Retailers feel comfortable with the defenses they have deployed in online transactions, so extending online selling options to include picking up merchandise at a store doesn’t seem to be associated with much risk of increased fraud activities.
That’s where a familiar expression becomes applicable: “Trust, but verify.” Experts say the proverb popularized by President Ronald Reagan in the 1980s should be the catchphrase for retailers seeking to protect themselves from fraud as they build and roll out programs that allow customers to order and pay for items online and then pick up the merchandise in a physical store.
Known as “click and collect” and “buy online, pick up in store,” these programs are growing in popularity as consumers choose to shop in comfort on computers or mobile devices while saving on shipping and enjoying (almost) instant gratification by fetching their goods from a nearby store.
Adobe Analytics estimates that consumer use of BOPIS more than doubled during 2018, and even tripled for some larger retailers.
“This is a customer expectation — omnichannel access to inventory in the system,” says Michael Klein, director of industry strategy for retail, travel and consumer product goods at Adobe Analytics.
“Customers expect to be able to see something online and get it at the store,” Klein says, “just as, when shopping in a store, they would expect that if the store didn’t have the item in stock — or the right color or size or model — to have the retailer get it from another store.”
He says the driving force behind BOPIS is a fear “that a discounted item or hot seller would be sold out. They are reserving the store’s inventory.”
When something like BOPIS becomes widespread, it doesn’t take long for dishonest individuals to take note and hatch schemes to beat the system. “Without a doubt, loss prevention interests closely monitor the situation for the bad guys trying to take advantage,” Klein says.
The key element is verification — verification when the purchase is made and verification at the point of pickup. The challenge for retailers is to beef up verification enough to protect themselves, but not so much that it is cumbersome to the point where customers are driven away.
“It’s a balancing act between loss prevention and customer service,” Klein says. “ERP [enterprise resource planning]falls into our domain. All the technologies and information: artificial intelligence, patterns, more data patterns,” are available to retailers operating BOPIS programs, he says.
“It’s a blend of art and science,” he says. “We still need some level of human intervention. You and I and most people have patterns. Remember, over 90 percent of the customers out there are good. The questions retailers have to ask themselves involve the other 10 percent.”
He cautions retailers that are establishing BOPIS programs: “Protect yourself. Protect your margins by not losing on orders that are fraudulent.”
In addition to BOPIS, Klein says buy online, return in store programs also expose retailers to fraud. “Stores can leverage exchanges inside or give credit for the returns,” he says.
Consumers buying online and picking up their items at a store are already willing to accept some friction in exchange for safety and security, says Mike Nelson, vice president of North American identity at Mitek Systems.
“We learned that people are looking for the safe sale more than speed and convenience,” Nelson says. “Friction is safer than having something stolen off your front porch.”
For Nelson, the friction — which also helps protect retailers from theft and fraud — involves digital verification. “We automate the process of verifying identification,” he says. “It removes the retail associate from the process. There is no skill set involved.”
The idea is that store employees are not usually trained at verifying forms of identification that can be forged; scanning the customer’s image with a tablet is much more accurate at detecting fake IDs. The ID verification technology builds on Mitek’s innovation that allows people to deposit a check in a bank merely by taking a smartphone picture of the check and forwarding the image to the bank.
The verification system also works without humans to scan the images, such as when retailers stow the merchandise in lockers with interactive digital locking mechanisms.
“In 2012, electronic lockers were a relatively new development. Amazon and we were working on them,” says Georgianna Oliver, founder of Package Concierge. “Amazon was looking to go into convenience stores and other locations while we were starting to go into apartment houses.”
THE DIY CONSUMER
The landscape has changed considerably. Package Concierge is now heavily involved in BOPIS, providing lockers for retailers who want to provide customers with a quick and easy pickup option rather than storing merchandise in a back room or at a customer service counter.
“BOPIS is growing because millennials, Gen Z and people like myself are very self-serve,” Oliver says. “We want to do things ourselves, want to move quickly through the system and out the door. No need to talk to anyone. That’s what we sell. It’s all about speed and efficiency.”
With Package Concierge, retailers place the merchandise in lockers and customers are sent a notification with a barcode. When the customer shows up, all that is required is holding the phone displaying the barcode in front of the screen on the locker.
Oliver says many retailers use a second level of authentication involving a four-digit access code after the digital authentication. “There’s a sense of security knowing the item was secure in the locker,” she says. “We’re mostly concerned about theft. We make sure individuals using lockers are who they say they are.”
In addition to the interactive electronic lockers, Package Concierge creates what it calls an “overflow room,” where large items such as rugs and mattresses are held for pickup. The door to the overflow room requires the same barcode reader and four-digit access option that the lockers have.
In the early stages of the BOPIS boom, fraud associated with it seemed to be of the garden-variety ecommerce fraud. None of these experts, however, feel safe forecasting that it will stay that way.
David P. Schulz has been writing for STORES since 1982 and is the author of several non-fiction books.