Building a fraud-free business Amazon won’t compete with
Jay Amstutz credits his mother with driving Ohio Power Tool into the online sales business. “In 1999,” says the company’s president, “she just said to me ‘I think the Internet is a thing that people will be using. Let’s get on it!’” The site didn’t include ecommerce until 2003. “When we had our first site you couldn’t even buy anything,” says Amstutz. “It’s grown to more than half of our business.”
But with online sales came online fraud. “Over the years, it’s gotten way more sophisticated to the point where everything looks right, everything seems to be in line,” he says. “But then they try to do something [odd, like] re-route it mid-shipment. Or, they send it to another business that looks like a legitimate business.”
By 2009, distinguishing fraudulent orders from legitimate ones was taking hours out of Amstutz day and stressing out the two people in his shop whose job it was to screen fraud. “I think if Debbie was doing it she would spend an hour or two or more everyday looking at orders. The good orders would go through very quickly. But then we’d end up with a kind of a fraudulent order or suspicious order, and she’d need a lot of time for those,” said Amstutz. “It was really causing her stress and worry. She didn’t want us to lose money because she thought something was good. She didn’t want to make that call.”
“But with Signifyd there to support us – they say ‘this is good, no problem’ then Debbie says ‘ok.’ Those orders never even get to me so I’m not holding it up so we can get them out to customers faster, and they’re happier,” says Amstutz.
Managing Fraud on Their Own
Before signing on with Signifyd, Ohio Power Tool tried to minimize what it spent to contain fraud. “We had subscription services that we would use to look up people’s information and a lot of them would come to me to approve,” says Amstutz.
But the president says follow up could cost him a full day each week, or more. “It was a constant ‘make a phone call, wait for somebody to call back, and then I was in a meeting when the guy called back,” says Amstutz. “(And) there’s worry. Sometimes we’re sending product out that I didn’t check thoroughly… so it went out, and then it came back as fraudulent.”
“I think we also caused some frustration with some people that were legitimate customers where we may have denied people a sale – you know, not ship some stuff out, because it just looked suspicious – and so then we said, ‘ok, so you’re going to have to wire the money for this because you want to send this to another state. And they’re like ‘what? no, we’re not doing that.’”
In some cases, he said, legitimate same-day orders could be delayed two days. That could kill a sale, for example, for a driver that’s needed right away to make holes in concrete.
In the autumn of 2015, six months before signing on with Signifyd, Ohio Power Tool decided the fraudsters were too sophisticated for the company to handle on its own. The pivotal order was for four generators delivered in the New York City area that were sent, instead, to a fraudster’s home. “I think they got a hold of the freight company and said that they didn’t have a loading dock at that location and so they had to take it to a different location that was two blocks away. So then the shipping company directed it over there,” says Amstutz.
“It’s nothing that we would have picked up on. Nothing that if you ever showed it to me I wouldn’t have said ‘ok,’” says Amstutz. Two days later Ohio Power Tool got a call from the owner of the credit card. “So then we were frantically trying to get it stopped, but it (had) already been delivered.”
“That was when we said ‘we need to find a different solution.’” Amstutz says fraudsters will set up phony companies, websites, and domains. “We’ve seen things from universities that look like some totally legitimate university with a (purchase order) and everything on it is right except the website for the university (which ends with dot-com).”
Finding a Solution That Fits
“We had reviewed some other fraud solutions and it seemed like Signifyd was the most robust,” says Amstutz. “We like the idea that if fraud does happen we can get our money back from them.”
Ohio Power Tool was losing a half to 1% or $20,000 to $30,000, of all sales, Amstutz says. Today, he says, Signifyd enables Ohio Power Tool to avoid being complacent. “What we found is (fraud) kind of comes and goes. So, if we ever feel like ‘we’re doing really good and not having any fraud’ that is going to be the moment when you start getting a lot of them.”
“We found that if stuff gets through, you become a target for more stuff. And we don’t want to become a target so it’s better to just prevent it before it happens than to try to insure something. We got insurance after the fact, too, but we really wanted (to) prevent fraud from happening, prevent becoming a target, We don’t fraudsters to think ‘hey, this is an easy place to go get some free stuff.’”
Building on a Tradition of Customer Service
Jay Amstutz’s, dad, a former salesman for Ingersoll Rand, Inc., founded Ohio Power Tool 34 years ago after buying out one of his customers. Today the company sells everything online, from a pair of 99-cent safety goggles to a $15,000, hundred-ton hydraulic system complete with pumps, hoses, couplers and manifolds used to lift a house or a bridge.
“People are going to have questions, they’re going to have technical issues,” he says. “It’s really hard to configure those things. We’ve had guys that have been fixing them and selling them for 30 years or so,” says Amstutz who says his advantage over an ecommerce site like Amazon is that he can provide customer service with every sale. “It’s very difficult for them to sell that stuff.”
Most of the sales these days are power tools from big brands like Milwaukee, Rigid, Bosch, and Nahita. “We aim to service professional users – professional plumbers, professional electricians, people who work with concrete, people who lift very heavy things.”
He says fraudsters are likely to order a name brand like a Bosch jackhammer “and they would probably send it to a freight forwarder in Miami.”
Partnering with Signifyd
Ohio Power Tool signed up with Signifyd’s Complete Guaranteed Fraud Protection in May of 2016. “We had been using Signifyd before that but we only used it when there were questions, which was a problem. So we had used just their scoring ability with the On Demand service.”
“(Now) I don’t even see most of the stuff. The process is just much quicker. We just go in and see if Signifyd has approved it, and if they have, then we ship it.”
“When there are issues, we will review those,” says Amstutz. “We’re dealing with a lot of construction companies that may be on a job site, or building a building before there’s even an address for the building. We could be sending the order to a job trailer. I’m sure we provide some pretty unique challenges for Signifyd’s review team.”
Before Signifyd, Ohio Power Tool was considering adding another person to process online orders, but now they’re looking to hire another person to answer questions and provide customer service.
“Ensuring our people aren’t stressed out about stuff is good. I don’t really want to put undue stress on my people. We’re paying several thousand dollars a month to Signifyd and I’m happy to do so.”
“It just makes all of our orders process that much quicker,” says Amstutz. “Officially, we say our cutoff is at 1 o’clock for new orders each day, but really, if we get an order at 4 o’clock we can now process it and send it out the same day. And that helps our customers…we can serve all of them better.”
“Working with (Signifyd) gives us peace of mind and it also just helps us do our job better because we no longer have to worry fraud. We don’t need to lose time or money on bad orders and we can spend more time focused on good orders, processing things correctly and moving the business ahead – the way it should be done.”