Editors Note: This article was contributed by Ronen Shnidman from Justt
While many fraud solution vendors have not reported their full 2023 holiday shopping season fraud figures, eCommerce fraud was either significantly down or slightly up during the early holiday sales shopping period comprising Cyber Week, depending which fraud solution vendor’s reports you follow. Signifyd claimed a 20% drop in fraud pressure for U.S. sales across the company’s Commerce Network during the five days that followed Thanksgiving. According to company spokesperson Mike Cassidy, this matched a general trend that occurred throughout November with the year on year drop heavily influenced by a major fraud attack that took place in November 2022. According to Signifyd, an organized fraud ring last year made off with an estimated $660 million in goods from online retailers nationwide across the U.S. while attempting fraudulent purchases of more than an estimated $3 billion in products.
Meanwhile, Forter reported a 4% year over year increase in fraud pressure during Cyber Week, meaning the number of fraudulent transactions over total transactions slightly but noticeably increased on its Trust Platform. Forter did not respond to a request for comment from Merchant Fraud Journal; however, the discrepancy is likely explained by the different experiences of the different merchants using Signifyd and Forter’s anti-fraud solutions. The key takeaway from the numbers is that there was not a major increase in fraud attacks this year around the traditional start of the holiday shopping season relative to the total number of number of transactions processed.
In general, total online sales during the holiday period from November 1 to December 31 rose 4.9% year over year to $222.1 billion, according to an Adobe Analytics report cited by Reuters. Online sales figures for Cyber Week performed even better, rising 7.8% year on year to $38 billion, according to Adobe. Spending on Cyber Monday alone reached $12.4 billion, a 9.6% increase over last year. The total number of shoppers across websites and stores reached an all-time high of 200.4 million over the five-day period from Thanksgiving Day through Cyber Monday, according to the National Retail Federation (NRF).
There was a shift in how shoppers bought goods during Cyber Week in 2023. The number of in-store shoppers declined slightly, to 121.4 million from 122.7 million in 2022. However, the number of online shoppers grew, from 130.2 million last year to 134.2 million this year. Meanwhile, 73 million consumers shopped on Cyber Monday alone, down slightly from 77 million in 2022, according to NRF figures.
In addition to the continuing trend towards greater online sales at the expense of brick-and-mortar shopping experiences, the holiday sales period continued to lengthen this in 2023. According to the NRF, 55% of consumers took advantage of early holiday sales, and 35% specifically engaged in shopping during the week leading up to Thanksgiving. McKinsey and Company reported that 50% of holiday shopping began in October or earlier. Post-Thanksgiving sales were also expected to have increased as a PYMNTS Intelligence survey found that 57% of U.S. consumers planned to make a purchase in the weeks following Black Friday and through Christmas, up 2% from 2022.
This might explain a finding by Lexis Nexis Risk Solutions across their Digital Identity Network they saw a 33% increase in payment transactions during Cyber Week compared to a normal week. However, this compared to a 36% increase during the same period in 2022.
“I think part of that has to do with the fact that what we have seen is what we call a huge Amazon spillover effect,” Kimberly Sutherland, Vice President of Fraud & Identity Strategy at Lexis Nexis Risk Solutions, told Merchant Fraud Journal. “When Amazon has their Prime days, it causes an increase in shopping across many e-commerce merchants. Some of that behavior may have happened during other periods and not just limited to how it used to be years ago with only Black Friday, Cyber Monday.” The bottom line is that shoppers are searching for deals not only during Cyber Week and the traditional holiday shopping period is now longer.
Despite reports of muted consumer discretionary spending, demand was high on the shopping holiday. Spending was largely driven by new demand, not higher prices from inflation, according to an Adobe report cited in Digital Commerce 360. Online prices have actually fallen year over year, and were down about 6% in October 2023 over 2022.
The increase in sales; however, was driven by discounts at major brands. Some 55% of Cyber Week period purchases were driven by sales and promotions, according to the NRF. Meanwhile, 31% of consumers said they were convinced to make a purchase they were hesitant about due to a limited-time sale or deal.
“Our data shows that on Cyber Monday [there was a ] 46% increase in online sales at big box stores over last year,” Lexis Nexis Risk Solutions’ Sutherland told Merchant Fraud Journal. “And in our network we actually saw a 22% decline in [online sales at] luxury retailers. That doesn’t mean to me that people aren’t buying luxury goods necessarily, but that they are not buying them from luxury retailers from our observations.”
Perhaps unsurprisingly, due to high credit card interest rates and consumers looking to stretch their holiday budgets, BNPL usage hit an all-time high on Cyber Monday, with a staggering increase of 42.5% compared to last year, according to Adobe. BNPL online purchases totalled $940 million on Cyber Monday. Similarly, most BNPL providers reported double-digit growth in usage over Cyber Week.
In short, the holiday season was a major win for retailers appealing to cost-conscious shoppers, whether via discounting or BNPL financing. And on a macro level, the 2023 holiday shopping season proved to be a relatively manageable one in terms of fraud prevention, as compared with 2022.
