Top scams that target eCommerce sellers — and how to avoid them

Online fraud is nothing new. But with the growing popularity of online shopping, fraudsters have a new target — sellers. In fact, the latest Juniper Research report notes that global online payment fraud losses are expected to rise by more than 50 percent by 2025, including a 52% growth in merchant losses to scams.

With many scams that target global payments and products, eCommerce sellers looking to scale their business to international markets need to be especially aware of fraud. To avoid losses, understand the top eCommerce scams targeting sellers — and how to avoid them.

1. Counterfeit product scams

While we might think about counterfeits as knock-off handbags sold on the street, the fact is that fake products and materials can be found in nearly every part of the market. In fact, counterfeits have become the world’s #1 criminal enterprise. Not only will you receive inferior products from a counterfeit supplier, but you might also be on the hook for damages if the fake products you purchase are found to be dangerous or harmful to your customers.

How can you avoid counterfeit product scams?

• Beware of price offers that are too good — and too low — to be true.
• Don’t work with vendors who don’t have a verified physical location. Scammers love to use fake addresses and P.O. boxes to remain anonymous.
• Research your suppliers. Make sure you check online scores, reviews, social media sites, and forums for any good — or bad — feedback about a potential supplier.
• Request information and documentation. When working with suppliers, ask for specifics: Where do you purchase your components? How do you verify that your components are reputable? Do you have a formal grading process for products? Ask for documentation for any and all of these questions. A reputable supplier should be able able to provide records for their inventory.
• Protect your transactions. Use a global payments partner to screen your payments and keep transactions transparent.

2. Credit card scams

Credit card scams take many forms, but there is one very common way that eCommerce sellers can be victims of fraud. This happens when scammers use stolen credit card data to purchase your goods. Because online sales don’t require that a physical card be present at checkout, eCommerce sellers are hit hard by this scam. When it happens, not only can you lose the product that you shipped to the scammer, but you may be on the hook for refunding the purchase to the true cardholder. In some cases, you may even have to pay a chargeback fee.

How to avoid credit card scams:

• Keep your shopping cart software up-to-date. Make sure the way that you accept payments is as secure as possible.
• Collect comprehensive information at checkout. By requiring additional information beyond a credit card number — like full address and phone number — you can prevent charges from scammers who only have limited information. Likewise, pay extra attention to purchases that have separate billing and shipping addresses.
• Keep an eye out for suspicious email addresses. Email addresses that contain a string of letters and numbers rather than a more standard identifiable name or phrase are a red flag for fraudulent purchases.
• Regularly review transactions and statements. It’s not enough to just assume that each transaction is legitimate. A savvy business owner regularly reviews their transactions and statements to look for suspicious activity.
• Use a global payments partner. A global payments partner will screen and verify your transactions.

3. Dropshipping scams

Dropshipping is when a store or seller uses a third party to fulfill orders so that they don’t have to keep the products they sell in stock. Instead, the third party fulfills the orders made to the seller from a different location. Dropshipping itself is a common and legitimate business industry. However, there are many dishonest — and sometimes outright fake — dropshipping companies that prey on global eCommerce sellers looking to scale their business in the international market. These companies can charge extra fees, ship fake products, or even take your money without shipping anything at all.

How to avoid dropshipping scams:

• Do your homework. This means researching the dropshipping company online, reading reviews, and checking out their social media sites. Ask questions in eCommerce seller networks to see if anyone else has worked with them. To verify and monitor companies located in China, use the Nuna Network to research potential vendors.
• Get to know your representative. A reputable company will have a reliable point of contact with a name and phone number — not just a generic email address.
• Avoid companies that ask you to pay extra fees. These can be upfront or asked for on a weekly or monthly basis, sometimes posing as “access” fees that allow you to buy in bulk.

4. Chargeback fraud

A seller purchases from your store, the payment goes through, and you ship the product. But then, several weeks or even months later and despite not having returned the product, a payment processor is asking you to return the purchase amount to the issuing bank. This is chargeback fraud, also known as “friendly fraud.” When this happens, the scammer relies on the fact that the seller doesn’t have the time to research or dispute every single return claim — and it works more often than you might think.

How to avoid chargeback fraud:

• Clearly define your return policy and make sure it is publicly posted. This will help you dispute claims.
• Use shipping tracking methods. Being able to prove that your product was delivered is key.
• Use a global payments partner. A global payments partner prevents unauthorized and fraudulent payments and makes all transactions transparent.

Stay secure with a global payment solutions partner

When it comes to eCommerce scams, the majority of victims never get their money back. That’s why you should take the steps to make your transactions secure. A global payments solution partner like LianLian Global can help by:

• Screening and verifying transactions
• Making payments transparent
• Preventing unauthorized transactions and fraudulent payments
• Encrypting information to keep data safe
• Operating with trusted financial partners

Scale your eCommerce business today with LianLian Global.