Today’s online shopping experience means customers can purchase groceries, clothes, home furnishings and more without ever leaving home — so why shouldn’t gin and tonics be eligible for delivery, too?
Merchants selling liquor and wine in brick-and-mortar stores face a tightly legislated industry, but the lure of the online marketplace has attracted many of these businesses. With increased demand and high-value products, these e-commerce retailers are poised for big financial gains — or catastrophic hits to their bottom line if their businesses aren’t adequately protected.
As liquor and wine retailers work tirelessly to meet customer demand and expand their reach, they must simultaneously protect their online store from an increased exposure to fraudsters.
Why Are Liquor and Wine Retailers a Target for Online Fraud?
In the last five years, the online beer, wine and liquor industry’s revenue skyrocketed. According to IBISWorld, revenue was expected to reach $614 million by the end of 2016, which represents an 11.7% annual growth rate over the last five years.
With this increase in online sales, liquor and wine e-commerce merchants have found themselves the target of online fraud because:
- High-quality liquor and wine are always in demand and easy for fraudsters to resell at or near the purchase price.
- With some online retailers offering high-value single bottles — like a $3,400 bottle of Veuve Clicquot champagne — they become a target for fraudsters who can achieve big financial gains with a single purchase.
Fraud Risks That Liquor and Wine Retailers Are Exposed To
Online alcohol retailers must be mindful of the myriad ways determined criminals will try to commit fraud, including:
- Rush shipping of expensive orders. Some of the newest online alcohol merchants now offer next-day delivery via local retailers. Fraudsters will take advantage of this shipping option to make and receive high-value purchases before the card number theft is reported.
- Telephone transactions. Some customers will place phone orders with in-store clerks and pick up the order at the brick-and-mortar location.
This type of order presents special screening challenges for merchants: How can they effectively screen transactions without being able to review traditional online ordering data points? Are merchants asking for the physical credit card or an ID for confirmation when the customer picks up the order?
- Recurring subscriptions. With subscription-based alcohol delivery services, there’s an increased risk for friendly fraud. Users don’t always remember when their shipment is processed each month, and instead of cancelling their subscriptions, they initiate the chargeback process when a charge hits.
- Unclear legality of online alcohol sales. With the age restrictions on alcoholic products coupled with shipping regulations that vary widely by state, the legality of online liquor and wine sales is still unclear. This ambiguity can lead to higher chargeback rates if legitimate transactions can’t be delivered to the purchaser.
How These Retailers Can Minimize Their Fraud Exposure and Chargeback Risks
Card-not-present fraud, friendly fraud and chargebacks are devastating to an online retailer. Approximately 51% of the price a consumer pays for an alcohol product is government taxes and fees, so the theft of expensive bottles can be a serious hit to a merchant’s profit margin and bottom line.
Because liquor and wine e-commerce businesses are considered high-risk merchants, they must ensure they have a credit card processing solution in place that specializes in high-risk accounts but won’t break the bank.
Just as important, liquor and wine e-commerce merchants should integrate a multilayered fraud protection strategy that will minimize their fraud risk and protect their business against excessive chargebacks.
At ClearSale, we’re committed to helping liquor and wine retailers maximize their sales and protect their profits. Contact us today to learn how our Total Guaranteed Protection Solution can help you maximize your online sales, protect your profits and defend your business against the rising threat of fraud.