received” was the top non-fraud reason code they did not challenge. There is a disconnect between consumer expectations and merchant fulfillment—and it’s resulting in holiday chargebacks.
