Most online retailers see false 'lost goods' claims as threat but don't have strategy to deal with problem

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More than 90% of the UK's leading retailers believe 'goods lost in transit' (GLIT) fraud is a serious threat, yet most say that home shopping firms don't have strategies or processes in place for thwarting false claims, according to research undertaken by event organiser Retail Knowledge for consumer data and insight firm Transactis. The research report, entitled The Digital Shoplifting Survey, was based on interviews with a cross-section of leading retailers attending a recent anti-fraud conference organised by Retail Knowledge.

Among the findings was the calculation that fraudulent GLIT claims cost UK retailers roughly £405 million last year with the average operational cost per claim estimated to be more than £40. Other key findings included:

  • 93% of the retailer representatives interviewed believe fraudulent GLIT claims pose a serious threat for most firms in the sector
  • 64% of the respondents say most home shopping retailers do not have a strategy in place for preventing false GLIT claims from succeeding
  • 82% think most retailers are unable to distinguish between legitimate and fraudulent GLIT claims without alienating honest customers
  • 75% believe most retailers do not have a process for recording and tracking all GLIT claims
  • 71%  believe most retailers do not have a process for investigating suspicious GLIT claims

The survey also revealed that few of the retailers interviewed see organisations in the sector carrying out much investigation into potentially fraudulent GLIT claims, as three-quarters say fewer than 10% of cases of reported lost goods are actually scrutinised by home shopping firms. This finding comes after recent analysis by Transactis (of data provided by companies sharing information on orders, delivery and GLIT claims with its ClaimsID system) indicated that some brands may be seeing a much higher proportion of potentially fraudulent claims.

Meanwhile, the cost to retail firms of false reports of lost goods goes largely unnoticed in many companies, as more than 60% of the respondents believe most retailers are failing to track and measure the direct or operational costs of GLIT claims. Nearly 70% of the people interviewed feel that most retailers are unaware of the growing margin loss caused by GLIT claims, which involves not just the cost of replacing goods but of dealing with calls from and to the complaining customer, of handling the replacement items, of redelivery, of internal investigation, and of foregone profit on additional products sent out.

A false GLIT claim occurs when a customer alleges a product they have ordered has not arrived – when, in fact, it has. Or they might falsely claim that not all the goods in an order arrived with the delivery. Similarly, customers may claim an item has been returned for a refund but must have gone missing en route to the retailer – even though it was never actually sent.

John Sharman, Transactis' commercial director, comments: "Clearly, goods lost in transit fraud is an emerging concern within the industry, and yet it remains very much under the radar at many retail firms. Most UK businesses would not normally tolerate unnecessary expense but all too often the cost of GLIT fraud is shrugged off as a necessary evil that retailers can't really do anything about – just the cost of doing business. In reality, as we can see from The Digital Shoplifting Survey, the vast majority of people in the industry see most retail players taking too few steps to address or even assess the problem. Too many home shopping firms simply don't see the full scope of GLIT fraud.

"Certainly, tackling false GLIT claims can be a double edged sword:  be too accepting of the customer's word and fraudulent claims slip through the net; be too aggressive and honest customers with legitimate complaints feel treated like criminals and take their business elsewhere. But the problem cannot be allowed to continue to grow – professional fraudsters, amateur scammers and just plain unethical consumers will see failure to confront the practice as an open invitation.

"What is essential to enable home shopping firms to eliminate GLIT fraud and ensure that legitimate claims are dealt with promptly and efficiently is having the necessary consumer data to hand to allow them to take an informed and appropriate approach to each customer on a case-by-case basis – that is, giving frontline claims management staff information that enables them to identify which claims are potential cases of fraud and which are likely genuine instances of goods gone missing.

"This approach is most effective if the retailer implements a system that enables it to screen claimants for potential risk and fraudulent activity at the first point of contact, where costs are still relatively low. This solution requires that claims management staff have access to full up-to-date information on both the customer and the delivery destination – a clear view of the transaction and fulfilment history for each, including data from other retailers if possible. That way, cases of potential fraud can be identified and extra security precautions put in place, while the complaints of honest customers can be expedited. The result is cost savings and a better customer experience."

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