[Industry Focus] Fraud Risk Profile for Jewelry Retailers
Whether jewelry retailers are selling diamonds and gold or well-crafted costume jewelry, they face the threat of online fraud. While the merchandise’s high sale price and profit potential appeal to merchants, they make these goods an ideal target for fraudsters.
In today’s growing online marketplace, what can jewelry retailers do to minimize their risk exposure and maximize legitimate sales?
What Makes Jewelry Retailers a Target for Online Fraud?
As today’s consumers find themselves with extra discretionary income, they often spend it on luxury goods like jewelry. In fact, the jewelry and watch market is anticipated to grow to nearly $408 billion by the end of 2019 — growth that’s also been fueled by the prevalence of e-commerce retailers.
But jewelry’s high price tag often comes with an increased fraud risk because:
- Luxury and name-brand goods are in demand.
- Fraudsters can easily resell these items to deal-seeking shoppers near the retail price.
- Jewelry is small, making it easy and relatively inexpensive to ship.
How Jewelry Retailers Experience Fraud
Jewelry retailers face unique challenges in combatting both card-not-present (CNP) fraud and determined criminals. In this market, merchants must be mindful of:
- Volume spikes. Jewelry retailers should expect an increase in fraud attempts around major holiday shopping seasons, such as Valentine’s Day and Mother’s Day.
- Increased order size. A large order of multiple expensive pieces, especially from a first-time customer, may indicate fraud.
- Cross-border transactions. Although many overseas transactions may be legitimate, merchants should be cognizant of international customers’ shopping patterns and expectations. Remember, however, that not all overseas orders are equally risky, as different countries carry different risk levels.
- Telephone transactions. Some customers will place phone orders with in-store clerks, presenting a special screening challenge: Merchants must ensure there are measures in place to effectively screen transactions in the absence of traditional online ordering data points.
How Can Retailers Protect Themselves?
Jewelry retailers can minimize their fraud risk by:
- Monitoring order patterns. Does the same customer order multiple quantities of the same expensive item?
- Examining orders with expedited shipping. Fraudsters often pay extra for priority delivery to shorten the paper trail and quickly turn around stolen merchandise.
- Verifying order information. Check the billing and shipping addresses of suspicious orders to verify their legitimacy. Retailers can also confirm the order by calling the phone number on the order directly. While such calls risk alienating legitimate customers, they can build relationships and encourage trust when made properly.
- Checking IP addresses. Retailers should confirm that the IP address of the order originates from the same country as that listed in the billing or shipping information.
Minimizing Jewelry Retailers’ Fraud Exposure
It’s projected that online sales for the jewelry industry worldwide will make up 25% of sales by 2020. But as retailers scramble to capitalize on ecommerce’s popularity, they expose their business to an increased fraud risk.
Because of the potential value of a single piece of merchandise, screening every transaction is important. Missing even one fraudulent transaction can result in significant financial repercussions for the merchant.
But retailers must also balance fraud prevention with customer satisfaction. Too-stringent fraud rules may result in lost sales and reputational damage, but a comprehensive protection strategy can help jewelry retailers grow a stronger business.
So how can retailers implement comprehensive CNP fraud prevention while still offering a user-friendly, seamless online shopping experience? ClearSale is committed to helping merchants improve both their profits and their customer relationships through our Total Guaranteed Protection Solution. Contact us today to find out how it can benefit your business.