Blog December 10th 2019

Black Friday & Cyber Monday: The True Cost Of False Declines This Thanksgiving

As another stressful Black Friday and Cyber Monday season finally comes to a close, retailers across the nation heave a collective sigh of relief. U.S. consumers spent a combined $16.8 billion online this year – a 19.6% increase from 2018 figures. An event that many online merchants spend months preparing for has been and gone almost as quickly as the leftover turkey: but are merchants taking the time to thoroughly scrutinize the period’s lost sales?

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Callum Godwin

Chief Economist

As many online merchants know, the perfect payments mix is about getting the right balance between high approval volumes and low fraud – easier said than done. Merchants spend time, money and resources smoothly guiding customers to the checkout page, only for transactions to unnecessarily fail. While it may be tempting to aggressively push for increased approval rates, this is risky and can often lead to a spike in fraud and other issues throughout the supply chain.

According to CMSPI estimates, for every $100m of online spend during the Black Friday and Cyber Monday period, online merchants lost an average of $2m in revenue to false declines. These declines occur when a legitimate customer with adequate funds attempts to make an online purchase but is prevented from doing so. CMSPI estimates that such declines accounted for over $330 million in lost sales for U.S. eCommerce merchants during the Black Friday and Cyber Monday period this year.

Toby McFarlane – Head of Ecommerce

“With around 52% of declined shoppers turning to a competitor to complete the sale, merchants aren’t just losing the initial sale revenue – they are likely to lose out on a significant amount of lifetime revenue from returning customers. “

Online retailers are constantly vying for market share, and these false declines could be detrimental to staying afloat in a highly competitive, growing market. These issues are particularly worrying for an industry that often operates on razor thin margins: and perhaps even more worrying is that many merchants are unaware they can do something about it.

Understanding your decline codes would seem like the first logical step towards improving approval rates, but 60% of decline codes are reported as ‘Do Not Honor’ by suppliers and offer little insight into trends or possible solutions. CMSPI estimates that less than 10% of sales lost to false declines during the Black Friday and Cyber Monday period were due to merchant error – meaning that the vast majority of those transactions were out of the merchant’s hands. Most false declines are related to friction in the actual payments supply chain, including inconsistent fraud rules; inefficient transaction routing; and a lack of proactive communication between all parties involved in a transaction. Despite this, many merchants believe false declines are their own fault.

As retailers look to boost sales throughout the holiday period, genuine customers with the desire and means to pay are being turned down by the inherent problems in the payments supply chain – and the icing on the cake is that merchants are actually charged a fee for losing customers.

But there is hope on the horizon. With an extensive database, CMSPI can benchmark your approval rates against market-leading retailers across a range of sectors and processors, ensuring you don’t lose out to false declines at any time of the year. By highlighting inefficiencies in your supply chain and working with your suppliers, we can minimize losses, boost your top line and improve your customer experience. Backed by proprietary software and a rich, global database, our team empowers merchants with the information and expertise they need to spark their supply chain to life – driving value direct to the top line.

See what Smarter Payments Intelligence can do for you.

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