5 Tips for Merchants to Protect Themselves from Disputes and Chargebacks During the 2020 Holiday Season
Far more consumers are expected to buy holiday gifts online this year compared to last year and potentially shop earlier due to concerns about delivery times. In fact, online sales are forecasted to grow 25% to 35% compared to the 2019 holiday season, according to Deloitte’s annual holiday retail forecast.
While this is welcome news for online retailers, the outlook isn’t all jolly. Merchants can expect more chargebacks this holiday season due to many unique shopper issues—such as shipping delays and supply chain strains.
Remember: Chargebacks are very costly to your business—so you want to do all in your power to prevent them.
Here are five expected trends that could spark an increase in cardholder disputes and chargebacks this holiday season, along with tips for how to protect your business against them:
1. Increase in ecommerce translates to more fraud
With more shopping happening online this holiday season, merchants should be prepared for more fraudulent transactions. In fact, card-not-present (CNP) fraud has been estimated to hit $5.9 billion in the U.S. alone this year—and this is only expected to increase as more transactions move online.
More CNP fraud means that cardholders will be disputing more charges on their accounts. This could become problematic for merchants because they pay a chargeback fee every time a chargeback is initiated. Moreover, too many chargebacks can lead to higher processing fees or even the loss of card processing rights.
Tip: Look for a solution that can notify you in near real-time when a shopper reports fraud, so you can take steps to prevent it from turning into a chargeback.
2. Overwhelmed shipping networks
Shipping networks are expected to be 5% over capacity globally this holiday season, putting 700 million gifts at risk for delayed arrival, according to Salesforce’s holiday shopping forecast. If shoppers don’t know where their packages are—or don’t expect them to arrive in time—they are more likely to dispute those purchases with their payment card issuer.
In fact, a study by Aite Group found that only 23% of people reach out to merchants directly when they have purchase problems and want to cancel their order, which means most contact their issuer—leading to a chargeback.
Tip: Encourage your customers to contact you directly with any concerns or purchase issues, by providing them with contact information on your email receipts and website. Also make sure you have a dispute alert system, such as Ethoca Alerts, that will let you know whenever a consumer disputes a charge, regardless of whether that dispute is fraud or customer service related.
3. Unfilled orders due to supply chain strain
As merchants navigate the surge in online shopping and expected shipment delays, they are also likely to grapple with supply chain issues. As always, they have to predict what consumers will want to purchase the most this holiday season. But that could be especially tricky this year given the significant shift to online shopping and the lack of historical data to use for forecasts.
The confluence of these trends is likely to lead to supply shortages and items being put on backorder—meaning they may not arrive until well after the holiday season. If that happens, more shoppers are likely to dispute those purchases because they don’t want to pay for gifts that don’t arrive on time for the holidays.
Tip: Actively communicate with your customers about their order status and expected arrival time of their purchases. Such communication is even more important if there is any delay, so they know when to expect a gift—and are more likely to come to you directly if they need to cancel their order.
And by actively communicating with your customer, you also improve your chances of protecting yourself from a chargeback, as you have a record of trying to resolve any inquiries or issues.
4. Post-holiday returns go digital
Since so much buying will happen online this holiday season, so will the return and exchange activities. Instead of heading into stores to return or exchange unwanted gifts, they will be calling, emailing and requesting digital return labels to mail them back. This could lead to more disputes and chargebacks, if you’re not careful about how you handle returns and exchanges.
Tip: Have your contact information, return and refund policies clearly communicated on your website, on your receipts and in post-purchase emails. Making your return and exchange policies transparent and easy to follow will minimize calls and emails to your business, while also preventing customers from having to consider alternative measures such as contacting their issuer.
5. More online shopping causes purchase transaction confusion
Shoppers may experience more transaction confusion this year due to the sheer number of transactions that will be made online. In general, online purchases can be more confusing due to lack of clear merchant descriptor or other visual cues that help customers recognize a transaction on their card statements. Customers are also more likely to forget about online transactions than in-store purchases, especially when they’re making many of them. Keep in mind that multiple household members may be using the same credit card to make online purchases—adding to the potential confusion.
Such confusion can lead to “friendly fraud,” when shoppers mistake legitimate transactions for fraudulent ones simply because they do not recognize the company or product name. This can result in more chargebacks, as cardholders dispute these transactions.
Tip: Make sure your merchant descriptor for card transactions is clear, and look at solutions to help improve transaction clarity, such as providing your customers with detailed digital receipts that include a recognizable logo. You can also visit logo.ethoca.com to get started—for free today.
Stop chargebacks before they happen
Merchants can benefit from the expected growth in online sales this holiday season without the fear of mounting chargebacks by understanding the top reasons disputes happen and taking steps to minimize their impact. Ethoca provides many solutions to help merchants prevent chargebacks and strengthen their financial position while improving the customer experience.