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Country Profile: The Guide to Ecommerce in
the United States

In the world of ecommerce, one market looms larger than the rest: The United States of America. 

Third in the world in population,
America’s 300 million-plus people
are among the wealthiest on the planet, and they’re primed to spend online.

America is the nation where ecommerce first took root ... and ecommerce continues to expand into every conceivable corner of the U.S. economy.

Are you ready to make it in America?

In this comprehensive guide, we’ll survey the U.S. market for ecommerce, highlighting trends relevant to foreign companies
looking to enter the market (many of these trends will also be of interest to existing U.S. brick-and-mortar stores who are expanding into ecommerce).

Then we’ll profile the buying habits of the typical U.S. consumer and illuminate some of the key benefits and opportunities of selling into the U.S.

We’ll also explore some of the challenges involved with ecommerce in the United States, including the risk of online payment fraud. Finally, we’ll offer some tips for preventing fraud when selling into the U.S. market.

Grab your stars and stripes, and let’s get started.

Ecommerce Shopping Habits and Demographics in the United States

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The age of online shoppers in America

As is true in many other markets, the most frequent ecommerce consumers in the U.S. are also among the youngest. According to Statista, about 20% of online shoppers in the U.S. are between the ages of 25 and 34. Shoppers between 35 and 44 account for another 17% of the market.

In the U.S. 20% of online shoppers are bettween the ages of 25  and 34. Another 17% of the market account for ages between 35 and 44

 

Older Americans do shop online, however:  Americans between 45 and 54 account for 15.5% of the market, and those between 55 and 64 and those over 65 account for 14.6% and 14.4%, respectively.

And how much are older Americans spending online? According to our most recent consumer attitudes survey, What Consumers Thought About Ecommerce, Fraud & CX in 2021, 47% of Americans over the age of 55 spend between $50 and $200 per month on online shopping; 30% spend over $200 per month. 

What Consumers Thought About Ecommerce, Fraud & CX in 2021 - Read the original search

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What (and how often) are people buying online?

Shopping online has become a habit. According to our survey, 52% of American consumers shop online once or twice a week. 

And they're buying just about everything: As of February 2021, ecommerce sales accounted for 69% of all book, music, and video sales, and 53% of all computer and consumer electronic sales in the U.S. The next two most popular categories for online shopping were toys and hobbies (about 45% of all sales) and office equipment and supplies (about 40%).

There are some categories in which ecommerce is still finding its feet, but growth is still taking place. In 2020, only 3.2% of food and beverage sales in the U.S. were online in 2020, as were less than 4% of automotive and auto parts sales. In 2021, ecommerce sales in each of those two segments now sits at 4.8%.

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Key Benefits and Opportunities of Selling in (or into) the U.S.

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The most obvious reason to do business in America is that the United States is the world’s largest economy, a position the country has held since 1871. In fact, the U.S. represents nearly a quarter of the global economy, thanks in part to its abundant natural resources, advanced technology and infrastructure, and large population.

Investopedia assessed the U.S. economy at $20.89 trillion in 2020, but that's not the only good reason to expand your ecommerce business into the United States.

First, internet penetration is excellent in the U.S. As of 2021, 90.8% of Americans were internet users. That number climbs to 99% among 18-29 year old consumers. 

CallOut3 - As of 2021, 90.8% of Americans were internet users

 

While the vast majority of Americans are internet users, Americans do not all access the internet the same way. 15% of American adults do not use broadband at home but rely on smartphones for their internet access. Again, that number is higher in the 18-29 set: 28% of them don't use broadband at home. 

Even among broadband subscribers, mobile internet is commonplace in America, with an 83% penetration rate in 2021. 

Almost all American millennials (95%) own a smartphone, as do 83% of consumers aged 50 to 64. 

What does this mean for ecommerce stores operating in America? It means if you don't have your mobile commerce site or app in order now, get started.

Willingness to shop across borders

While America is known for its domestic ecommerce behemoths (especially Amazon), Americans are not averse to shopping beyond the borders of their own country to secure a deal or access products they can’t get at home. And as the pandemic brought them shopping online more frequently, they started to explore other options: From January to mid-June of 2020, total U.S. cross border ecommerce growth hit 10.2%

What do Americans like to purchase abroad? Top categories include automotive; vehicle parts and accessories; clothing, shoes, and accessories; home and garden products; sporting goods; and jewelry and watches.

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The Challenges of Ecommerce
in America

Australia and Cross-Border Ecommerce

Willingness to shop across borders

As one would expect, the world’s largest economy and second-largest market for ecommerce attracts the biggest players. The competition is fierce for ecommerce customers in the U.S., and new entrants into the market must go up against giants like Amazon, who, because of their sheer scale, can offer perks like free two- or one-day shipping, convenient returns, and low prices.

On the other hand, rather than launching their own sites, ecommerce merchants can choose to do business on existing marketplaces like Amazon or eBay. The pros of selling on Amazon include access to hundreds of millions of potential customers, a readymade storefront that allows customers to review your products, minimal costs for web hosting, and less worry about logistics and shipping.

The downside of selling on Amazon is the competition and lack of control. As an Amazon merchant, you will not be able to tailor the shopping experience to your customers' needs and your brand image.

Tax complications

In the federal system of the United States, each state determines its own system of sales tax. Some states have no sales tax at all. In the 45 states that do charge sales tax, rules, rates, and regulations vary.

For example, some states waive sales tax for groceries, while others do not. Some states tax shipping charges, while others do not.

This can be confusing to merchants that are accustomed to working in more centralized systems. We recommend you consult with an expert on U.S. taxes before entering the American market.

Difficult logistics

The United States is not only one of the largest countries in the world by population. By landmass, the U.S. is fourth largest in the world.

Much of the country is populated, although quite sparsely in some areas. This can present some logistical challenges, especially to companies that aren’t familiar with American geography. 

Ecommerce Fraud in the United States

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Payment fraud is a global phenomenon. Card-not-present (CNP) fraud is especially on the rise, even as in-person fraud declines due to widespread adoption of payment card chip technology. Card-not-present fraud is expected to result in global losses of $130 billion between 2018 and 2023.

Naturally, the United States, with its wealthy residents and robust ecommerce economy, has become a prime target for online fraudsters, especially recently: U.S. ecommerce merchants reported a 140% increase in fraud attacks in 2020. 

Some reasons for rising CNP fraud rates in the U.S. include:

  • Delayed rollout of fraud-prevention measures, such as 3D Secure 2.0. (The first iteration of 3D secure never gained a significant foothold in the U.S.)

  • An increase in in-store returns. Fraudsters have learned to make fraudulent purchases online and then return the merchandise to brick-and-mortar stores for a refund.

  • An increase in “click-and-collect” fraud. “Click-and-collect” takes advantage of in-store pickup, an increasingly common option offered by ecommerce retailers. With in-store pickup, customers are not required to provide a shipping address, making it more difficult for businesses to validate transactions at the point of sale.

CallOut5 - For every dollar of fraud commited

The frequency of data breaches is also skyrocketing worldwide including in the U.S.: The Facebook data breach alone leaked data on over 32 million users. 

Each new incident exposes payment card information for thousands or millions of consumers to the risk of fraud.  Fraudsters build off the information they gain in data breaches to instigate account takeover attacks, compromising other customer accounts.

Industries & Regional Markets With the Highest Level of Fraud Risk

Fraudsters prefer to target products they can resell easily. So, the product categories that are the highest risk for fraud in the U.S. tend to be high value, high demand, and small enough to ship easily and cheaply.

ClearSale internal data allows us to classify product categories into risk groups, which are broken down in the chart below:

2-ClearSale Main KPIs and Risk Group

ClearSale internal data indicates that the U.S. states with the highest risk of fraud are Florida, New York, and Michigan. Within Florida, most of the fraud is concentrated around Miami, due to the high presence of freight forwarders. In New York, the borough of Brooklyn has the highest fraud rate.

Government response to fraud

Despite the high and growing rate of CNP fraud in the United States, the U.S. government has not made combatting fraud a priority. There are currently no U.S. equivalents to the European Union’s Payment Services Directive 2 (PSD2), a regulation that, among other things, requires an additional layer of fraud protection on electronic purchases known as Strong Customer Authentication (SCA).

However, ecommerce merchants should be aware of the California Consumer Protection Act (CCPA). Put into effect on Jan. 1, 2020, CCPA grants California residents certain rights concerning the personal information they share with for-profit organizations online (get more specifics here).

The California Consumer Protection Act applies to any merchant that meets certain criteria for doing business in California. Consult with an expert to determine whether your business must comply with CCPA.

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What Australians Shop for Online

How to Prevent Fraud When Selling into the U.S.

Ecommerce in Australia: CNP Fraud Facts

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Top payment methods

Payment fraud is a significant risk to ecommerce merchants (in the U.S. and everywhere else) for several reasons. There is, of course, the cost of losing merchandise and never getting it back. But there is also the cost of chargebacks to consider.

Chargebacks occur when consumers notice an unauthorized payment on their credit or debit account and ask their bank to reverse the charge. If the issuer determines the claim is legitimate, they will refund the payment and debit the merchant – usually with an additional fee.

Chargeback fees can range from $50 to $100 or more per transaction. The more chargebacks a merchant incurs, the higher their fees will be. In some cases, banks will remove a merchant’s ability to accept credit card payments entirely.

Another indirect cost of CNP fraud is the damage it can do to a merchant’s reputation.

American consumers tend to distrust merchants they feel will not handle their personal information securely: In our consumer attitudes survey, 42% of Americans are deterred from online shopping more by the possibility of scams, while 34% are worried the website might not have adequate security.

4 Options for Fraud Protection

How to Prevent Fraud When Selling in Australia

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1. Fraud filters

Typically, the first line of fraud defense for ecommerce merchants doing business in the U.S. market is the fraud filter. Fraud filters are provided by ecommerce platforms and are designed to identify potentially fraudulent orders and stop them from being processed.

Fraud filters can function a number of ways, such as by:

  • Limiting how many sales can be submitted to a website during a given time period.

  • Using an address verification service (AVS) to ensure shipping and billing addresses line up.

  • Flagging or blocking transactions that occur during specified timeframes.

  • Checking for errors with the card verification value (CVV) submitted.

  • Flagging high-dollar sales that fall outside the merchant’s typical range.

  • Looking for IP address mismatches

While these common filters can prevent a high amount of fraud, they may also stop even more legitimate transactions.

The risk of false declines

When legitimate transactions are caught up in efforts to prevent fraud, they are called false declines.

False declines are a risk anywhere merchants use automated fraud rules. In high-risk industries, merchants may tighten up their fraud rules, only to lose even more revenue to false declines.

According to the ClearSale survey:

63_w
of American respondents said they would not proceed with a purchase if they were asked to call customer service to confirm some data.
21_w
said that if a merchant declined their payment, they would not try again before moving on to another website.
41_w
said that if a merchant declined their payment, they would never shop with that merchant again.

When the cost of lost revenue, dissatisfied customers, a worsened reputation, and poor online reviews are taken into account, false declines can cost businesses much more than actual fraud (perhaps up to 13 times as much).

U.S. merchants lose nearly $118 billion each year to falsely declined transactions.

2. Manual review

An alternative to automatic fraud filters is manual review, which is just what it sounds like: a team of individuals reviewing each transaction (or a selection of transactions) to detect fraud.

Human fraud experts tend to be better than machines at understanding context. Trained fraud experts can look at each situation individually instead of blindly adhering to preset rules.

However, manual review is very time consuming and resource-intensive. A drawn-out manual review process can annoy customers who are eager to complete their orders.

3. Machine learning/artificial intelligence

Software that relies on machine learning or artificial intelligence (AI) can provide a fast and reliable way to screen out fraud. These applications rely on mathematical algorithms and data to identify fraud trends and patterns. Because no humans are involved, machine learning is scalable and consistent, applying the same level of scrutiny to every transaction.

Unfortunately, like “unintelligent” fraud filters, machine learning can be inflexible. Algorithms can also miss new types of fraud that haven’t yet made it into the algorithm’s database.

4. Fraud managed services

Fraud managed services is a “best of all worlds” approach that combines cutting-edge automated technology (including advanced fraud filters and machine learning) with expert manual analysis.

At no point is an order automatically declined. Instead, when the automated system flags an order, the order is passed on to the team of experts who use their knowledge of human behavior and the latest fraud trends to make a final call. The human analysts can flag new trends for insertion into the AI’s algorithm, thereby helping the machine learn faster.

The goal with this approach is to reduce or eliminate false declines entirely while providing a quick, seamless shopping experience to customers – all while staying one step ahead of the most sophisticated fraudsters.

The Effective Fraud Solution for Ecommerce in the U.S. Is ClearSale

A New Fraud Prevention Solution for Ecommerce in Australia

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At ClearSale, our fraud managed services solution combines advanced statistical and artificial intelligence technology with the world’s largest team of specialized fraud analysts to deliver a balanced, real-world approach that is unlike anything else in the American ecommerce market.

With ClearSale, ecommerce merchants receive:

  • Simple ecommerce integration. Our fraud protection solutions quickly integrate with all major ecommerce platforms via an easy-to-install plugin.

  • Near-immediate order approvals. Even our human analysts are fast.

  • Comprehensive protection against fraud. ClearSale’s Chargeback Insurance program offers 100% guaranteed coverage of all fraud-related chargebacks.

  • The highest approval rates in the U.S. (and anywhere else). Our system will never auto-decline an order.

  • An innovative approach. Our multitiered team approach to fraud prevention lets us continually calibrate our proprietary statistical model as new fraud patterns emerge.

ClearSale maind KPIs

With our headquarters nearby in Latin America, ClearSale knows the American market.

If you’re thinking about expanding the reach of your ecommerce business into the United States of America, get in touch with us today to talk about keeping your business, your reputation, and your customers safe from fraud.

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ClearSale Reviews

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"Quick fraud detection on all orders. Ease of use on the platform. Never had a chargeback."

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From the viewpoint of someone who has been the victim of credit card fraud

"We are in the Durable Medical Equipment supply industry and we use Shopify as our shopping cart. With Covid 19 we have seen a tremendous increase web traffic and online purchases. Prior to Covid 19 we had a number of fraudulent transactions that led to multiple investigations on Local, State and Federal levels all of which produced no returns only because the crooks were faster. This cost us in..."

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Amazing Company to work with

"Their customer service is the best. They are quick to respond and answer questions regarding orders that are denied."

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