INTERNET RETAILING Build your online business : use multichannel opportunities and take advantage of the digital age MAKE YOUR BUSINESS SUCCEED On the move Mobile phone ‘apps’ that get customers buying on the go Fulfil promises Get your product to your customers when they are expecting it Retailer profile How John Lewis ensures customers get the right experience 4 TIPS FOR BUILDING YOUR ONLINE BRAND PHOTO: FENG YU/SHUTTERSTOCK No.1/Feb ’11 This paper is an independent supplement by Mediaplanet
Transcript
INTERNET RETAILING
Build your online business: use multichannel opportunities and take advantage of the digital age
MAKE YOUR BUSINESS SUCCEED
On the moveMobile phone ‘apps’ that get customers buying on the go
Fulfi l promisesGet your product to your customers when they are expecting it
Retailer profi leHow John Lewis ensures customers get the right experience
4TIPS FOR
BUILDING YOUR ONLINE BRAND
PHOTO: FENG YU/SHUTTERSTOCK
No.1/Feb ’11This paper is an independent supplement by Mediaplanet
2 · FEBRUARY 2011 AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
Retail opportunities in the age of the multichannel customer
YodelFrom the internet user, to the retailer, to the home‘It’s the smile on people’s faces when I hand them their parcel that makes the job rewarding,’ is how one Yodel driver described the satisfaction he gets from his job.
In every postcode across the country, Yodel drivers deliver some 200 million parcels a year to consumers who have ordered goods from UK retailers. Increasingly, consumers have turned to their computers to order online anything from CDs to household furniture. The time from when an internet user in the comfort of their home places an order, to a Yodel driver delivering it, can be as little as 24 hours.
Yodel can achieve this because of its extensive network of service and sort centres from Inverness to Truro, and its fleet of over 5,000 vans, fitted with environmentally friendly ECO-Start engines, and trucks.
Yodel is the name of the UK’s newest parcel delivery business and the country’s largest outside of the Royal Mail.
Since the launch of Yodel, the company has seen significant growth as retailers have chosen it to be their service delivery partner. For Yodel’s CEO Jonathan Smith, the company’s approach is a simple one: ‘pay attention to what the consumer is saying on the doorstep, find out what our customers want, and tailor what we offer to match.’ Jonathan continues, ‘that means offering our customers an unrivalled range of delivery options and great customer service.’
Yodel offers a range of delivery options including: Next day or 48 Hour service, Timed deliveries, SMS alerts and a 2-man delivery service for larger items.
Some 15 years after the start of the commercial web the ‘late majority’ of retailers are adopting digital channels in significant numbers and changing the face of retail in the UK
According to the Of-fice of National Sta-tistics, 73 per cent of UK citizens have broadband access. The UK also has 93 per cent of the top
10 per cent of earners (2010) — and a customer-base which is already mul-tichannel in their expectations and behaviours. Smartphone growth has the UK customer entirely ready for m-commerce... as soon as the retail-ers follow suit.
Equally, the UK has one of the most competitive retail sectors in the world and the ongoing hunt for new opportunities has pushed the UK’s leading retailers to embrace digital channels more actively than many other countries, certainly in Europe.
Embracing digital
1The latest change, however, is that the baton is passing from
the leaders to the mass market. Low-er costs of entry, stable technology, and the readiness of customers to pay online have come together just as the mass of retailers are ready to embrace digital.
This supplement considers the
gamut of front-end technology and customer experience, then the un-derpinning logistical and supply chain management, before focusing upon the customer insight that pow-ers our commercial connection with our customers’ money. Features in-clude a discussion with the Manag-ing Director of the IMRG (the indus-try body in the UK) drawing out the importance of mobile-optimised websites as m-retailing increases in popularity. Paul Rouke of PRWD dis-cusses the importance of your web offerings being ‘usable’ by the cus-tomers: if you’ve spent the money and brand collateral to attract cus-tomers’ attention, you’ll only sell to your highest potential if your site is both functional and intuitive.
Key area
2Logistics is a key area: in essence, it’s the ability to deliver upon
your promises, repeatedly and con-sistently at scale. Customers may shop with a new retailer once but if the experience of fulfilment is a poor one they’re unlikely to shop a second time. Indeed, one could say that the whole of one’s brand rests in the hands of the people taking your products the
‘final mile’ to the customers’ doors! Retail could be defined as the act of
taking a customer’s money; so there are also questions around risk, fraud management and payment systems. We need to balance our own security with making payment a simple and rapid process for customers. Experts give their views.
Customer insight
3Plus, to ensure that we make the most of our customer interac-
tions, there’s an investigation into the growing area of customer in-sight: not just ‘web analytics’, but harvesting information and insight from every customer touchpoint and every channel. This equips our busi-nesses to grow.
Finally, there’s a case study on John Lewis, winners of the Internet Re-tailing Inspiration Index in 2010, and in particular upon their approach to multichannel (and not solely a stand-alone website).
Within these pages, then, you’ll find a succinct picture of how to suc-ceed — in particular by embracing a customer-focused approach to the new digital channels and building on the best approaches now available.
“One in 20 customers coming to us online are doing so via mobile which is not insignificant”
Jonathon BrownHead of online selling, John Lewis
WE RECOMMEND
PAGE 8
Good website design p. 51. Transform your business with a ‘user-centred’ website design
Protect against losses p. 102. Prevent your business from fraud but don’t stop customers spending
INTERNET RETAILING, 1ST EDITION, FEBRUARY 2011
Managing Director: Willem De GeerEditorial Manager: Katherine WoodleyBusiness Developer: Christopher Emberson
Responsible for this issueProject Manager: Faye GodfreyPhone: 0207 665 4411E-mail: [email protected]
Ian JindalEditor in Chief of Internet Retailing Magazine
“We need to balance our own security with making payment a simple and rapid process for customers”
4 · FEBRUARY 2011 AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
Question: Are consumers increasingly ditching their PCs and using their mobile phones to make online purchases?
Answer: Yes. So even though the PC is still the most popular consumer portal, savvy retailers need to be switched on to the latest mobile shopping technologies
With the explosion of Smartphone technology, online shopping has found a popular new platform. A re-cent survey by Foresee Results found that more than 30 per cent of shop-pers have accessed a retailer website via their mobile, with as many as 67 per cent of these doing so in the re-tailer’s store. More than a quarter have looked at rival websites to com-pare prices and products when in a competitor’s store.
So is mobile shopping replacing online/PC shopping? No: we’re not there yet. But if the soothsayers are right, it won’t be long before we are, says David Smith, Managing Director of IMRG, the membership communi-ty for the e-retail industry.
Convenient“Forty-one per cent of UK retail brands are planning to have a mobile-opti-mised site (specifi cally tailored for mobile phones) within the next 18 months,” he says. “By 2014, we could be in a position where an awful lot
more shopping is being done by mo-bile. And when you include the pro-liferation of iPads, etc, it’s quite easy to imagine that the PC will be falling way behind as a shopping portal.”
The explanation for mobile phone shopping is fairly obvious. For consumers, it’s immediate and incredibly handy. “It doesn’t get any more convenient,” says Paul Skeldon, Editor of online industry magazine, M-Retailing. “Retailers have the chance to build a more personal relationship with their consumers, if they can harness their mobile numbers.”
These days, notes David Smith, the customer isn’t just always right. He’s always connected, too. “Partic-ularly young people,” he says. “How many young people send emails now? It’s all done by text or by Fa-cebook. They don’t need a computer to communicate or shop, especially if sites are mobile-optimised.”
FunctionalityA mobile-optimised site is one that knows when a customer is connect-ing to it from a mobile phone — and
what kind of device they are using. “It’ll ‘scrape’ data off the main site, repurpose it and send it back out with a way that will fi t with that phone,” says Paul Skeldon. “We’ll see new mobile sites this year which will have the kind of func-tionality you get with an ‘app’.”
‘Apps’ (‘application software’) are designed by retailers for their custom-ers to download. The drawback here is that diff erent ‘apps’ need to be written for diff erent operating systems (such as Apple’s iOS or Android) and have to be updated. This could be a costly proc-ess — but there are upsides.
Advantages“Some stores’ ‘apps’ enable custom-ers to browse offl ine – and then, when they’re connected again, take their order,” says David Smith. “That’s one of their advantages while access to the Internet isn’t universal.”
Either way, for retailers, this is no time to be a technophobe. “Retail-ers have to follow their customers,” says David. “It’s a fact that custom-ers adopt new technologies quicker than retailers. If you’re a retailer who is not embracing technology then I don’t believe you are going to exist in the near future. Your customers will be elsewhere and engaging with your competition.”
FEBRUARY 2011 · 5AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
If you’re a retailer, the question isn’t: ‘Do you have a website?’ It’s: ‘What kind of website do you have?’ In 2011, after all, a brand without an online presence isn’t just unthinkable. It’s suicidal.
Paul Rouke is from PRWD, a con-sultancy which provides a range of usability services for websites, intranets and business systems. “A well-developed retail website, which has been developed with the end-consumer in mind, has the ability to transform a busi-ness,” he says.
Good experienceAnd this, ultimately, is the key point: end consumers should never be underestimated. “End consum-ers are the most important part of website design,” says Paul. “How-ever good your website looks, it might fail when it comes to being a good experience for them.” The best way to overcome this is through
‘user-centred’ design: i.e., involv-ing the people who will be access-ing the site right from the start of the design process, via market re-search and focus groups, etc.
Rich imageryDon’t be tempted to frontload your site with needless flashy graphics and videos, either. “Most good re-tailers have got (their design) sort-ed,” says Max Childs from Scene 7 – Adobe Systems. “Ten years ago, customers were willing to wait for three seconds for the page to download before they got bored and left the site. That’s dropped to something like one-and-a-bit seconds today.
“So speed will lose you custom-ers; but won’t necessarily gain you customers. Yet showing rich imagery will help you sell prod-uct. That’s because in a shop you can pick it up and feel the mate-rial. Online you can’t; so the visu-al merchandising has to overcome that barrier.”
Your decision to feature rich media (interactive multimedia) and video on your site will depend entirely on your line of business, says Max. “If you’re in banking or insurance and selling non-visual goods, then rich media won’t be high on your agenda. But if you’re in, say, fashion or clothing, seeing the product up close is crucial.”
Paul RoukeHead of usability, trainer and consultant. PRWD
When a retailer or brand comes to design their website, thinking about the needs of the end user is of paramount importance
A WORLD OF APPLICATIONSThere are many advantages of investing in ‘apps’ for retailersPHOTO: IQONCEPT/SHUTTERSTOCK
Engagement:When emotive design & usability combine to create customer focussed websitesWe help partners including Jaeger, Hobbs, Aquascutum, 7 For All Mankind, Virgin Media Business, Galt & New Look to engage online.
or visit www.designuk.com/engagement
Call Robert on 0207 292 2772We’d love to help you too...
1Whatever your site sells, you need to understand the re-
quirements of your end users from the very start of the design process — so undertake focus group and market research, etc. Otherwise, you may encounter is-sues after the design process has been completed.
Learn from your rivals
2Undertake competitor anal-ysis. No doubt there will be
existing retailers in your industry selling online; and, potentially, there may be a number of things you can learn from them.
Define usability goals
3Ask yourself about the diff er-ent goals your consumers
have. Some will be looking to fi nd an item as quickly and as effi cient-ly as possible and make a pur-chase. Others will want inspira-tion and ideas and be able to com-pare products side by side. Others will want to log-in and check the status of their order.
6 · FEBRUARY 2011 AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
Good service: it’s all in the delivery
Consumer patience famously wears thin on the Internet. Because on-line off ers such variety and immedi-acy, all that customers want to know when they click on their shopping basket is that a) the item you sell is in stock; and b) it will get to them quick-ly and effi ciently. Otherwise they can — and will — go to another retailer in a matter of seconds.
Access to servicesGerry Farwell is Head of Supply Chain in Royal Mail Marketing. “Your busi-ness is only as good as your logistics and supply,” he says. “Traditional-ly, all the big names in Internet and high street shopping have grappled with logistics and supply chain is-sues for years. Equally, smaller busi-nesses used to think: ‘We’re not go-ing to be a customer of a third par-ty logistics company because we’re not at a scale that will interest them.’ Well, that’s changed. Smaller busi-nesses now have access to services which don’t require huge upfront in-vestment in consulting, project man-agement and implementation.”
Increased capacityGerry cites the case of a husband-and-wife team who started selling goods on eBay four years ago. They now have a £500,000 business with a 750-strong product line.
They also have a big problem because their company, which used to hold stock in a spare room, moved to a small unit and has
again outgrown its original busi-ness model.
“They can’t sell more product, which is constraining their busi-ness,” says Gerry. “Something has to change.” The couple are now planning to move all of their prod-uct lines to Royal Mail’s shared-us-er facilities, with upwards of a mil-lion square feet of warehousing,
and are looking to increase their product range to 3,000. “Smaller companies may only start to think of these issues when it starts to hurt,” says Gerry.
Visible supplyBecause of the explosion of online sales and online sales channels, Royal Mail has been quick to spot Internet shopping as a commercial opportunity. Recently, however, vol-cano ash and extreme weather have done their best to put a spanner in-to the supply chain – but seems on-ly to have increased online sales. “The feedback I got was that, before Christmas, people were snowed in so began Internet shopping,” says Gerry. “They were more confi dent in the postman being able to get to their door than their own ability to get to the shops.”
Switched-on companies now have full supply visibility and have opened new sales channels by us-ing multichannel inventory and order management software that, historically, was not available to smaller businesses.
Transparency is therefore key for retailer efficiency and con-sumer satisfaction. “Stock, order and product tracking technology is there,” says Gerry. “And now it’s more affordable for SMEs.”
“Your business is only as good as your logistics and supply”
Gerry FarwellHead of Supply Chain, Royal Mail Marketing
Question: Do online businesses realise the importance of good logistics and an effi cient supply chain?
Answer: Savvy ones do, because in the Internet shopping arena, it can mean the difference between commercial success and failure
BEATING THE WEATHERDuring the pre-Christmas period where weather conditions made shopping difficult many customers relied on the shop to come to themPHOTO: KRIVOSHEEV VITALY/
SHUTTERSTOCK
NEWS
COMPLETE THE SERVICE
2TIP
FACTS
Royal Mail delivers some 400 mil-
lion parcels a year through Parcelforce
Worldwide and General Logistics Sys-
tems (GLS).
Parcelforce Worldwide delivers
around 150,000 parcels a day to cus-
tomers.
GLS – Royal Mail’s European par-
cels business – handles over one mil-
lion parcels a day. It has a network of
667 depots, 29 central transshipment
points, 16,000 delivery vehicles and
1,700 long-distance trucks.
As customers begin to expect their
suppliers to act socially responsibly, a
report from OPS Logistics, published
in October, highlights the future impor-
tance of ‘reverse logistics’. This can in-
clude returns, recalls and waste man-
agement.
A key finding of a report from the
2020 Future Value Chain Initiative was
the importance of optimising a shared
supply chain, where information as
well as assets are shared.
TOP TIPS
Be aware of limitationsOur expectations have gone way up in the internet retail-
ing age. We’re also learning now that our supply systems are more fragile than we realised, with, for example, the volcano ash cloud from last year or the bad weather we had before Christmas.
Keep the customer notified
The consumer wants to be kept informed if there is a de-
lay. Packages can be tracked in transit and retailers will increas-ingly be expected to report to the consumer that everything is going as planned. If the product isn’t go-ing to show up at their door as planned, then the customer wants to know so that they can make de-cisions to do things diff erently. Re-tailers need to have transparency in their supply chain – and then understand how they can mitigate breaks in it.
Meet customer demandThe etiquette we expect in a face-to-face interaction goes
away online: notice how ungra-cious people are to call centre agents, for example. When cus-tomer-retailer interaction is in the form of an email or text written onto a window, customers can be that much more demanding. Re-tailers need to keep up.
Respect the ratingsGood logistics can lead to an overall good customer experi-
ence. Look on the Internet and more and more products, companies and services are rated on a scale of fi ve stars. Consumers go for the fi ve-star rated companies – and hiccups any-where in the supply chain can af-fect that rating. The Internet is a ruthless medium in that way.
Make the most of opportunity
On the fl ipside, the Internet off ers incredible opportunity.
Companies who make it easy for their customers to buy will watch their sales channel take off and in-crease the size of their business dramatically in a very short time.
Salman MalikCEO of software company, Brightpearl
Retail organisations are being challenged by the complexity of bringing cross-functionality to their many channels to market. To date, few have attained this ‘Holy Grail’ of multi-channel retailing, but the answer lies in achieving Blended Channel Activation.By Craig Sears-Black, UK Managing Director at Manhattan Associates
The emergence of multi-channel retailing over the last ten years has radically changed the way consumers shop and retailers are now engaged in a battle for sales across multiple channels knowing that consumers are demanding continuity across all channels and that poor performance in any one can have a very damaging effect on the brand as a whole.
The challenge for the retailer is one of tackling complexity. To create continuity across channels, a retail organisation must move from a siloed landscape where each channel operates independently and develop a service offering that represents excellence for the brand across all channels. Achieving success in this regard requires a new way of thinking, an approach known as Blended Channel Activation.
It is important that consumers do not feel they are using distinct and individual channels, but instead are interacting with the brand in a cohesive way. The channels must be “Blended”. By way of example, you may want to buy online and return it to the store or you may be in a store and cannot find something, so you need the store assistant to have easy access to information that helps you find what you want
– perhaps, finding it somewhere else on the network and then placing an order for you or reserving an item for you at another store for collection.
Acting on this requirement for continuity, flexibility and reactivity is the issue facing the retailer and demands that multiple systems - the Point of Sale (POS) system, the e-commerce engine, the Warehouse Management System (WMS) – are brought together. To deliver on the “Activation” element of the transition, it is critical that data from these systems can be accessed however you don’t have to go ripping out these systems and replace them. It’s a matter of working with them and scaling up integration over time to achieve full Blended Channel Activation.
So what are the key benefits to the retailer of realising Blended Channel Activation? Without a doubt, it is top line sales growth. If you have greater visibility of inventory you can sell more and fulfil more orders. If you can view “buy online, pick-up-in-store” you are going to be driving store traffic. Beyond pure revenue growth, Blended Channel Activation strengthens brand identity by instilling a sense in the buying public that, out of your peers, your brand is the easiest to do business with.
Blended Channel Activation is a way of combining a number of solutions to achieve visibility and continuity across a retailer’s multiple channels to market. It is a way of bringing together an Order Management Solution, a Store Gateway Solution, a Supply Chain
Visibility Solution, a Warehouse Management Solution, a Reverse Logistics Solution etc… all behind the scenes. It also creates the opportunity for retailers to offer the customer a more consistent, flexible and ultimately, more satisfying shopping experience.
For more information call Emma Acton on 01344 318076
http://response.manh.com/blendedchannel
STEPPING UP TO BLENDED CHANNEL ACTIVATION
8 · FEBRUARY 2011 AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
Question: How can a retailer make the most of multichannel opportunities?Answer: By building your online business around brand values, making shopping easy for customers and then listening to their feedback through social media
Like many big retailers, John Lewis used to be just a high street name. Now it’s a multichannel one.
But that is precisely what today’s cus-tomers want says Jonathon Brown, Head of Online Selling. “We want to make sure that a customer’s journey – be it online, in-store or via mobile – is as joined up and as consistent as it can be,” he says. “That’s good for us and good for them.”
John Lewis first bought a standalone website platform – John Lewis Direct – in 2001 to establish and grow an online offer. Two years ago, after sales had increased, the company decided to integrate the site into its mainstream business. The John Lewis website now stocks over 150,000 products and is consistently ranked one of the top online shopping destinations in the UK. Last May, the company won Best Online Retailer at the Which? Awards 2010; and, in November, was named best Large E-tailer at the Drapers Awards.
Brand evaluation Then, on Christmas Eve, records started
being broken when customers went online for the John Lewis Clearance, which kicked-off with a record hour. Christmas Eve as a whole saw online sales up 42 per cent with more than four products sold every second.
So who are John Lewis’ online customers?
“It’s probably fair to say that our online customers are the same as our store customers,” says Jonathon. “There are some small variants. Our online customers are slightly younger and slightly more affluent. But you’d have to look hard at the data to find a difference.”
Despite record numbers visiting John Lewis online over Christmas, the website didn’t crash. “We planned well,” says Jonathon. “And we have spent a lot on infrastructure and in-vestment to make sure we can cope with demand.”
The key to designing the website, says Jonathon, was looking hard at the brand, asking what it stood for and then making sure that the online business replicated it and fulfilled customer
expectations. It needed to be a quality site offering usability, fast-loading pag-es, a range of good value, competitive products and good customer service.
Mobile-optimisedIn October, the company launched its mobile optimised site, and plans are now being made for a John Lewis app. “One in 20 customers coming to us on-line are doing so via a mobile, which is not insignificant,” says Jonathon, “and we expect that to accelerate in the next few years. Smartphones have made the difference in that regard.”
The company has also embraced so-cial media and, late last year, launched on Facebook, Twitter and You Tube. “It’s a way to be where our customers are,” says Jonathon, “and to provide new ways for them to interact with — and be fans of — the brand. Social me-dia is interesting because we’re learn-ing a lot from it. It’s giving us a very good insight into things that are work-ing and not working… and then giving us the opportunity to react to them.”
Jonathon is sanguine about negative
comments on social media platforms.“You can’t control what a customersays about you in the pub — or onFacebook,” he says. “The point is, if a customer has concerns about JohnLewis (and voices them through socialmedia) then we are there to help and support them.”
Recently, one of Jonathon’s team saw a comment on Facebook from a customerwho wanted a pair of leopard skin slip-pers. “She couldn’t find them – but one ofthe team told her that they’d been in the Oxford Street store that day and seen apair there. It was a simple thing, but the customer was delighted that we’d lis-tened to what she was saying and found a solution to her problem.”
If you are a mainstream retailer op-erating without a multichannel of-fer, then you are missing a huge trick says Jonathon. “It’s contrary to whatcustomers are doing. And they will choose with their fingers or feet and go somewhere else.”
“We want to make sure that a customer’s journey is as joined up as possible”Jonathon Brown, Head of Online Selling, John Lewis
INSPIRATION
FEBRUARY 2011 · 9AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
A JOINED-UP EXPERIENCEJohn Lewis invested a lot in their website to ensure the customer received the same experience as they expect in storePHOTO: MARK MACKENZIE
10 · FEBRUARY 2011 AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
Making your online security pay
Cybersource, the payment manage-ment company, recently asked mer-chants to rank the greatest threat to their businesses. A weighty 59 per cent said online fraud. Large businesses ex-pect to lose £173,500 (1.2 per cent) to it; and medium businesses £66,000 (2.4 per cent).
Those are worrying statistics, but the truth is that scammers love the anonymity of the Internet. So, as a re-tailer, operating a secure payment sys-tem could be crucial to your survival.
Balancing actIn its 2011 report into online fraud, Cybersource found that credit cards and debit cards remained more popu-lar than other online payment meth-ods; and that retailers were increas-ingly using 3-D Secure schemes (aka payer authentication) such as Veri-fi ed by Visa and MasterCard Secure-Code, which add another layer of se-curity to help protect against fraudu-lent online transactions. PayPal was accepted by 41 per cent of retailers; bank transfers by 31 per cent; and 27 per cent accepted direct debit.
How internet retailers combat on-line fraud, however, remains a deli-cate balancing act. “You do need to have a fraud-prevention process in place,” says John Wilson, editor of retailfraud.com, the website for fraud and loss prevention industry. “But not in a way that’s going to pro-hibit the core activity of your busi-
ness. You don’t want to stop legiti-mate sales or annoy potential cus-tomers so that they stop using you.
Line of defence“One loss-prevention manager I spoke to was told by his bosses: ‘Just remember: you’re in loss-preven-tion, not sales prevention, so don’t
put too many safeguards in place to stop people buying’.”
David Mitchell, Senior Analyst with the National Fraud Authority, agrees that squaring this particular circle is a nightmare, especially for SMEs. “If you are a larger company, you can have various checks and bal-ances in place,” he says. “If you’re a smaller business, you may only have one or two individuals looking after your fi nances. But implications for retailers who don’t take fraud seri-ously can be huge. If a small business takes one hit of, say, £10,000, then it could be forced to close down.”
Good intuitive automated review software may be the best fi rst line of defence.
Manual reviewThen, says John Wilson, it’s impor-tant to operate a manual review, whereby question-marked custom-ers will be called to double-check the authenticity of their transaction. Factors that trigger a manual review may include the delivery address being diff erent to the cardholder’s home address.
Sadly, all loss-prevention is a cost to the business – but an essential one.
“There are many pressures on on-line retailers,” says John, “because fraudsters are forever fi nding new ways of operating.”
“Fraudsters are forever fi nding new ways of operating”
Question: Is Internet fraud only a problem for consumers?
Answer: No. It’s a potentially business-wrecking problem for retailers, too – so operating verifi cation checks and secure payment procedures is crucial
MANAGING FRAUDAlthough you have to protect against loss from fraud it is key that you don’t prevent people from buyingPHOTO: ANDREA DANTI/
SHUTTERSTOCK
INSPIRATION
FACTS
The percentage of annual online
revenue that businesses expected to
lose to payment fraud in 2010 dropped
from 1.8% to 1.6%.
59% of business expect fraud
management budgets to remain
stagnant, with 10% expecting to have
less available.
59% of merchants now accept
online orders from abroad.
64% of merchants use manual
review to check for potential online
payment fraud.SOURCE: CYBERSOURCE
An estimated £67million of at-
tempted online fraud was committed
in December.
In December, 41% of consumers
said they couldn’t or wouldn’t shop via
their mobiles, because they either be-
lieved that they didn’t have the abil-
ity to — or that the technology was not
secure.
According to figures from the UK
Cards Association, online fraud fell by
36% in the fi rst half of 2010 to £24.9m,
compared to the same time in 2009.
HOW WE MADE IT
How can retailers make sure their payment system is secure?
!Card Not Present fraud is still a big problem in the UK for
companies who decide to retail on-line. Make sure the payment sys-tem you have in place is as secure as it can be. Discuss with your bank the use of a secure payment system such as Verifi ed by Visa and Master-Card SecureCode. Ensure cardhold-er data is secure by complying with the Payment Card Industry Data Security Standard (PCI DSS).
When processing payments, what should retailers watch for?
!When looking to process payments, it’s worth bearing
a few points in mind. Make sure delivery addresses are authentic. And watch purchasing patterns from customers. If someone who regularly makes low-value pur-chases suddenly makes an ex-tremely large order, you need to ask the question: ‘Why?’
What should retailers be doing to check authenticity?
!There is automated review software you can buy which
undertakes fraud screening for you. And retailers can undertake manual review screening, too, whereby members of staff can ring the consumer to verify an authentic purchase.
Are there other measures they should take?
!Draw up an anti-fraud policy and make your processes and
procedures as tight as possible. The Fraud Advisory Panel has produced a range of useful fact sheets for small businesses including an anti-fraud policy template and guidance. www.fraudadvisorypanel.org
What should you do if you are a victim of fraud?
!Action Fraud is the national fraud reporting centre. It is
important that SME victims of fraud submit a report to Action Fraud to enable the law enforce-ment community to build up intel-ligence about the fraud and help protect other small businesses in the future. To report a fraud or to fi nd out more about protecting your business, you can visit www.actionfraud.org.uk
QUESTION & ANSWER
David Mitchell,Senior Analyst, National Fraud Authority
PROTECT AGAINST LOSSES
3TIP
12 · FEBRUARY 2011 AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
The days of retailers really getting to know their customers ended with the demise of the local shop. In the 21st century, anyone could be your customer — and from anywhere.
So the problem in the Internet age is fi nding out who they are and what products they like. To entice them back, in other words, you need good customer insight.
“The old cliché, even in the dot.com days, is that your competition is only one click away,” says Neil Mason, from Foviance, the customer experi-ence consultancy. “So the require-ment for all retailers is to be relevant to their customers. I spent a lot of time in the offl ine world – and some-times I think: ‘It’s just the same. It’s just a diff erent channel.’
Understanding consumers“Retailers need to understand their customers, how they behave and what they think. Customer infor-mation allows retailers to provide a better off er – and a better consumer experience.”
There are three types of custom-er data to harvest: behavioural, atti-tudinal and demographic (age, sex, etc). Behavioural data is well-estab-lished and shows retailers how peo-ple are using their websites, the pag-es they look at, the paths they take to
get there, the content they consume and the widgets they play with.
“This is web analytics,” says Neil. “Any meaningful online retailer would, hopefully, have a good web an-alytics solution in place so that they can see where people are getting
stuck and where they fall out of the purchase process.”
Attitudinal data includes ‘voice of the customer’ programmes – such as surveys or feedback on comment pages. “That’s really rich information for retailers to have,” says Neil.
Consumer conversationsThe customer review page is also a popular feature of many retail web-sites. Richard Anderson is Head of Cli-ent Services at Bazaarvoice, which spe-cialises in introducing customer voic-es to websites, via add-on software. “As a consumer, you are less likely to trust a product description from a manu-facturer than you would a recommen-dation from someone who has bought that product,” he says. “With the way ‘social’ is evolving, consumer conver-sations are more widespread and the manufacturer is less in control.”
But isn’t this a dangerous road for a retailer to travel? Because what if those customer reviews and opin-ions are…well… bad?
“We have examples of companies changing or discontinuing products because their quality hasn’t been good,” says Richard. “So customer comments can be negative – but only if you do nothing with them. The retail-er can take that feedback and respond and engage with its customers.”
Getting to know you: consumer insight
KEEP CUSTOMERS ON YOUR WEBSITE. Making the consumer experience easy and enjoyable could be the difference between them buying with you or a competitor PHOTO: LEV DOLGACHOV / SHUTTERSTOCK
Question: Is shopping online always an impersonal experience?
Answer: Not always. Many retailers are adding features to their websites which enable them to engage with — and fi nd out more about — their consumer-base
NEWS
UNDERSTAND YOUR
CUSTOMERS
4TIP
FACTS
Figures from the Offi ce of Nation-
al Statistics showed that the value
of internet retail sales in Great Brit-
ain rose from an average weekly val-
ue of £169.3m in November 2006 to
£446.1m in July 2010.
Research by eCommera’s found
that 16% of online retailers don’t grade
customer satisfaction at all.
However, 20% of online retailers
ask for feedback after every interaction.
eCommera also found that 16%
run regular after sales surveys and
48% run regular onsite surveys to
measure onsite visitor experiences.
A US report by ATG gives an insight
of trends which could hit the UK - and
found that we could be about to enter
an age of social shopping.
The report found that 37 per cent
of respondents thought it important or
very important that retailers provide
them with an opportunity to interact
through social networks.
The cost of customer insightCustomer data technology needn’t be expensive to acquire – but implementing it and managing it may need investment, says Neil Mason of Foviance
From a technology perspective, ac-quiring customer data isn’t, neces-sarily, expensive: there are good free or low-cost tools available to down-load. The real cost may be in imple-menting these technologies and/or managing them.
“A company can get into the game at relatively low expense and, there-fore, low risk,” says Mason. “The minimum a retailer may need to have is good tracking on their web-site; and, from time to time, the abil-ity to run a survey. If you are a com-pany getting into this area from scratch, you need to look for oppor-tunities to collect diff erent types of customer data at low cost.
“If you ARE going to invest, how-ever, invest in people or time. And be clear about what you want to know. There’s so much ‘noise’ around the data, it’s easy to get lost in it. So be specifi c. Better in-tegration of customer data is al-so important in order to extract a better meaning from it. The Inter-net as a marketing channel is still young. We’re still learning, We’re still evolving new techniques and approaches, and bringing a lot of thinking from the offl ine world in-to the online one.”
FEBRUARY 2011 · 13AN INDEPENDENT SUPPLEMENT DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
eCommerce has been changing the face of retail for the last 5 years and - just as UK customers are taking to the web in compelling numbers - mobile commerce, social retailing and the mass adoption by retailers are creating further disruption... and opportunity!
Th e established, major players are unstinting in their eff orts to sustain their early advantage, but niche,
specialist and unique retailers still have a vital place: we simply need to act now and then work harder. We need capabilities to match the best, ruthlessly capable operations... and then that certain ‘magic quality’ to set ourselves apart. We also need to have the confi dence that we’re being inspired by the best and have excellent, capable supplier partners to support our digital activities.
With these needs in mind we’ve constructed our Expo - an intense, two-day event at Birmigham’s NEC, where we offer two conference streams, three JumpStarts, six Workshops, 100+ of the best suppliers in the sector, the M-Retailing Zone
and InternetRetailing.TV - all dedicated to making 2011 the year your multichannel business fl ies.
Our conferences, JumpStarts and workshops are tailored to senior managers and business leaders, functional specialists and entrepreneurs. The Evolution
Conference Stream focuses upon the best practices we can extract from the UK’s leading retailers, while the parallel Insights Conference Stream pays special attention to the entrepreneurial SMEs and the ‘Amazons of tomorrow’. Keynotes from Debenhams, DunnHumby (inventors of the Tesco Club Card), Nick Wheeler of Charles Tyrwitt Shirts and Julie Meyer, BBC Online Dragon.
Full information on the agenda and exhibitors is available at www.internetretailingexpo.com. Registration is free to retailers and we look forward to welcoming you to the NEC on 23 and 24 March.
Internet Retailing Expo provides two days in which to discover the latest innovations and solutions to drive your multichannel and online businesses in 2011. Ian Jindal considers why you should attend.
Internet Retailing Expo - a must-visit event on March 23 and 24 at Birmingham’s NEC
“Unique retailers still have a vital place: we simply
need to act now and then work harder”
14 · FEBRUARY 2011 A SUPPLEMENT BY MEDIAPLANET DISTRIBUTED WITHIN THE SUNDAY TELEGRAPH
Fraudsters are continually evolving new online scams, and they spread like wild-fi re. The methods usually involve transac-tions with lost or stolen cards, or by creat-ing fake credit card numbers. Gift cards are one of the most fraud-prone products. These can be bought online with fraudulent da-ta and, because the fraudster will get some-thing like 75 per cent of the face value of the card, it’s the next best thing to stealing cash. Card fraud can be opportunist – or hugely sophisticated.
Use a specialist in fraud prevention. A re-tailer’s IT people may be able to build a sys-tem; but because they aren’t experts they may have diffi cultly in keeping pace, as fraudsters fi nd new loopholes to exploit. Fraud is a global, organised phenomenon. The problem with a company undertaking its own fraud prevention is that it only ev-er sees its own transactions. It doesn’t have the availability of pooling data from a large number of diff erent sources. The more infor-mation, the more fi nely-tuned the fi lter.
Losing business by settling for an off -the-peg system – each merchant needs a be-spoke solution. Some retailers may take a Draconian approach, and the result is that they needlessly turn away good business. I don’t think retailers understand all the costs of CNP fraud. Everyone knows that if you sell to a fraudster, you’ve lost that sale and prod-uct. But if you’re, say, an airline and you deny a good customer a seat because of too severe fraud prevention measures, they may go to another airline and never return to you.
The main card schemes, such as Visa and MasterCard, provide a number of fraud mitigation tools which have reduced fraud substantially. But account and identity ‘takeovers’ where fraudsters steal or invent enough data to impersonate a valid shop-per remain a challenge, aff ecting up to 4 per cent of transactions. Multiple purchas-es made quickly across many locations and countries by organised gangs sharing stolen data, changing the data quickly to see what works, is another.
Merchants should employ automated screening tools in addition to adopting cur-rent industry standards (as recommended by banks and card schemes) which are all ef-fective. The important thing for most mer-chants will be to balance the costs of fi ght-ing fraud against actual fraud losses. It’s also important not to be overzealous. A bad trans-action can be costly, but so too can lost or un-happy customers rejected mistakenly.
It’s not uncommon for chargeback rates to reach 30 per cent before experts are called in – it’s never too late, but it can be an expen-sive lesson. Failure to use a reputable fraud screening tool and, for business processing high volumes or in high-risk sectors, seek-ing professional help, rather than relying on standard bank and card-issuer checks for protection, is still the most com-mon mistake. That and not hav-ing a managed process in place for reviewing high-risk or suspicious orders.
Customer authentication is an issue for online retailers, because they don’t have the benefi t of having the customer or the card physically present when processing a pay-ment. Because of the anonymity that the In-ternet provides, e-retailers are more exposed to the risk of online fraudsters who are look-ing to make purchases with either a genuine card that has been stolen, or through using data stolen from a genuine card.
E-retailers need to make authentication checks, in order to be sure that they are deal-ing with the genuine customer. Examples in-clude the Address Verifi cation System (AVS), the three digit card security code system and Verifi ed by Visa or MasterCard SecureCode – an online fraud prevention solution that makes cards safer when shopping online. The indus-try also encourages retailers to make use of the various Card Not Present fraud prevention tools, such as intelligent fraud detection soft-ware, available from third-party providers.
When it comes to fraud prevention there really is no silver bullet; retailers must en-sure that they use a variety of fraud protec-tion methods and systems to help protect their business and maximise their chanc-es of avoiding fraud. For more information about avoiding Card Not Present fraud, re-
tailers should speak to the bank that pro-vides their card-accepting services.
Question 1:What methods of CNP (Card Not Present) payment fraud are e-retailers exposed to?
Question 2:How can online retailers minimise payment fraud and maximise the good transactions?
Question 3:What is the most common mistake retailers make regarding payment fraud prevention?
