What Merchants Need to Know to Decrease Losses This Holiday Season

By Eyal Raab

It’s the holiday season, and, for many, “the most wonderful time of the year.”

Retailers tend to agree with that assessment, and online merchants are likely to have the widest smiles of all. Forecasts indicate U.S. shoppers will spend nearly $144 billion online in November and December, up 14 percent from 2018 holiday spending.

However, while the holiday shopping season creates great revenue opportunities for merchants, it also brings challenges. On top of managing a spike in volume and ensuring customers have a good shopping experience, many merchants are also wary of fraud losses during this season.

We won’t bury the lede — the good news is that they shouldn’t worry! While it’s true that there’s an increase in fraud during the holidays, our “Unwrapping Holiday Fraud” report shows that increase is small, and it’s easily outpaced by the increase in legitimate shoppers. That means that merchants should sell confidently and maintain approval rates at least as high as the rest of the year.

Our research also shows that there isn’t just one holiday shopping season. Different shoppers increase their activity at different times of the season, and they have different buying patterns. Understanding those sub-seasons can help merchants make smarter decisions.

Let’s take a look at those seasons:

Warmup (Oct. 24-31): Merchants at this time begin to see an upward trend in sales. And international consumers, who may need extra time to receive their shipments, make up a good portion of these shoppers. Merchants tend to consider international orders riskier than domestic ones, but they should know that international orders at this time are very common and they should be aggressive in approving them.
Pre-Sales (Nov. 1-22): During this time, online merchants regularly receive legitimate higher-value orders. While such orders often signal fraud at other times of the year, that’s not necessarily the case now. Online merchants that automatically assume such big orders are fraudulent may miss out on significant revenue opportunities.
Cyber Weekend (Nov. 23-27): This is traditionally the highest grossing sales period of the year for almost all e-commerce merchants. And it’s not just gift buyers who are shopping. Many shoppers are buying for themselves, creating an opportunity for merchants to reduce their shipping costs by offering incentives to customers to pick up purchases in-store.
Pre-Christmas (Nov. 28-Dec. 23): International shipping is lowest during this holiday sub-season. However, volume from international customers is still about 30 percent higher than average.
Christmas (Dec. 24-25): Fraudsters never take a day off, huh? This is the sub-season where fraud rates are highest, and it’s the only sub-season where they’re higher than during the nonholiday period. This is largely due to a steep drop in legitimate shoppers (likely unwrapping presents) while fraudsters try to take advantage of exhausted manual-review teams and call centers.
After Sales (Dec. 26-31): Merchants offering promotions at this time may see a 20 percent increase in revenue vs. nonseason averages. This is also the holiday sub-season with the highest fraud rate for orders on digital goods, which include items like digital gift cards, e-books and music files.

We’re sharing these findings to help online merchants make the most of the holiday season, so they can eat, sell and be merry. Retailers that know what to expect and have the systems in place to act on that intelligence are best positioned to decrease their losses, increase their sales, and ensure that they and their customers have the happiest of holidays.

Eyal Raab is the vice president of sales and business development for Riskified, an e-commerce revenue protection and fraud prevention company.