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Grocery retailers, what does your fraud look like in 2023?

Grocery retailers and merchants, what are your top challenges? Find out how wider factors like the online sales boom, reduced footfall and order fulfillment strains impact your fraud risks...

Grocery retailers, what does your fraud look like in 2023?

Online grocery buying is rapidly growing. By 2027, the global online grocery market is expected to reach a value of $1,594.15 billion at a 33.10% CAGR. By 2025, online orders will account for almost a quarter of all US grocery sales.

But as your competitors (and your customers) move online, the more vulnerable you become to fraud. We asked your peers to name which types of fraud they’re most concerned about — the top choices were:

  1. Online payment fraud

  2. Account takeover

  3. Friendly fraud

The first step in protecting yourself is understanding how we got here. Let’s take a closer look at how fraudsters are taking advantage of the online grocery market — and how you should respond.

Addressing online demand requires change

The average annual spend of online grocery buyers is expected to go up to $1,524.84 by 2025 — a huge rate of growth compared to $856.47 in 2021.

This rise hasn’t been all smooth-sailing for merchants. Let’s recap on some of the fixes that have been critical to success:

  • Buy Online Pickup In Store (BOPIS): When more than 50% of customers were seeing food delivery delays, click-and-collect, or Buy Online Pickup In Store (BOPIS), options served as the perfect solution. Three quarters of shoppers in the UK now use BOPIS.

  • Simple accounts and faster payments: Smooth buying journeys are an expectation rather than a nice-to-have. Latest figures indicate that fast delivery times are a priority for 38% of customers. Allowing customers to save their login details and credit/debit card information in their accounts has made purchases faster and more seamless than ever.

  • Online promotions: Promo campaigns (like voucher codes and seasonal offers) entice buyers and retain their loyalty. 60% of customers look at online discounts before deciding on which grocery merchant to buy from.

But change has opened a gateway for fraud

In the rush to meet customer demands and attract new ones, you can find yourself exposed to bad-faith actors. Critical trends we’ve seen include:

  • ID verification loopholes: Fraudsters also benefit from click and collect. Because many retailers tend to not double-check IDs or shipping addresses, scammers can show up to a store to pick up a purchase they haven’t made without getting caught.

  • Friendly fraud growth: Common examples of friendly fraud (or chargeback fraud) include claims like their order not being delivered or a refund not being processed. The average grocery merchant estimates that 1.2% of their orders end up being friendly fraud — and because of how difficult it can be to track, that number is likely a lot higher.

  • Promo abuse: Similarly to chargeback fraud, customers can also take advantage of your promotions. Common methods include creating multiple accounts to profit from your business’ sign-up deals or using free trial schemes over and over again without paying. The danger here is that a lot of merchants misjudge how harmful this kind of fraud is. If it happens often enough and is left unaddressed, you will see damage to your brand reputation and bottom line.

  • Supplier fraud risks: Suppliers can play just as large a role in committing fraud as customers do. This usually involves suppliers creating fake customer accounts to capitalize on rewards or a courier placing an order that’s lower in value than the delivery fee they’re paid, helping them make a profit. If left unaddressed, supplier fraud not only results in losses for your business, but damage to your customer loyalty.

These instances of fraud can be easy to miss if your business doesn’t have efficient identity checks and verifications. But how can you protect your business without it interfering with your customers’ buying journeys?

Let’s cover how.

Suggested reading: How did a food marketplace reduce account takeovers by 95%?

How grocery merchants can combat fraud

If you want to make better-informed decisions around how you can combat fraud risks to your business, you need to make better use of your data.

A big mistake many merchants make is looking at different types of fraud in isolation. You might think you need a variety of individual fixes, but your focus should be on securing the entire customer journey.

On top of that, fraudsters don't respect these divisions. In fact, they rarely act alone and often work within a larger web of bad actors, sharing information and tips. So it's about time you take a leaf out of their book — make sure that data is being shared between your tools and across your business.

The key is to invest in solutions that make use of your business-specific and industry-specific data. It’s the only way to stamp out fraud without blocking genuine transactions.

Machine learning for fraud detection has made significant advancements in recent years. When properly trained with data from across the grocery space and your business, you can:

  1. Reduce false positives

  2. Map connections between fraudsters

  3. Get alerted about potential fraud attacks before they happen

Remember, no two businesses are the same.

You need a bespoke fraud solution that can be customized to fit your specific needs, built on your data and risk profile. We at Ravelin can help — speak with one of our fraud specialists to learn more.

Source list

  1. Global Online Grocery Market Forecast to 2027: Increasing Working Population Drives Growth
  2. Online Grocery Sales Projected to Reach $250B by 2025, According to New Research From Mercatus and Incisiv | Business Wire
  3. Retail Ecommerce Report
  4. Digital grocery will be a $243 billion market in the US by 2025: Here are the stats and trends you need to know
  5. 54% Of Shoppers Have Experienced Grocery Delivery Delays - Retail TouchPoints
  6. Use of BOPIS by shoppers in selected countries 2021 | Statista
  7. New Study Shows Delivery Businesses Braced For Increasing Demand And Heightened Expectations In 2023
  8. Coupon Statistics: Usage Stats For 2023
  9. What is Click and Collect Fraud?
  10. Three major types of food fraud—and how to stop them

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