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What Do Holiday Chargebacks Really Cost You?

posted on: Wed Feb 03 2016
The 2015 holiday season will likely end up with record fraud and record chargebacks. How much will that cost you? For a typical merchant, it could mean hundreds of thousands of dollars or even millions of dollars in penalties and lost merchandise.

Let’s look at three typical examples, using real-life numbers based on actual customer data and use cases:

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  1. Company A is a small eCommerce apparel merchant with fewer than 20 employees. Two employees handle all the phone orders, customer service calls, fraud prevention, manual reviews, chargebacks, etc. Even with a low 0.6% chargeback rate, they’ll sacrifice nearly $200,000 every year to chargeback fees and product losses.
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  1. Company B is a medium-sized merchant with both brick-and-mortar locations and eCommerce sales. They just started offering “buy online, pickup in store,” which has proven quite popular. Even with a lower-than-average 0.4% chargeback rate, they’re hit with nearly a substantial half million dollars in chargeback fees and product losses.
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  1. Company C is a large online digital goods merchant in a highly competitive market space. They process over 100 thousand transactions every week and use sophisticated eCommerce and fraud prevention tools. While their chargeback rate is 0.8%—modest for digital goods transactions—they see a whopping $2 million dollars plus in chargeback fees and product losses go down the drain every year.

If you’re like many eCommerce merchants, you’ve surrendered to the reality that chargebacks are just a cost-of-doing-business, right? Wrong! Not if you use a best-in-class fraud prevention solution like Kount.

Kount customers consistently achieve reductions of 20% to 50% or more in chargebacks. The impact can be dramatic. Let’s revisit the 3 scenarios above and see just how big an impact these reductions have on their bottom lines:

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  1. After implementing Kount and achieving a very modest 20% decrease in their chargeback rate, this small eCommerce apparel merchant sees savings of $39,139* in chargeback fees and lost product. While not earthshaking, it might represent one additional employee to help with customer service, order fulfillment, or other revenue-producing activity.

 

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  1. When the second merchant deploys Kount and reduces their chargeback rate by 35%, their savings are more significant, adding $166,774* to the bottom line through the elimination of chargeback fees and lost merchandise.

 

 

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  1. Our third example of the digital goods merchant illustrates what a big impact Kount can have on profitability. With Kount reducing their chargeback rate by 50%, this merchant achieves a remarkable $1,123,480* in savings by avoiding unnecessary chargeback fees and merchandise losses! That does qualifies as earth-shaking!

Are you experiencing higher chargeback levels than normal from the 2015 holidays? The start of a new year is the ideal time to improve fraud prevention. Don’t lose money needlessly. With a best-in-class fraud prevention solution like Kount, you’ll be able to detect and shut down fraud in real-time, not 60-90 days after lagging chargeback reports alert you to a problem. Download the Beat Those Post-Holiday Chargeback Blues eBook to learn how you can prevent chargebacks and add thousands or even millions of dollars back to your bottom line.

*Potential savings equal reduced chargeback fees and product losses only. Does not include additional ROI that Kount can deliver via increased order approvals, reduced fraud mitigation expenses, and other factors, which can be substantial. Kount does not guarantee any level of savings since every merchant is different and may manage their level of risk tolerance differently.

 

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