Without a doubt the most popular post I’ve written was last years post about chargebacks. Like most retailers, we feel pretty helpless when it comes to chargebacks, and I think that resonates with people. Since the system at it’s core is very broken, retailers don’t have a whole lot of options. Any system you put in place to reduce chargeback fraud invariably creates issues for legit customers. Creating new problems for all customers when a very small few are causing the issues, without guaranteeing any higher success rate, is what makes us tread very carefully. Dave wrote a post about this recently and I commented on a system we’ve seriously considered implementing, and there are about ten other things we’ve considered, but have always decided to hold back for these reasons. The only thing we’ve done – which has made a big difference – is stop shipping internationally. Now that we’ve done that though, I don’t think we’re going to make any other sweeping changes.
Still, we always try to stop fraud in it’s tracks. Since we don’t ever win a chargeback case after it happens*, we try to stall suspicious orders in hope of having it still in our possession (or in the possession of FedEx) when we get the chargeback . Until yesterday though, we never actually stopped someone. Once, Greg we missed calling off delivery by minutes. He then tried calling the customer at the phone number they registered with and actually got someone on the phone, but they denied knowing anything.
Anyway, flash forward to yesterday. We finally got someone. Here’s my best account of the time line:
- Middle of last week a customer places an order for an abnormally large quantity of one product. His billing address passed verification (meaning that his billing address matched the billing address on his credit card) but of course he was shipping it to another address in another state. He was smart enough to give the person in the other state the same last name. He also paid an exorbitant amount for expedited shipping.
- Greg flagged it for all of those reasons. We did have the inventory to fill the order, but it would have left us with next to nothing for the product, so we likely would have wanted to hold the order for a week or two regardless. He put the order in our “pending” system and shot me an email asking my opinion.
- I replied “Hmm. His AVS and CSC both matched for his billing address. We could require that he ship the order to the billing address, which would pretty much 100% eliminate the possibility of fraud. When you email him to let him know they’re on backorder you could inquire as to what he’s using them for and if he’ll be ordering regularly so we can stock inventory accordingly. That might give us a little more insight. ”
- Greg contacted him and he replied quickly (less than a day). He said he ran a business and was reselling them (which might have been true), and that we could ship it to his billing address, but it would really suck that he would have to then ship it again. He was trying to guilt us into shipping it out.
- And it worked. We decided to finally ship it out on Monday.
- Later that afternoon, Greg received an email from someone with the same name as the buyer. The “real” customer never ordered with us, has had several other fraudulent charges on his card recently, has just canceled his card, and told us not to ship the order because it’s fraud.
- Greg called FedEx and had the package re-routed back to us. Scammer stopped.
Although we lucked into it in this case, we now have a new policy: large first time orders from people we don’t know must be shipped to a verified billing address. I think requiring this on every order is overkill. It might even be overkill to require it on every single first order. But on a big first order that’s not from a legit business this is a more than acceptable policy.
*in that post last year I wrote “Despite being able to provide tracking information to prove delivery for every single chargeback filed against us, we have lost all but one case.” I think I misspoke – I’m fairly certain that I confirmed later on with George that said “win” was a case of “blackmail” where the buyer rescinded the chargeback himself, which does happen from time to time.