Sneakers are a hot commodity, and an increasing preference for shopping online is fueling overall growth across this vertical. Industry leaders like Nike and Under Armour announced big gains in online sales last year, a big reason why the global athletic footwear market is projected to balloon to $220 billion by 2020. But this rapid growth presents new challenges to sneaker retailers, among them preventing Card Not Present (CNP) fraud.
When it comes to coping with the high rate of CNP fraud in sneakers, there’s no substitute for experience. Riskified provides fraud management services to several sneaker retailers, including Fortune 500 companies, and is familiar with the intricacies of safe and fraudulent online shopping patterns within the industry. We analyzed our data to compile a report for sneaker retailers, providing insights and best practices for detecting fraud while maximizing online revenue. In this post, I share some of the findings that appear in the full report.
Fraudsters Follow the Trends
In most industries, fraudsters choose their targets based on price. But when it comes to sneakers, fraudsters are more interested in trendiness; the more popular a model or brand, the more confident the fraudster is that she’ll quickly find a buyer on the secondary market.This pattern explains why running shoes tend to be much safer than basketball shoes. At an average price of $256, Adidas’ NMD line is far from cheap. Yet retailers can and should safely approve nearly 92% of orders for this line, making it a much safer shoe than the industry average. In contrast, Adidas Superstars are not particularly expensive ($92), yet orders for them are quite risky. Similarly, Nike’s line of Kyrie Irving basketball sneakers are currently among the riskiest on the market, their popularity spurred by Kyrie’s breakout performance in the 2016 NBA Finals.
Of course, sneaker trends change all the time, and retailers need to constantly track popularity in the sector to stay on top of fraud patterns; for instance if star point guard Chris Paul has a good playoff run in 2017, it’s reasonable to expect an increase in the popularity–and riskiness–of the Nike sneakers bearing his name.
Don’t Miss Out on Global Sneakerheads
In a sector as risky as sneakers, it’s natural for retailers to become risk averse and reject swaths of orders bearing risky indicators. Traditionally, one of the most frightening red flags on a sneaker order was a ‘risky’ shipping country. However, Riskified’s data shows that although shipping country should certainly be considered, retailers who blanket decline orders based on location are missing out on many legitimate customers.
Because the industry has become so global, sneaker aficionados are more than willing to shop cross-border if it means getting a good deal, or a pair not available in their home country. As a result, even the riskiest shipping destinations have huge amounts of legitimate orders. Imposing a strict filter on even a highly risky country like France means throwing out the 46% of orders that retailers should be able to safely approve. While retailers surely shouldn’t ignore shipping destination, they should understand that it should be considered in the greater context of the order.
Download The Full Report
These are just a couple of the insights included in our special report about CNP fraud in online sneaker sales. The full report includes stats and tips on sneaker reshippers, the rate of fraud associated with omni-channel shopping options like in-store pickup, how to view AVS mismatches and more. For more insights and fraud prevention best practices, download a complimentary copy of the full report.