51ÊÓƵ

“AÌýcustomer isÌýalways right” isÌýaÌýrule that many ofÌýusÌýhave learned byÌýheart. However, that’s not necessarily true, especially when itÌýcomes toÌýscammers.

While all customers should beÌýtreated with respect, there are plenty ofÌýscammers who take advantage ofÌýbusiness owners trying toÌýprovide quality service. That’s why every online seller should beÌýaware ofÌýcommon red flags andÌýtake steps toÌýminimize their risks.

Some scam methods originate from in-person shopping, while others are only f´Ç°ùÌýonline stores. The most common scams include refund abuse andÌýcredit card fraud.

Read onÌýtoÌýlearn more about theÌýmost popular types ofÌýscams andÌýhow toÌýprevent ecommerce fraud ¾±²ÔÌý²â´Ç³Ü°ù online store.

What IsÌýFraud?

Fraud isÌýanyÌýtype ofÌýdeception ´Ç°ùÌýmisrepresentation that isÌýused toÌýillegally obtain something ofÌývalue. InÌýtheÌýcontext ofÌýonline shopping, fraud can take many forms. Fraud can look like using stolen credit card information toÌýmake unauthorized purchases, posing asÌýaÌýlegitimate customer returning merchandise that was never purchased, andÌýmuch more.

Every small business owner should beÌýable toÌýidentify theÌýmost common types ofÌýshopping scams andÌýknow how toÌýprotect their store from becoming aÌývictim. Read onÌýtoÌýfind out how toÌýprevent ecommerce fraud.

Overpayment Scams

One ofÌýtheÌýmost common types ofÌýscams inÌýonline shopping isÌýoverpayment.

Overpayment happens when aÌýcustomer pays more than theÌýagreed price f´Ç°ùÌýanÌýitem, sometimes with aÌýfraudulent credit card, andÌýthen asks f´Ç°ùÌýaÌýrefund ofÌýtheÌýdifference.

There are three ways toÌýrecognize these scammers:

• You haven’t received anyÌýmoney. The customer claims that theÌýmoney isÌýbeing held until you return theÌýextra payment.
• The receipt looks ²õ³Ü²õ±è¾±³¦¾±´Ç³Ü²õ—t³ó±ð²â can send you aÌýfake one.
• The customer wants you toÌýsend theÌýmoney toÌýaÌýspecific bank account ´Ç°ùÌýuse aÌýwire transfer.

How toÌýPrevent It

AÌýsituation like this usually results inÌýyou chatting with theÌýscammer personally. AsÌýsuch, it’s hard toÌýmiss theÌýsigns once you’ve learned about this type ofÌýfraud. Here’s what you can doÌýtoÌýprotect your business from overpayment scams:

Use Trusted Payment Providers

First, always beÌýsuspicious ofÌýanyÌýpayments that are higher than theÌýagreed price. IfÌýaÌýcustomer requests aÌýrefund f´Ç°ùÌýanÌýoverpayment, beÌýsure toÌýconfirm that theÌýfunds were actually transferred toÌýyour account.

Second, make sure that you only accept payments through reputable payment methods, such asÌýStripe, Lightspeed Payments, PayPal, etc.

±õ´ÚÌý²â´Ç³Ü sell with 51ÊÓƵ byÌýLightspeed, you can choose from from all over theÌýworld. You can pick aÌýconvenient andÌýsecure payment provider available ¾±²ÔÌý²â´Ç³Ü°ù region, based onÌýyour preferences andÌýlocation.

±õ´ÚÌý²â´Ç³Ü suspect aÌýscam, you should never send theÌýmoney back toÌýtheÌýcustomer, especially not using cryptocurrencies, wire transfer, ´Ç°ùÌýprepaid cards. It’ll beÌýnext toÌýimpossible f´Ç°ùÌýyou toÌýget theÌýmoney back.

Limit Staff Members inÌýCharge ofÌýPayment Operations

±õ´ÚÌý²â´Ç³Ü are aÌýsolopreneur, this doesn’t apply toÌýyou.

However, ifÌýyou have aÌýco-founder, anÌýemployee, ´Ç°ùÌýeven aÌýfriend ´Ç°ùÌýaÌýfamily member who helps you with customer care, make sure everyone who has access toÌýpayments isÌýaware ofÌýscam protection methods.

Swapping

InÌýthis day andÌýage, you can buy aÌýfake copy ofÌýalmost ²¹²Ô²â³Ù³ó¾±²Ô²µâ€”o´Ú³Ù±ð²Ô f´Ç°ùÌýaÌýfraction ofÌýtheÌýprice. AsÌýsuch, it’s often quite hard toÌýtell theÌýdifference.

Swapping isÌýwhen someone returns aÌýproduct but instead ofÌýgiving you theÌýproduct they bought, they give you aÌýcheaper ´Ç°ùÌýolder product. This scheme can beÌýespecially dangerous f´Ç°ùÌýsellers ofÌýexpensive items.

Another common type ofÌýfraud isÌýwhen someone replaces aÌýnew product with aÌýbroken one andÌýtries toÌýreturn it. Especially ifÌýyou sell household appliances andÌýelectronics, you should watch out f´Ç°ùÌýthis scam inÌýparticular. Scammers will replace aÌýnew product with aÌýbroken one andÌýask f´Ç°ùÌýaÌýrefund.

How toÌýPrevent It

ItÌýisÌýnot easy toÌýfight “swappers.” AÌýcustomer may blame you ´Ç°ùÌýtheÌýcourier service f´Ç°ùÌýaÌýdamaged item. This scam can beÌýdifficult toÌýcounter ifÌýyou don’t have proof that itÌýwas inÌýgood condition when itÌýleft your hands. ToÌýavoid this, it’s important toÌýtake some precautions beforehand:

Check Products Before Sending Them toÌýClients

Record your product’s finest details soÌýthat you can identify anyÌýflaws ´Ç°ùÌýdifferences ifÌýtheÌýproduct isÌýswapped. Make sure your products don’t have anyÌýdefects ´Ç°ùÌýdamages before you ship anÌýorder. IfÌýselling electronics, always ensure that they work before shipping.

Also, keep documentation ´Ç°ùÌýproof that theÌýproduct was inÌýgood condition when itÌýleft your hands. This could include photos ´Ç°ùÌývideos ofÌýtheÌýproduct being packaged and/or shipped.

±õ´ÚÌý²â´Ç³Ü are sure you sent aÌýhigh-quality product andÌýyour customer claims theÌýopposite, you can provide theÌýdocumentation that proves itÌý´Ç°ùÌýcompare serial numbers onÌýtheÌýproduct andÌý¾±²ÔÌý²â´Ç³Ü°ù records. OrÌýyou can give them theÌýrefund without hassle but put this person onÌýyour blacklist soÌýthat they can’t shop ¾±²ÔÌý²â´Ç³Ü°ù store anymore.

Pack Orders Thoroughly

ToÌýprevent damage toÌýyour product during shipping, pack itÌýwell. This means using high-quality packing materials like bubble wrap, foam peanuts, ´Ç°ùÌýeco-friendly options such asÌýrecycled cardboard andÌýbiodegradable peanuts. Make sure theÌýbox isÌýsturdy enough toÌýprotect theÌýcontents inside.

±õ´ÚÌý²â´Ç³Ü are shipping electronics ´Ç°ùÌýother items that could beÌýeasily exchanged without you knowing, include tamper-proof packaging ´Ç°ùÌýsome other way toÌýensure that theÌýproduct cannot beÌýeasily swapped.

Record Stock

Keep track ofÌýyour inventory levels carefully. This will help you identify anyÌýdiscrepancies ifÌýaÌýproduct isÌýswapped out andÌýreturned toÌýyour store.

Use barcodes, universal product codes such asÌýUPC ´Ç°ùÌýGTINs, ´Ç°ùÌýcome upÌýwith your own product codes, such asÌý. You can add theÌýproduct’s number toÌýtheÌýorder receipt soÌýthat you can confirm theÌýproduct isÌýactually from you inÌýtheÌýcase that itÌýisÌýreturned.

Plus, with specific codes, anyone can check theÌýproducts’ ²¹³Ü³Ù³ó±ð²Ô³Ù¾±³¦¾±³Ù²â—a delivery person, theÌýpostal service, you, andÌýyour employees can all make sure it’s legit.

±õ´ÚÌý²â´Ç³Ü sell online with 51ÊÓƵ byÌýLightspeed, you can specify product codes when inÌýtheÌýproduct details. You can also display SKUs ¾±²ÔÌý²â´Ç³Ü°ù .

Learn more: How GTINs Can Power Your Ecommerce Business Across Platforms andÌýMarketplaces

Create aÌýReturn Policy andÌýInstruct Employees

ToÌýavoid anyÌýconfusion later on, have aÌýclear return policy inÌýplace from theÌýbeginning. This should include what types ofÌýproducts can beÌýreturned, their condition, asÌýwell asÌýhow andÌýwhere returns should beÌýsent. It’s also aÌýgood idea toÌýhave aÌýtime limit f´Ç°ùÌýreturns.

Your return policy must beÌý³¦±ô±ð²¹°ùâ€Â£´Ç³Ù only f´Ç°ùÌýcustomers but also f´Ç°ùÌýemployees who process refunds. Give clear instructions toÌýeveryone involved andÌýmake them follow them strictly. Think through theÌýwhole procedure, from determining theÌýlegitimacy ofÌýtheÌýreturn toÌýrefunding customers who have followed theÌýrules.

±õ´ÚÌý²â´Ç³Ür delivery person deals with returns, explain toÌýthem how toÌýtell anÌýoriginal product from aÌýfake one before returning theÌýproduct back toÌýyou.

Wardrobing

Wardrobing isÌýaÌýpopular scheme inÌýtheÌýfashion industry, especially among shops that sell evening gowns, accessories, ´Ç°ùÌýjewels. AÌýcustomer can order anÌýexpensive dress, wear itÌýtoÌýaÌýparty, andÌýthen return itÌýasÌýifÌýitÌýdidn’t fit.

While wardrobing may seem like aÌývictimless crime, itÌýactually causes significant financial damage toÌýbusinesses.

According toÌýtheÌý, f´Ç°ùÌýevery $1Ìýbillion inÌýsales, theÌýaverage retailer incurs $166Ìýmillion inÌýmerchandise returns. Moreover, f´Ç°ùÌýevery $100ÌýinÌýreturned products, retailers lose $10.30ÌýtoÌýreturn fraud.

Not only doÌýbusinesses lose money when wardrobers return clothes, but they also have toÌýspend time andÌýresources dealing with returns.

How toÌýPrevent It

AÌýprofessional wardrober can make worn clothes look unused, soÌýitÌýcan beÌývery hard toÌýexpose them. However, that doesn’t mean you should let things slide.

Call Customers Back

Confirm orders onÌýtheÌýphone toÌýask ifÌýtheÌýcustomer chose theÌýright size andÌýcolor. Personal attention can scare away scammers. You can also call them theÌýday after theÌýdelivery toÌýcheck ifÌýthey are satisfied with theÌýproduct.

Use Anti-Wardrobing Tags

Anti-wardrobing tags, ´Ç°ùÌýreturn tags, allow aÌýcustomer toÌýtry onÌýaÌýpiece ofÌýclothing but are hard toÌýconceal while wearing. Once such aÌýtag isÌýremoved, it’s hard ´Ç°ùÌýimpossible toÌýput itÌýback.

State ¾±²ÔÌý²â´Ç³Ü°ù return policy that theÌýtag must not beÌýremoved ´Ç°ùÌýdamaged f´Ç°ùÌýproducts toÌýbeÌýeligible f´Ç°ùÌýreturn andÌýrefund. This way, you’ll deter wardrobers while still allowing honest shoppers toÌýreturn aÌýproduct that didn’t fit.

Think Through Your Refund Policy

It’s likely people will shop again atÌýtheÌýstore which accepted aÌýproduct back without aÌýproblem. However, inÌý2021, worldwide reported noticing anÌýincrease inÌýrefund abuse.

Making your return policy aÌýbreeze doesn’t mean letting scammers take advantage ofÌýyou. Specify theÌýconditions f´Ç°ùÌýaÌýreturn andÌýrefund: limit theÌýreturn period, give aÌýlist ofÌýdocuments f´Ç°ùÌýpurchase confirmation, andÌýask them toÌýfill out aÌýrefund form.

You can also decide who pays f´Ç°ùÌýshipping expenses inÌýcase ofÌýaÌýreturn. One great way toÌýdeter returns isÌýbyÌýmaking shipping costs theÌýcustomers’ responsibility. Paying shipping fees creates aÌýhassle f´Ç°ùÌýscammers.

Also, check out your local laws toÌýsee what protections you have asÌýaÌýbusiness owner. For example, , customers can’t return made-to-order ´Ç°ùÌýclearly personalized products.

Pretending theÌýOrder Didn’t Arrive

Scammers may take advantage ofÌýpostal services, too. AÌýcustomer might receive theÌýorder but act asÌýifÌýthey didn’t, then request their money back. IfÌýtheÌýstore can’t prove that theÌýproduct was delivered, they have toÌýprovide aÌýrefund.

How toÌýPrevent It

ItÌýisÌýnot that difficult toÌýprove theÌýproduct was delivered. You can:

Track Parcels

Most postal services provide tracking numbers. ±õ´ÚÌý²â´Ç³Ü use aÌýmajor shipping provider, you can check ifÌýtheÌýorder was received onÌýtheÌýcarrier’s website. This way, noÌýone will beÌýable toÌýtrick you ´Ç°ùÌýpretend that they didn’t receive theÌýorder.

Providing your customers with tracking numbers f´Ç°ùÌýtheir orders not only helps toÌýprevent fraud but also improves theÌýpost-purchase experience ofÌýyour store. ItÌýmakes theÌýshipping process transparent. Plus, you’ll have fewer “Where isÌýmyÌýorder?” questions ¾±²ÔÌý²â´Ç³Ü°ù inbox.

±õ´ÚÌý²â´Ç³Ü sell online with 51ÊÓƵ byÌýLightspeed, you can soÌýthat your customers can get real-time updates about their purchases onÌýtheÌýcarrier’s website. You can also use theÌýAftership ´Ç°ùÌýTrackFree app toÌýtrack all ofÌýyour shipments inÌýone place, automatically notifying customers ofÌýdelivery updates via emails ´Ç°ùÌýSMS notifications.

Chargeback Fraud

Chargeback fraud, also known asÌýfriendly fraud, which occurs when aÌýrightful cardholder places anÌýorder andÌýthen pretends that their card was stolen. Often, friendly fraud can look believable andÌýhonest, soÌýit’s hard toÌýtell when it’s happening.

Typically, chargeback fraud will occur after theÌýproduct has already been shipped. AnÌýonline store will get aÌýrefund request from theÌý“true” cardholder, who says that itÌýwasn’t them who bought theÌýitem.

IfÌýtheÌýbank takes theÌýcustomer’s side, you have toÌýpay theÌýmoney back. AÌýseller suffers double damage because aÌýproduct isÌýlost, andÌýmoney has toÌýbeÌýpaid toÌýtheÌýscammer.

Sometimes chargebacks doÌýhappen because ofÌýhonest mistakes. For example, ifÌýyou sell products onÌýaÌýsubscription basis, some customers might place aÌýsubscription order instead ofÌýaÌýone-time purchase byÌýmistake. InÌýthis case, they might request aÌýchargeback.

ToÌýprevent confusion, ensure that you clearly state theÌýsubscription terms onÌýtheÌýproduct page.

±õ´ÚÌý²â´Ç³Ü sell subscription-based products with 51ÊÓƵ byÌýLighstpeed, all theÌýnecessary details about setting upÌýaÌýrecurring payment are displayed automatically onÌýtheÌýproduct pages ofÌýsubscription items.

How toÌýPrevent It

The best way toÌýavoid chargeback fraud isÌýbyÌýhaving strict verification measures inÌýplace before fulfilling anÌýorder. Follow these tips toÌýprevent chargeback fraud:

Confirm Orders Before Shipping

IfÌýcustomers confirm their order byÌýphone ´Ç°ùÌýemail, they can’t claim that they didn’t buy it. Ensure toÌýclearly describe theÌýpayment terms when confirming theÌýorder.

However, this type ofÌýfraud prevention works best with smaller stores ´Ç°ùÌýones that sell personalized products. ±õ´ÚÌý²â´Ç³Ü don’t have aÌýlot ofÌýemployees but offer aÌýhuge inventory, confirming each order will take too much time.

Luckily, there are other ways you can avoid chargeback fraud.

Accept Cryptocurrencies

Accepting cryptocurrencies eliminates chargeback fraud. Once aÌýclient has paid f´Ç°ùÌýyour product ´Ç°ùÌýservice, theÌýmoney isÌýandÌýwill stay ¾±²ÔÌý²â´Ç³Ü°ù account. Cryptocurrency payments are final. Unlike credit card payments, transactions cannot beÌýreversed.

Once aÌýperson pays with cryptocurrency, they can usually get their money back only ifÌýtheÌýperson they paid sends itÌýback. SoÌýifÌýyou suspect aÌýchargeback fraud, you won’t beÌýforced byÌýaÌýbank toÌýmake aÌýrefund.

±õ´ÚÌý²â´Ç³Ü sell online with 51ÊÓƵ byÌýLightspeed, you can such asÌýBitcoin, Ethereum, Dogecoin, etc., ¾±²ÔÌý²â´Ç³Ü°ù online store from customers all over theÌýworld.

Purchase with aÌýStolen Card

Scammers often pay f´Ç°ùÌýorders inÌýonline shops with stolen cards. InÌýtheÌýUS, credit card fraud isÌý ofÌýidentity theft.

How toÌýPrevent It

±õ´ÚÌý²â´Ç³Ü accept credit cards, make sure your payment gateway has theÌýfollowing anti-fraud technologies:

Customer Identity Authentication via SMS (3D secure protocol)

3DÌýprotocol minimizes theÌýrisk ofÌýstolen card fraud. Here’s how itÌýworks: one more authentication step isÌýadded toÌýaÌýpurchase payment inÌýanÌýonline store. Typically, itÌýisÌýaÌýrequest toÌýprovide aÌýcode sent toÌýtheÌýcustomer’s phone. Visa, Mastercard, andÌýAmerican Express use this asÌýaÌýway ofÌýtransaction protection.

Fraud Monitoring andÌýDetection Systems (AntiFraud)

AÌýfraud monitoring system checks transactions automatically. IfÌýitÌýlooks suspicious, theÌýsystem requires aÌýmanual check ´Ç°ùÌýcancels theÌýtransaction.

Transactions are checked inÌýmany ways, from theÌýcomputer’s IPÌýaddress toÌýaÌýcard’s payment statistics. The aim ofÌýtheÌýsystem isÌýtoÌýconfirm that aÌýuser isÌýaÌýtrue cardholder who normally shops atÌýthis online store.

For example, ifÌýaÌýtransaction isÌýperformed inÌýtheÌýUSÌýbyÌýaÌýUSÌýcardholder, andÌýtheÌýorder’s sum doesn’t exceed theÌýaverage order value (AOV) ofÌýaÌýshop, then theÌýtransaction will beÌýapproved. IfÌýaÌýcustomer tries toÌýpay f´Ç°ùÌýanÌýorder that exceeds theÌýAOV byÌýaÌýsignificant amount, then theÌýtransaction isÌýconsidered suspicious.

AntiFraud can beÌýused even ifÌýyou don’t have aÌýpayment provider. Create aÌýportrait ofÌýyour typical customer: age, AOV, location. IfÌýsome features don’t match with your portrait ofÌýyour typical customer, it’s best toÌýconnect with theÌýcustomer andÌýconfirm theÌýorder.

Cash Fraud

Along with other payment methods, you can allow cash payment ¾±²ÔÌý²â´Ç³Ü°ù online store. Unfortunately, scammers take advantage ofÌýthat, too.

For example, aÌýscammer can ask you toÌýmeet them inÌýtheÌýstreet (so that they can run away ifÌýexposed). They pay, you count theÌýmoney andÌýnotice it’s not enough. The scammer apologizes, takes money back, supposedly adds theÌýlacking banknote, andÌýgives itÌýback toÌýyou. OfÌýcourse, theÌýsum isÌýwrong again because theÌýscammer has already taken some money out ´Ç°ùÌýreplaced them with fake banknotes.

±õ´ÚÌý²â´Ç³Ü count theÌýmoney again andÌýdetect theÌýscam, aÌýcustomer will try toÌýleave asÌýfast asÌýpossible. But ifÌýyou don’t count theÌýmoney again, it’ll beÌýalmost impossible toÌýfind andÌýblame theÌýscammer.

How toÌýPrevent It

±õ´ÚÌý²â´Ç³Ü decide toÌýaccept cash payments, you must treat itÌýwith theÌýsame seriousness asÌýonline payments:

Have Strict Instructions f´Ç°ùÌýCash Payments

It’s best toÌýaccept cash payments only f´Ç°ùÌý. Ask your team toÌýavoid meeting inÌýtheÌýstreet, lobbies, andÌýother places where it’s easy f´Ç°ùÌýaÌýscammer toÌýrun away.

Also, ifÌýyou often accept payments inÌýcash, consider investing into aÌýcounterfeit money detector.

How toÌýReport Fraud

The most common customer fraud isÌýtheÌýabuse ofÌýpayment f´Ç°ùÌýproducts, like overpayment. Watch out f´Ç°ùÌýsuspicious orders. ±õ´ÚÌý²â´Ç³Ü are inÌýanyÌýdoubt about aÌýtransaction, make sure toÌýgather asÌýmuch information asÌýpossible toÌýestablish your customer isÌýlegitimate.

You might also beÌýwondering how toÌýreport scammers. ±õ´ÚÌý²â´Ç³Ü believe you have been theÌývictim ofÌýfraud, you should first contact theÌýcredit card company toÌýreport theÌýfraudulent activity, like ifÌýyou believe aÌýpurchase was made with aÌýstolen card. You should also file aÌýpolice report ´Ç°ùÌýcomplaint toÌýlocal authorities.

ToÌýSum Up

Customer fraud can beÌýcostly andÌýdamaging not only toÌýyour business, but theÌýretail industry inÌýgeneral. Retailers have toÌýcompensate f´Ç°ùÌýtheÌýlosses caused byÌýscammers, which may lead toÌýincreased prices andÌýcost-cutting. That, inÌýturn, can result inÌýmore expensive products ´Ç°ùÌýjob cuts.

Luckily, byÌýtaking some simple precautions, you can minimize your risks andÌýhelp protect your business from fraudulent activity. Remember theÌýinformation weÌýshared inÌýthis article theÌýnext time you have aÌýsketchy order, unreasonable return request, ´Ç°ùÌýanyÌýother suspicious behavior.

Ìý

• Data Privacy inÌýEcommerce: Emerging Trends andÌýBest Practices f´Ç°ùÌý2024
• The State ofÌýEcommerce Payment Security
• How toÌýUse HTTPS Protocol andÌýSSL Certificates toÌýProtect Your Online Store
• Ecommerce Fraud: How toÌýProtect Your Store From Online Shopping Scams
• How ToÌýProtect Your Online Store From Cyber Threats