This holiday shopping season is shaping up to be quite distinctive. Even with high interest rates and prevalent economic uncertainty, consumers are not expected to cut back on their spending overmuch. However, they are likely to explore different avenues for their online purchases and seek speedier transactions, lower costs, and seamless customer experiences.
Deloitte forecasts a year-over-year eCommerce sales growth between 10.3% and 12.8% for the 2023-2024 holiday season. Total online retail sales for the holiday period are expected to land somewhere near $284 billion. Furthermore, eCommerce is projected to account for close to 20% of overall holiday sales, contributing 48.5% of overall growth in holiday spending.
All that being said, we shouldn’t get too excited. With the crescendo of online shopping around major festivities like Christmas and New Year, there will be an accompanying spike in fraud to be on the lookout for, as well.
4 Retail Trends to Consider This Holiday Shopping Season
The upcoming holiday season appears bright for online retailers… if they can avoid some key threats developing in the offing, that is. In my opinion, here are four primary trends that could influence online retail during this holiday season, each presenting potential fraud risks:
Rising Risk of BNPL Fraud
Buy now, pay later options have gained traction, especially in light of inflation. It offers customers a way to delay payment while obtaining their goods immediately. And, with over half of the top 1,000 retailers incorporating BNPL options, and nearly one in ten purchases in 2024 expected to be made using this option, the risk of BNPL fraud is escalating. This is mainly due to the increase in online shopping, the high-speed nature of holiday retail, and BNPL’s appeal to new users and fraudsters alike.
Extended Holiday Shopping Season
The holiday shopping craze is starting earlier each year. One study revealed that 42% of American shoppers started their holiday shopping in late summer, a trend influenced by inflation and the need to spread out expenses. This extended shopping season provides a larger window for fraudsters to execute their schemes, taking advantage of increased transaction volumes and relaxed scrutiny.
Personalization Demand Increases ATO Risk
The pursuit of differentiation has led online retailers to offer more personalized shopping experiences. 75% of beauty product shoppers, for instance, are willing to pay extra for these tailored experiences. However, the amassed personal and behavioral data turns retail accounts into lucrative targets for account takeover (ATO) fraud. The holiday season exacerbates this risk, overwhelming fraud prevention systems and potentially allowing fraudulent activities to slip through.
Package Theft & Shipping Fraud
With the influx of online orders comes an increased risk of package theft and shipping fraud. Scammers might intercept deliveries or exploit weak points in the shipping process to make off with goods. This results in financial losses for retailers, and also damages customer trust.
5 Holiday Fraud Prevention Best Practices for 2023
Ultimately, embracing a holistic, multi-layered fraud prevention approach will help you foster loyalty and trust with your customers, but it can also significantly reduce the risks associated with the bustling holiday shopping season.
Adopting comprehensive, multi-faceted fraud prevention can help retailers form a strong defense against a range of fraudulent activities. A multifaceted strategy integrates a variety of tools, technologies, and practices to form a flexible and cohesive security network. This, in turn, enables retailers to effectively shield their operations, safeguard their customers, and uphold their brand’s integrity.
I recommend that retailers:
#1. Use Advanced Authentication Tools
Protect customer accounts with multi-factor authentication (MFA), adding layers of security beyond passwords. Options like SMS verification, email confirmations, or biometric authentication can be crucial, especially during high-traffic shopping days like Black Friday and Cyber Monday.
#2. Get Acquainted With Machine Learning
Use machine learning and AI to scrutinize transaction patterns and customer behaviors specific to holiday shopping trends. These technologies are invaluable for quickly pinpointing anomalies or unusual activities that could indicate fraud. They facilitate a swift response to protect your customers and your business.
#3. Educate Customers About Holiday Scams
Take the initiative to educate your customers about the heightened risks of holiday-specific scams and the steps they can take to secure their accounts. Provide clear guidelines for creating robust passwords, identifying phishing attempts in holiday-themed emails or messages, and securing their accounts from potential threats.
#4. Boost Security
Ensure your payment processing systems are updated and compliant with the latest security standards, particularly in preparation for the holiday season’s transaction influx. Consider implementing additional verification steps for transactions, with special attention to high-value purchases that are more common during this time.
#5. Strengthen Your Support Team
Prepare your customer support team for the potential increase in fraud incidents during the holidays. Equip them with targeted training and resources to recognize and respond to fraud indicators swiftly, ensuring they are ready to efficiently assist customers and mitigate risks during this critical shopping period.
The Dangers of Singular Focus in Fraud Prevention
Naturally, awareness and proactive measures are crucial to mitigating these risks and ensuring a secure holiday shopping season. But, even though the above trends are a real and present danger for eCommerce, focusing solely on one type of fraud is a strategic misstep. It will leave your business vulnerable to new and developing threats.
Fraudsters are constantly innovating and diversifying their tactics. This makes it imperative for retailers to adopt a comprehensive and multi-layered approach to fraud prevention.
Relying on a single strategy or tool can create blind spots, as different types of fraud require varied detection and prevention methods. For instance, while a solution may be effective in preventing BNPL fraud, it might not be as successful in detecting account takeover incidents. This is why a multi-layered approach is best.
