Going from zero to 60 mph with fraud prevention strategy

Dec. 11, 2017
The rise of online fraud has outpaced regulations to combat it, especially in the auto parts industry, so it’s important to maintain a good reputation and to authenticate transactions and protect customers.

The proliferation of eCommerce and online marketplaces have influenced all industries and sectors – including the auto parts industry. Car enthusiasts and professionals alike spend a lot of time and energy finding the right parts at the best prices.

But as with any online sector, it’s important to distinguish the authentic from the fraudulent. Not only do auto parts retailers need to confirm that the orders they receive are legitimate, but consumers must also be vigilant to ensure they are buying from actual retailers, and not from shady shops selling counterfeit or stolen parts.

The rise of fraud has outpaced regulations to combat it, especially within the auto parts industry, so it’s more important than ever for auto parts manufacturers, retailers, and auto parts suppliers to maintain their reputations and ensure they have a means of authenticating transactions and protecting customers. 

Shifting from brick-and-mortar to online

While the auto parts industry is thriving, it’s still relatively slow to support online transactions.  According to a report from Automotive Aftermarket Suppliers Association and SAP, most auto parts manufacturers aren’t yet equipped to accept online orders from service repair centers or individual shops. The same report found that fewer than 10 percent can receive online orders from individual consumers.

As businesses and consumers continue to favor convenience by purchasing their auto parts online, there’s ample opportunity for auto parts suppliers and manufacturers to boost their sales. They’re catching up now, but becoming a target for fraud along the way.

According to the Financial Times, while U.S. auto sales grew only 1 percent per year over the previous decade, sales at the major aftermarket auto parts chains grew 7 percent per year. The industry sees high value orders with high shipping costs, and often involves many hours of labor.

Where consumer demand goes, fraud follows. According to Forbes, card-not-present fraud losses total to just under $22 billion and automotive/power sports accounts for approximately 1.5 percent of that, costing the automotive/power sports industry more than $300 million. This equates to almost 2 percent of total industry revenues that are lost.

As auto parts retailers build-up their online offerings, the customer experience becomes extremely important. With more options available to them, customers need to be continually reassured throughout the purchase process that they are transacting in a safe environment.

Chargebacks in charge

To meet consumer demand, some auto retailers have transitioned full steam ahead – without a fraud prevention strategy. Some companies have tried to increase their online offerings to entice consumers, but in the process open themselves to greater vulnerabilities, including expedited shipping, pick-up in-store, or loyalty programs. These can result in significant initial sales, that, unbeknownst to the retailer, are mired with fraudulent orders and open the business to more fraud.

These merchants won’t know that they were victims of higher fraud for several months. By the time chargebacks get fully reported, merchants are 60-90 days or more down the road. Furthermore, the lag in chargeback reporting means financial reports will show a distorted picture of a company’s performance. Those great sales and profits seen in December could actually turn out to be ugly losses in February, March and April.

Without a way to decipher authentic orders from fraudulent ones, auto parts merchants that are securing orders for $4,000 or $5,000 can find themselves in flood of chargebacks costing them thousands of dollars a month. While increased manual reviews may help to slow fraud, it’s ultimately inefficient for the business long-term.

Before implementing a fraud prevention strategy, one European auto parts retailer had one out of every five orders experience fraud, requiring them to manually review about 25 percent to 35 percent of orders. While it’s important to have some sort of manual review option available, it shouldn’t dominate your fraud-prevention strategy. Manual review is both tedious and costly, so it’s important to keep it to a minimum.

Ramping up the right security foundation

As aftermarket parts sellers are starting to make this transition from brick-and-mortar to online, it’s critical that they have the right fraud prevention and digital transaction security infrastructure in place that can respond to the risks of today and tomorrow. Find a solution that offers dynamic tools that can evolve along with fraud attempts and integrate easily to your business’ customer shopping experience. A one-off tool to solve today’s problems won’t be enough for a long-term eCommerce strategy. Fraudsters are constantly changing tactics to find something that works, and without tools that can adapt, they can ultimately circumvent security precautions.

Customization isn’t only for cars

The auto parts industry is all about customization – and that mentality should also transfer over to identifying the right fraud-prevention solution. Aftermarket sellers should be able to find a solution that can be tailored to the checkout experience they want to offer their customers and the unique aspects for their business. The fraud-prevention system they implement should not only be customizable but also offer features and functionalities that offer retailers greater control. There is an array of options that can make certain guarantees, such as eliminating chargebacks completely, but will offer you little to no control over your orders while costing significantly more.

Ecommerce, especially given the dominance of mobile shopping, within the aftermarket industry will continue to rise fast. To remain competitive, a comprehensive eCommerce offering, which includes a fraud-prevention strategy, is needed. Don’t let fraud ruin the gains and opportunities available online.

Subscribe to Aftermarket Business World and receive articles like this every month….absolutely free. Click here.

About the Author

Shane Westwood is a marketing program manager at Kount dedicated to the aftermarket, automotive and powersports industry. In this role he helps merchants succeed in the card-not-present fraud environment by minimizing fraud losses while simultaneously accepting more good orders. Westwood is a global representative of Kount and has extensive knowledge on helping aftermarket companies succeed. He attends numerous industry events and often speaks with leaders about their needs and trends.

Sponsored Recommendations

Variable Valve Timing (VVT) Training Series

Almost every new vehicle is equipped with VVT technology. This video explains the weak points in OE designs and gives you a complete overview of the replacement options available...

Cam & Crank Sensor Training Series

Today's advanced engines depend on accurate and consistent information from cam and crank sensors for performance, fuel economy and emissions, and not all cam and crank sensors...

Buying Your Next Diagnostic Tablet

When you last invested in a diagnostic tablet for your shop, did you consider it a potential gateway to increased revenue? Probably not. It’s likely you viewed it as a necessary...

Access Carside OEM Repair Data with MOTOR TruSpeed

Now available on all Autel MaxiSYS Ultra Series tools, MOTOR TruSpeed Repair delivers expanded OEM service and repair data within days of being published by

Voice Your Opinion!

To join the conversation, and become an exclusive member of Vehicle Service Pros, create an account today!