The rise of online shopping scams presents significant reputational risks for e-commerce businesses of all sizes if they don’t take proactive measures to help protect consumers. Last year, Aussie online shoppers lost more money than ever to scams, including various ‘trojan horse’ methods that imitate e-commerce retailers. The most lucrative months for scammers last year were May and June, when many retailers are advertising End Of Financial Year (EOFY) sales, although the number of re
reports to Scamwatch wasn’t significantly higher than the rest of the year.
So far this year, Australians have lost more than $1.2 million to online shopping scams, and over $92 million to scams overall, according to Scamwatch.
Trust issues
Scammers are adopting new technology, such as artificial intelligence, and more elaborate methods to steal from online shoppers, with copycat sites and advertisements difficult to distinguish from the real deal.
“Websites are easier than ever to spin up,” Lou Simpson, an e-commerce consultant, told Inside Retail.
It’s now possible to “spin up extensive multi-page sites, allowing fake websites to rank in Search Engine Results Pages (SERPs),” she added.
As more consumers fall victim to scams, the level of trust in genuine retailers, brands and marketplaces could be eroded.
Independent review body Choice found that 61 per cent of online scam victims interviewed in its new report Passing the Buck had lost confidence in doing financial transactions online.
Mal Chia, managing director at Ecom Nation, told Inside Retail, “The latest wave of online scams often involves highly sophisticated methods that blur the lines between genuine and fraudulent activities.”
“A recent study showed consumers trust traditional e-commerce platforms less than they did in 2022,” Chia added.
By default, “this leads to increased customer service costs as businesses have to deal with more security measures, customer complaints, and refund requests, ultimately impacting the bottom line,” he said.
The integrity of online transactions forms the cornerstone of e-commerce, which is why businesses invest heavily in cybersecurity measures and reporting fakes, Chia said.
In addition, online retailers should be educating customers about safe shopping practices, and collaborating with financial institutions and cybersecurity firms to stay ahead of scammers.
Faux websites
Increasingly, scam websites are popping up that impersonate well-known retailers – or create faux brands – to defraud online shoppers. These are known as ‘trojan horses’.
“Many of these websites offer luxury items such as popular brands of clothing, jewelry and electronics at very low prices. Sometimes you will receive the item you paid for but it will be fake, other times you will receive nothing at all,” a spokesperson for the Australian Competition and Consumer Commission (ACCC) told Inside Retail.
The information gained through faux sites and other forms of identity phishing could be used for ‘brushing’. This is where consumers receive unsolicited goods from online sellers who can boost their retail profile through fake self-written reviews, purportedly from the recipient.
“Another common scam is the subscription trap, where consumers sign up for what they believe is a one-time purchase or a free trial, only to find themselves locked into hard-to-cancel, recurring payments,” Chia said.
Social media has presented an easy way for scammers to reach consumers, by promoting fake websites and e-commerce businesses next to legitimate ones to create a false sense of consumer trust.
“Social media targeting with fake ads is an increasingly popular tactic, bombarding individuals with advertising across multiple platforms, to make it feel like a legitimate brand,” Simpson said.
The ACCC confirmed the trend of scammers using social media platforms to set up counterfeit online stores, which open for a short time, and sell fake branded clothing or jewelry, only to disappear after making several sales.
In 2023, Scamwatch received 21,352 online shopping-related scam reports, which resulted in losses of $7.17 million.
“The anonymity afforded by the internet plays into the hands of fraudsters, making it challenging to trace and penalise them,” Chia said.
Who’s footing the bill?
But while some experts believe online shopping scams are a critical concern and should be on the radar of e-commerce businesses, others say it’s a bigger deal in media newsrooms than corporate offices.
“I speak to so many retailers and it’s honestly not high on the radar of a lot of people compared to how big it is in the news cycle,” Nathan Bush, e-commerce expert and Add To Cart podcast director, told Inside Retail.
“I don’t know if that’s a good or bad thing. Most retailers I speak to are more worried about big corporations, marketplaces and even supermarkets ripping them off as opposed to scammers,” he added.
This is particularly the case with brands that have developed innovative and unique products and experiences.
“They put a lot of effort, time and money into getting the traction and the audience. Then as soon as it’s proven, it’s the same old story. Someone else does it for half the price because they’ve got the power of scale,” Bush said.
Invest, differentiate and listen
One way that e-commerce businesses can make it harder for scammers to imitate them is by investing in the details of their websites and customer service channels.
“If you’re investing in your brand, content and design it becomes easier to make a scam obvious,” Bush said. He also stressed the importance of “the environments you’re in as an e-commerce brand and your cadence of messaging”.
To get ahead of fraudulent activity, e-commerce businesses can build social proof by tapping into social media conversations.
“As an e-commerce business, you might be the last to know what people are saying and it’s more likely they’ll vent on social media than to you,” Bush said.
Another way legitimate businesses can set themselves apart from scam sites is through their payment options.
Bush noted that many dodgy operators are credit card only and won’t offer secure payment options such as PayPal, Apple and Google Pay, so having security standards and the latest payment methods is key.
“I’m working on a platform that’s custom-built. It’s 10 years old – that’s ripe for scammers to imitate. Whereas working with a trusted platform like Shopify Pay and Paypal Pay it becomes a lot harder to imitate,” Bush said.