The women’s footwear retailer launched more than five years ago under Nordstrom’s off-price HauteLook brand.
Twelve times more fraud exists on Internet transactions, and online retailers are paying credit card discount rates that are 66% higher than traditional retailer fees, says a new Gartner survey of more than 160 companies. Web merchants bear the liability and costs in cases of fraud, while credit card companies generally absorb the fraud for traditional retailers, as long as the retailer follows procedures and saves a physical signature on a credit card transaction receipt, it adds. Surveyed online retailers reported that their average credit card discount rate was 2.5% plus about 30 cents a transaction. The same average for traditional retailers is about 1.5% plus 30 cents a transaction, says Stamford, Conn.-based Gartner; therefore, a merchant may pay credit card processors $2.80 for selling a shirt online, but pay only $1.80 for the same transaction in the physical store.
Also, online retailers spend about four times more to resolve and process chargebacks than retailers do. And they must pay for Internet payment gateways and fraud detection, which can add another 50 cents to each transaction. Meanwhile, credit card companies have failed to offer online retailers a cost-effective solution for fraud prevention, Gartner says. "There is no incentive for a credit card company to break this unfair fee structure for e-tailers," says Avivah Litan, research director, Gartner Financial Services. "However, the credit card issuer that is bold enough to lower the fees online could create a real competitive advantage on the Web and possibly gain early market share among e-tailers and Internet shoppers. In the meantime, several savvy startup competitors are giving e-tailers alternatives to credit cards, such as processing that accesses bank accounts directly or via closed loop systems. At the current rates, those firms could give the card companies a run for their money."