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Fashion ecommerce has shown no signs of slowing, with online purchases expected to more than double to $3.5 trillion by 2019, and with that, fraudulent sales have kept up the pace, according to a new report by Riskified. Riskified’s “Fraud in Online Fashion” report is geared toward ecommerce retailers selling premium and luxury fashion brands in the online space. For an industry that counted $8.5 billion in online sales for 2015, a figure expected to double by 2020, online retailers must be aware of the increasingly difficult challenges and risks the counterfeiting underworld presents.
"Today, more then ever before, consumers are willing (and often prefer) to purchase luxury items online and luxury brands want to make sure that they're providing the best possible online shopping experience for their customers," said Andy Freedman, CMO at Riskified. "With online fraud for luxury fashion more than double that of consumer fashion, luxury brands are on high-alert and overly restrictive with their online order approvals.
"While being watchful for fraudulent transactions is critical, equally important is ensuring that you aren't rejecting a large group of legitimate customers whose business and loyalty cannot be undervalued," he said. "Currently, luxury brands' fraud management systems are incorrectly identifying legitimate orders as fraudulent.
"The Fraud in Online Fashion report shows how prevalent and detrimental this is on their revenue and customers - especially the millennials and high-income customers, which are the most impacted by having their orders falsely declined."
Riskified works with a number of clients in the apparel and accessories space and has used its own data insights to compile the information used in the report, including consumer fashion and luxury fashion sites. Finding fraud Staying ahead of fraud has presented challenges for fashion retailers online, especially given the rapidness of the fashion calendar, its massive output, high demand from consumers and the quickness in which current style trends evolve. The way the fashion industry operates has resulted in legitimate and fraudulent buying patterns. For fraud protection and prevention, retailers must take a complex and multi-faceted approach to curbing these sales without negatively impacting revenue goals and new market penetration. Riskified notes that when thinking of fraud, fashion industry executives must enact effective consumer validation measures that do not add “friction” to legitimate shopping experiences. Retailers must also be aware of declining legitimate orders, as doing so may insult consumers and lead to significant losses. As more brands begin to offer international ecommerce, the balance between validation and prevention measures will accelerate in importance. For this, brands need to update fraud management systems and processes to handle the influx of cross-border transactions, a market estimated to reach $1 trillion in sales by 2020.![chanel.ecomm sunglasses1](https://americanmarketer.com/wp-content/uploads/2015/11/chanel.ecomm-sunglasses11.png)
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"For every transaction, there are two stories that can be told - the story of a legitimate consumer and that of a fraudster," Mr. Freedman said. "Riskified, takes a holistic approach to fraud prevention. We've spent years building our proprietary technology, using intelligent automation, machine learning and advanced fraud detection methods.
"But our true value is shown through our ability to drive top-line sales impact for our luxury clients - something typically not counted on by existing risk management tools or solutions," he said. "As an recent example, a multibillion dollar, global luxury fashion brand saw overall sales grow over 1 percent, using Riskified to drastically reduce the number of transactions being declined by their existing fraud prevention process."
Opportunity knocks As cross-border ecommerce continues to be an important aspect of the fashion industry, brands should be aware of where purchases are coming from. Eighty-four percent of Chinese consumers, for instance, made online cross-border purchases, primarily from United States-based retailers. With a third of Chinese consumers making a purchase from a foreign Web site, 43 percent of those cross-border transactions were made for apparel and accessories. These dealings, as with a number of other countries, do come with risks for online retailers. Riskified’s data shows that orders paid for with Chinese credit cards for shipping outside of China have a fraud rate of 3.5 percent. Luxury purchases made with Chinese credit cards but shipped to the U.S. are seen as safest at a fraud rate of 1.04 percent, while luxury orders paid with a Chinese credit card and shipped to any non-Chinese is riskier, at 1.58 percent.![estee-lauder-chinese-homepage](https://americanmarketer.com/wp-content/uploads/2014/05/estee-lauder-chinese-homepage.jpg)
"Cross-border ecommerce is already a $1 trillion industry and has become a market that luxury brands simply can no longer ignore," Mr. Freedman said. "The truth is that while expanding into new markets can seem daunting, Riskified's experience reviewing millions of transactions across the globe has taught us that the world isn't such a scary place and customer demand for new brands is growing exponentially.
"This is particularly true for U.S. retailers, where roughly 50 percent of all ecommerce purchases made by shoppers on a site outside their home country were placed on a U.S. ecommerce site," he said. "Riskified has been able to help hundreds of global luxury brands address concerns around global expansion, ensuring that new customers experiencing brands are delivered a frictionless shopping experience."