Ecommerce has given retailers more opportunities than they could have imagined. No obscure leases; no geographical limitations. All it takes is a website, an ecommerce platform, and a groundbreaking idea to jump start their business. And when they earn a loyal customer base online, retailers are given an opportunity to expand their business into the physical world. This has been a theme in a retail segment called ‘clicks-to-bricks,’ and this post will explain the benefits it can provide to dispute management.
Who Is A ‘Clicks-to-Bricks’ Retailer?
According to research firm JLL, clicks-to-bricks is a growing phenomenon of retailers who open up physical locations. This retail segment generally has four phases in its lifecycle.
Which Retailers Represent the Clicks-to-Bricks Retail Segment?
Retailers who sell apparel and accessories currently represent the majority (74.3%) of clicks-to-bricks retail segment. JLL found that Furniture & Houseware retailers represent 11.4% of this segment.
Across all clicks-to-bricks retailers, approximately 59.5% of them establish their first pop-up in New York City, specifically in SoHo. Los Angeles (16.2%) and Toronto (5.4%) come in second and third place, respectively. Given that SoHo is a popular fashion district with heavy foot traffic, it makes since for apparel and accessory retailers to test their presence there first.
The mutual benefit that retailers and customers can earn from clicks-to-bricks is direct contact. Basically, customers who visit pop-ups will have a chance to see, feel and try on the product they saw online. And retailers will earn some brand equity, earn additional data about their customer base, and test their dispute management methods for card-present transactions. The last benefit will be great to improve upon as retailers establish permanent locations.
But for those within Phase I of the clicks-to-bricks lifecycle, here some dispute benefits retailers can earn from pop-up stores.
Benefit 1: Learn How to Handle ‘Not As Described’ Disputes In-Store
A Not-As-Described dispute will be relatively similar in a card-present and a card-not-present environment. However, the compelling evidence involved to disprove it will differ significantly. For one thing, it will be hard for customers to claim a product was “not as described” if there is proof they actually engaged with the product in-person.
Pop-up stores give retailers a home field advantage in challenging this dispute. After all, pop-up stores are basically temporary storefronts. So the goal is not only be as transparent as possible when showcasing your product.
Furthermore, pop-ups give retailers an advantage in their chargeback responses. Whether the customer buys the product at the pop-up location or buys it later online, the data collected at the pop-up can used as compelling evidence.
For example, retailers will (or should) collect customer-consumer feedback on their pop-up store. While this data is primarily used for market research and marketing, it is also documented proof that the customer visited the pop-up store and (if applicable) made a card-present transaction.
Some of compelling evidence can include, but is not limited to:
- Feedback transcript
- Customer or consumer’s email address
- Customer or consumer’s social media content (i.e., geo-tags, photos, user handles)
- Copy of the transaction receipt
Here are some Not-As-Described disputes that puts the evidence above into great use:
|Reason Code||Card Network||Description||How to Respond|
|C31||American Express||Goods/Services Not As Described|
|RM||Discover||Cardholder Disputes Quality of Goods or Services|
|4853 (with Not As Described/Defective modifier)||Mastercard||Cardholder Dispute|
|13.3||Visa||Not As Described or Defective Merchandise/Services|
Benefit 2: Puts a Face on All Types of Fraud
Another benefit that pop-ups offer is associated to the direct contact among customers. More specifically, it helps retailers curtail three of the most common fraud disputes. This refers to friendly fraud, chargeback fraud and true fraud.
Pop-Ups vs. Friendly Fraud
Phase I in the clicks-to-bricks lifecycle is primarily focused on brand equity. This involves putting the retailer’s brand on display and make it recognizable on site. This in turn can help (constantly) remind customers of what retailers will soon withdraw funds from their account.
Moreover, the retailer’s brand and name should be recognizable on the customer’s next billing statement. In a way, the customer’s experience at the pop-up store, and the merchant billing descriptor that follows, should make it harder for them to not recognize the transaction.
That will reduce the likelihood of friendly fraud.
Pop-Ups vs. Chargeback Fraud
Every experiential campaign will invite some malicious behavior. In terms of chargeback fraud, some customers will visit these pop-up stores in order to buy the product and falsely dispute the charge. The end goal for chargeback fraudsters can range from earning a refund without the retailer’s involvement to reselling the disputed product. (We have another post that explains Chargeback Flip Fraud.)
Chargeback fraud can masquerade any type of dispute, including fraud disputes. Fortunately, not all fraud disputes are a result of true fraud. So it is recommended to submit a chargeback response even if retailers believe their chances of winning are slim.
Retailers are always welcomed to scroll through our main reason codes page and search for the exact reason code that affects them.
Pop-Ups vs. True Fraud
True fraud is when customers have legitimately been a victim of fraud, and they dispute the charge. The customer’s account will also be closed, and their issuing bank will issue a new card.
While winning against true fraud is difficult, preventing true fraud from pop-up stores is possible. For starters, pop-up stores allow retailers to accept card-present transactions. So retailers should establish fraud prevention methods as if they are running a permanent storefront. This will at least give them practice to prevent true fraud when they actually establish a permanent storefront.
Here are some tips to prevent true fraud at pop-up stores:
- EMV-Chip/NFC Transactions: Ask for the customer’s ID in order to verify the name on the credit/debit card.
- Authorization Holds: Retailers can place authorization holds before settling the funds in the transaction. An extra day to verify the customer and cardholder information can make the difference of true fraud to occur. (Learn more about authorization holds right here.)
Retailers can learn more about these types of frauds in our latest Ebook, The Three Faces of Fraud. Jump here for more details.
It is exciting to see how clicks-to-bricks are helping retailers break ground in the physical world. But this lifecycle still requires retailers to have an in-store game plan, which includes a method for in-store dispute management. Some tactics are as simple as merchant billing descriptors (to prevent friendly fraud) and others like chargeback responses require more documentation.
As long as retailers have the right tools in place, their methods will no doubt adapt as their business carries on from the first pop-up to the latest permanent storefront.