From a merchant services provider prospective, we see both sides of ‘The Retail Equation’

From a merchant services provider prospective, we see both sides of ‘The Retail Equation’

Making a return may become a little more difficult. As a merchant services provider, we think it’s a step in the right direction.

Back in March, we blogged about The Retail Equation, an independent, third-party ‘retail transaction optimization solutions’ provider based in Irvine, Calif., to which retail businesses contract to track customer returns. We read about The Retail Equation in a Wall Street Journal story, which detailed how an increasing number of retailers are using its services to track consumer returns in order to prevent return abuse and fraud.

Consumers cry foul, claiming issues related to privacy and simply the freedom to return a product if dissatisfied. However, retailers and merchants – e-commerce and storefronts – have a valid argument: too many lose their merchant accounts due to excessive chargebacks, returns and friendly fraud. Most merchants, especially small business merchants, have limited resources in defending themselves against serial returners and those who do it fraudulently.

It’s causing quite the debate.

A few modest predictions

Ideally, merchants who partner with The Retail Equation are seeking to cut their losses by way of consumers who commit return abuse as well as those who commit return fraud (for example, returning stolen merchandise). As more and more merchants are taking note of return fraud, we offer several predictions on the effects:

  • Consumer anger: Obviously, denying a return to a consumer is going to fuel their anger. Merchants have critical decisions to make, such as weighing the loss of a customer against the customer’s history.
  • Stir competition: Ultimately, many consumers who are denied returns will simply move on to a similar retailer, which in turn will create competition, for better or worse.
  • Buyer’s remorse: Two of the leading causes of returns is buyer’s remorse and wardrobing, the act of buying, for example, a dress for a special occasion only to return it after the special occasion. As return abuse has moved to the forefront among merchant priorities, we could see the frequency of these two traits decline.
  • Negative reviews: Some consumers who are denied making a return may take to cyber space to vent their frustration and give merchants and retailers negative reviews.

The consumer’s argument: It’s their money

Remember the policy, ‘The customer is always right’? From a merchant services provider prospective, merchants (especially those impacted by chargebacks and fraud) are straying from that sentiment.

Anytime a consumer is denied from making a return, it’s going to trigger frustration, understandably. Based on what we’ve read about the issue, the prevailing viewpoint among consumers is having the right to return goods when desired; that money spent on a product should be returnable. Additionally, there is the ‘blacklist’ theory: consumers find that the idea of merchants maintaining a ‘no returns list’ sends the wrong message.

The retailers argument: Why it’s become difficult for e-commerce merchants

Being a merchant services provider, it’s not easy being a retail merchant, whether it’s e-commerce, storefront or both. Chargebacks and fraud are a recurring problem, to varying degrees. More than ever, merchants are up against it, and here’s why:

  • Visa chargeback and fraud threshold: Effective in 2016, Visa reduced its chargeback threshold from 2 percent of sales or 200 chargebacks per month to 1 percent or 100 per month. Additionally, it has instituted a pre-monitoring program for merchants who lurk close to the 1 percent. Merchants who once relied on that 2 percent/200 per month cushion have no choice but to lower their chargeback rates.
  • Fraud levels: It is small businesses which bear the brunt of most fraud and data breaches. It comes in so many forms, that in today’s climate merchants have no choice but to spend the time to examine transactions and mitigate. It is a significant ask for a small business merchant.
  • Limited law enforcement: Merchants, especially those who operate online, are often forced to be their own police forces, which is time consuming and, when it leads to dead ends, can be frustrating.

Merchants need to strengthen customer service efforts

While merchants and businesses have every right to safeguard their businesses from the bad actors, arguably the biggest key to maintaining low chargeback and return frequencies is to bolster customer support efforts.

  • Better communication: One-on-one contact for customer inquiries – e-mails, telephone calls and, if possible, live chat is strongly encouraged.
  • Exchange/store credit: Consumers are going to return items – that will never change. However, merchants can always push a customer to make an exchange or suggest the return for store credit only.
  • Suggest a review: Google reviews are a very powerful tool for any retailer, online or storefront. Suggesting to the customer to post a review with every (positive) customer service interaction is a recommended practice that will strengthen the perception of any business.

Instabill: a merchant services provider that keeps merchants processing

As a merchant services provider, we prefer to have an initial conversation with prospective merchants which enables us to get a feel for their business and its needs. We also pride ourselves in offering the advice and guidance as well as news regarding the merchant services industry.

Our merchant account managers are always up for a conversation at 1-800-530-2444.

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