BEAUTY & HEALTH
Annual Ecommerce Revenue Optimization Report
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About the report
Forter optimizes genuine customer experience and lifetime value by solving for the root causes of eCommerce fraud and abuse. More than 10,000 businesses benefit from our technology, representing more than $250 billion in annual gross merchandise value. As a result, we have access to a unique dataset of eCommerce interactions with insight into emerging trends and tactics, and a customer base on the cutting edge of problem-solving. In the following micro-report, we’ve summarized the critical data points and ideas specific to the beauty and health industry.
Table of contents
New business challenges
3
The power of the persona graph
4
Calculating the business impact
5
Emerging eCommerce trends
6
A new era of eCommerce brings new challenges
Let’s start by getting the obvious out of the way—the global pandemic has accelerated the shift to eCommerce. In 2020, eCommerce exceeded $4.3 trillion dollars, a volume originally forecast for 2025; in just 12 months, we’ve leapt forward five years. So, while the surface area for fraud and abuse has grown, the real focus for businesses has to be on growth. That has created new opportunities and new challenges for any business transacting online. Let’s focus on three:
1. Omni-Channel Experiences
2. Account Takeovers
3. New User Missed Opportunity (NUMO)
The global pandemic changed the way businesses interact with their customers. For example, Buy Online Pickup In-Store (BOPIS), or Click and Collect, increased 208% as a means of limiting contact. Naturally, Buy Online Return In-Store (BORIS) also grew substantially. The rapid growth of these channels—and consumer expectations of integrated, omni-channel experiences—makes it increasingly necessary for businesses to have a 360-degree view of the personas they interact with.
208%
INCREASE IN BOPIS/ CLICK AND COLLECT
Looking at our dataset, we see a 55% increase in attempted account takeover (ATO) attacks, in which fraudsters use stolen usernames and passwords to make purchases and/or drain loyalty points. We expect this to continue as fraudsters have been harvesting data for future attacks, and new users entering the world of eCommerce are more likely to reuse passwords and less likely to take precautions to safeguard their personal data.
55%
INCREASE IN ACCOUNT TAKEOVER ATTACKS
The rapid growth of eCommerce means businesses are interacting with many first-time consumers. Since they have no data or history on these new users, businesses are 5-7 times more likely to decline transactions from them as compared to returning consumers. Furthermore, 40% of New Users on the receiving end of a false decline state they will never shop at that business again. Inaccurate decisions have a high cost, which is why we term this challenge New User Missed Opportunity (NUMO).
5-7x
HIGHER DECLINES FOR NEW USERS
The power of the Persona Graph
Forter has amassed a Persona Graph that covers more than one billion online personas. So, when one of our customers interacts with a persona for the first time, we look for a match across our entire dataset. If we’ve seen that persona interact with other businesses in our network, we have a history of their trustworthiness. If we’ve not seen the persona before, we know people like them and can pattern-match based on their behavior and attributes to offer a precise assessment of trustworthiness. This Persona Graph is far more accurate than a manual review, a rules-based approach or a scored result. It ensures new users are NOT a missed opportunity, they’re lifetime customers.
We've highlighted the overall risk of NUMO, but let’s provide a simple calculation specific to Beauty & Health. Our data shows the value of transactions from new users represents 3% of gross merchandise value. In a simplified formula, if you have:
$500M
in annual gross merchandise value
of those transactions are from new users
$15M
But that’s an example with Forter approving transactions based on our Persona Graph. Let's assume the average approval rate for all transactions is approximately 99.5% (0.5% rejection rate).
Without Forter, the rejection rate for new users would be approximately 6x greater, so these businesses would be rejecting up to 3% of new user transactions. That means they would be generating:
LESS revenue
$0.375M
If those new users would have attempted 3 more transactions in the next 12 months, and the average customer lifetime value is 4 years, then we’re actually talking about:
lost annual gross merchandise value
$1.125M
lost customer lifetime value every year
$4.5M
Calculating the real impact of NUMO
That’s NUMO, and it makes for a compelling case to invest in solutions that optimize genuine customer experience and lifetime value.
Looking ahead, we see 3 emerging trends for leaders to track
New users introduce more surface area. The global pandemic brought new users online; many of whom are from older generations and using weaker passwords and fewer protections. These individuals are therefore more prone to account takeover attacks. Since their accounts have limited histories, they are easier to breach. And so it becomes imperative to identify these fraudsters from their operations in the widest network possible.
New users introduce more surface area.
2
Early in the pandemic, many businesses made more allowances with flexible policies. As a result, losses from policy abuse rose to $65 billion in 2020. Promotions abuse, returns abuse and item not received (INR) abuse have become real challenges for businesses—especially because they are often perpetrated by known customers (not fraudsters concealing their identity). Thus, addressing abuse requires different tactics and technologies, and thoughtful assessment of how to redraw policy lines to achieve the right outcomes. It’s easy to shift this responsibility to a third party, but savvy leaders won't outsource critical aspects of their genuine customer experience.
More industries selling online equals more abuse.
As noted above, consumer expectations are evolving and include new interactions: BOPIS, BORIS, one-click purchase, same-day delivery and more. As businesses respond by introducing these options, fraudsters are shifting too. Bad actors understand that new offerings are less mature and therefore potentially less protected. Businesses can best serve their customers when they have a complete picture of the personas they are doing business with across these touchpoints.
Omni-channel exposes more surface area.
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The increasing scale of eCommerce
The common thread in the above three trends (and the completed circle from our opening) is the increasing scale of eCommerce. Businesses today have to be able to deliver differentiated customer experiences and fight fraud and abuse—across more touchpoints and at unanticipated scale. That is precisely why leaders trust Forter; to bring insight and expertise to new opportunities, to provide the largest Persona Graph on the planet, and to apply automation that drives outcomes at scale.
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