Brands4Friends isn’t your usual online shop but instead a shopping club only accessible for registered members. Private Sale GmbH launched the online platform in 2007 in Germany and Austria and specialized in off-pricing, i.e. the sale of brand products at greatly reduced prices.
The main categories of products sold are fashion, beauty, living, and electronics. This subsidiary of eBay is based in Berlin-Kreuzberg and is known to be the market leader of online shopping clubs. In their most successful years the company managed to achieve a revenue between 120 and 140 million Euros.
Various studies from the last two years show that Purchase by Open Invoice has been the most popular payment method for e-commerce in the DACH region since 2020 and should therefore not be missing from any checkout of reliable German-speaking online stores.
This development was foreseen by Brands4Friends many years ago. That’s why they decided to integrate Purchase by Open Invoice into their checkout in 2017. It was clear from the outset that this payment method should not be set up as an in-house solution, due to it’s many inherent complications. Brands4Friends therefore set out to find a payment specialist to whom invoice purchasing could be outsourced.
The main arguments in favor of this outsourcing were the high risk of default for non-liquid customers, optimal protection against fraud attempts by cyber criminals and the high internal resources required for risk management. After a lengthy comparison of various payment providers, Ratepay was ultimately chosen, and we were able to integrate invoice purchasing with a 21-day payment term into the Brands4Friends checkout.
It was particularly important to achieve a high acceptance rate, i.e. the percentage of orders for which Purchase by Open Invoice is accepted following a real-time risk analysis, so that the order can be completed with binding effect. The aim here is to find the right balance between accepting as many buyers as possible and enabling a smooth customer experience whilst also protecting buyers from over-indebtedness and identity theft. All this ultimately has a positive impact on the retailer’s turnover, customer satisfaction and contact rates.
How we were able to continuously increase the acceptance rate
Ratepay’s Merchant Onboarding Team closely supports merchants and partners with the technical integration and also advises on the checkout on the website in order to achieve the highest possible conversion. As the quality of the customer data collected by the online store during checkout has a significant influence on the subsequent risk assessment by the payment provider.
If this data is incomplete or inconsistent in any way, the likelihood of unnecessary rejections increases – for example due to incorrect address entries. We try to avoid such frictional losses right from the start through close cooperation and recommendations for the checkout and also provide appropriate feedback in the event of validation errors. This is done via our API, which the online store can display to shoppers on the website so that they can correct their data if necessary and order successfully.
Brands4Friends initially went live in 2017 with preliminary risk settings based on empirical values that we, as a long-standing payment service provider, were able to derive from comparable contexts. After going live, it is important to monitor the risk settings and fine-tune them as soon as possible.
However, particularly in the case of credit rating settings, this can only be empirically verified after approx. 3-6 months. The duration depends on the dunning cycles as well as on whether a sufficient number of orders have already been received, to be able to analyze different customer groups and parameters.
Fraud prevention settings on the other hand, can be optimized much more quickly because most fraud patterns are identified promptly by risk management specialists due to unusual ordering behavior.
Fine-tuning the credit risk settings
In 2018 we went on to readjust the credit risk settings for the first time. The focus was on the following factors:
- Which transactions have been transferred to collection and have not been paid and how are these differentiated from paid transactions? Does the actual default correspond to the expected defaults or should settings for certain segments/parameters be changed retrospectively?
- Segments that, contrary to expectations, had lower payment defaults were “opened up” further. This means, for example, that they were able to order higher basket values on account with immediate effect.
Further credit risk settings in the following years
In the following years, i.e. from 2018 to 2021, we focused our risk adjustments on the targeted opening of customers with insufficient identification. This measure in particular resulted in a sustained increase in the acceptance rate despite the continued low level of payment defaults. While the acceptance rate at Brands4Friends was still 88% in 2018, it grew continuously to 93.2% in 2022.
The continuous work on the acceptance rate at Brands4Friends has paid off. Purchase by Open Invoice with such good acceptance rates has significantly advanced Brands4Friends’ e-commerce in recent years:
- Brands4Friends was able to measure higher average basket values shortly after the introduction of Purchase by Open Invoice.
- Furthermore, 30 % of all orders were soon invoice purchases.
- In the years 2020 to 2021, the total number of orders grew by a total of 10 percent.
“The close and continuous cooperation with our personal key account manager at Ratepay, the high level of our exchange and the recurring and professional analysis of all important factors were key factors for this great success.”
Account Manager – Brands4Friends
Benjamin Woodman, Account Manager at Brands4Friends, is delighted with this successful growth and the level of development that the shopping club has reached until today.
We are also pleased to have made a contribution to Brands4Friends becoming the market leader among German shopping clubs. And we are ready to ensure that this remains the case in the future.