E-Commerce Fraud Is on the Rise Leaving Retailers Vulnerable


“Several factors are making it harder for risk teams to spot fraudulent behavior during the pandemic, including changing consumer behavior,” said Jason Cheung, product manager of fraud at Digital River, a global commerce solution. “Customers are shopping online more frequently and at different times, which can trigger false positives within risk models.”

Other issues could arise from increased bulk buying, whether due to consumers trying to stock up on product or take advantage of discounts (bulk orders have traditionally been a red flag for fraudulent resale activity). Cheung recommends that merchants work closely with risk teams on any new feature or service, so that they can vet potential risks and improve their e-commerce fraud prevention.

Retailers may be tempted to cut costs on risk teams right now, but this could leave them vulnerable. A recent report by brand protection company Red Points found that 41% of brand respondents had observed an increase in cybercrime, with a majority of those experiencing damage to business reputation as a result. And 68% of respondents deemed e-commerce fraud prevention very important at this time, with a further 22% agreeing it was “somewhat important”.

Unauthorized Sales
To combat cybercrime, companies must be aware of the different risk areas within their business. Bill Snowden, VP of business development at G2, has noticed that unauthorized selling has increased due to the amount of product inventory currently locked up in the supply chain, estimated to be worth around $500 billion.

“We’ve seen a dramatic increase of overseas-based, third-party sellers opening new seller accounts in online marketplaces,” said Snowden. “China now represents over a third of all 3P sellers on Amazon. We expect this to be a release valve for ‘goods in process’ or ‘finished goods’ that were cancelled by U.S. brands and retailers.”

While this tactic helps free up space, it can damage brand reputation if items are sold below price or in unapproved markets — either by unauthorized sellers or authorized sellers that are opening up new, unverified accounts online. While not necessarily illegal, these sales can violate existing brand policies and weaken a company’s control over brand protection.

Counterfeit Products
Similar damage can be done through counterfeit goods, which consumers may find through trusted channels like Google.

“Counterfeit and false product claims are showing up in search results via legitimate search engines,” said Snowden. “These search results are either leading to websites that offer counterfeit product or websites that would take your order, take your payment and never ship the product.”

These scams have been particularly popular during COVID-19, due to consumers spending more time online and also wanting to believe in good deals, such as for PPE, said industry experts. The economic climate has also weakened the financial position of many consumers, who may be more susceptible to scams — or may commit friendly fraud themselves.


Read the full article in Footwear News.