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With the recent surge of online shopping sites, eCommerce fraud is rapidly rising. In 2022, various scams involving platforms like Shopify cost businesses about $41 million in losses [1]Mastercard. “eCommerce fraud trends and statistics merchants need to know in 2024.” Accessed June 14, 2024.. As a business owner, it’s vital to be aware of these scams to protect yourself and your customers.
This guide breaks down popular Shopify scams, outlines how to recognize and prevent fraud, and provides the fundamentals of keeping your business safe.
How Shopify Scams Impact Businesses
Sellers can suffer direct financial loss if they fall victim to a scam. This could include not receiving payment for goods shipped or losing inventory to those exploiting return policies. Businesses may also incur costs associated with chargebacks due to fraudulent transactions.
Besides these obvious financial losses, Shopify scams can also have numerous other negative impacts on online sellers.
- Damaged Business Reputation. Even indirectly, association with scams can harm a seller’s reputation. Customers who fall victim to a scam might wrongfully blame the platform or legitimate sellers, leading to a loss of trust and customer loyalty. A damaged reputation can be hard to repair and could lead to decreased sales.
- Increased Operational Costs. Sellers might need to implement more stringent security measures, such as enhanced verification processes or fraud detection software. These measures can lead to increased operational costs and higher barriers to entry for new sellers.
- Legal and Regulatory Challenges. If a scam is associated with a seller’s store, even if they are not directly involved, they might have to deal with legal complications or investigations. This can be time-consuming and costly and can distract from running a business.
- Marketplace Restrictions. In response to scams, platforms like Shopify might implement stricter regulations and policies that could limit seller interactions with customers. This can affect sales strategies and customer relationships.
- Competition with Illegitimate Sellers. Legitimate sellers could find themselves unfairly competing with scam stores that offer too-good-to-be-true deals, siphoning away customers looking for the best prices—even if the deals are fraudulent.
Overall, Shopify scams can create a challenging environment for online sellers, affecting their finances, reputation, and ability to operate effectively in the marketplace. To mitigate these risks, sellers must remain vigilant and proactive in adopting best practices for fraud prevention.
Common Shopify Scams
With Shopify’s growing popularity comes a surge of scams. Here are some to be aware of.
1. Triangulation Scam
The triangulation scam is a sophisticated online fraud that manipulates the trust between a buyer and a seller. It usually occurs in three stages: first, the scammer sets up a fake storefront, offering high-demand goods at temptingly low prices. Unsuspecting customers place orders and share their payment details. The scammer then uses stolen credit card information to purchase the items from a legitimate website and has them shipped to the customer.
The customer receives their goods but is left with unauthorized charges. The merchant is responsible for chargebacks from purchases made with the stolen credit card and cannot recover the products sold.
Triangulation fraud is particularly deceptive, involving the customer in scamming activities. The unsuspecting customer receives their order, unaware of being involved in a scam. It also makes eCommerce businesses liable for the costs, with documentation that traces back to the purchasing consumer.
2. Viral Products Scam
This scam exploits the potent combination of consumer desire and the viral nature of trending items. Shopify sellers can significantly benefit from viral trends in sales and visibility. However, viral product scams can trap sellers by exploiting their eagerness to offer the newest popular products.
Scammers set up Shopify stores featuring products currently “viral” or in high demand, often with a fake inventory or misleading representations. They create irresistible deals, exclusive access, and limited-time offers.
Scammers may impersonate wholesalers, promising bulk quantities of popular products at exceptionally low prices. Eager sellers may purchase large amounts only to receive fake items or nothing. Selling counterfeit goods, even unknowingly, can damage a seller’s reputation. Customers may respond with negative reviews, chargebacks, or reports against the seller.
Investing in subpar stock can also lead to significant financial losses. Moreover, selling fake or unlicensed products risks legal trouble from the legitimate brand or consumers, possibly resulting in lawsuits, fines, or shutdowns.
3. Tracking Number Scam
In this scam, the scammer gives a customer a fake tracking number after they make their purchase, often without having shipped anything.
The customer waits for the delivery, believing their order is en route. As time passes and no package arrives, the customer may attempt to track the shipment and realize the tracking number doesn’t correspond to any package within the carrier’s system.
The customer is left without their product and potentially without a refund. Merchants placing bulk orders can suffer substantial financial losses. In addition, if a merchant has been impersonated as the seller providing the tracking number, they can suffer a damaged reputation, affecting future sales.
4. Duplicate Store Scheme
The duplicate store scheme is a malign practice where scammers create carbon copies of existing Shopify stores, complete with product listings and branding. Unaware customers, thinking they are purchasing from a legitimate source, are defrauded when they don’t receive the goods they paid for.
This scam is damaging to consumers, tainting the reputation and diluting the brand identity of the original stores. To protect your brand and clientele, remain proactive in monitoring for duplicity.
5. Counterfeit Return Scheme
Returns and exchanges are critical components of customer service, but they also present fraud opportunities.
This scam involves the scammer buying an expensive item from an online store and then returning a fake version to receive a refund. Consequently, scammers profit by keeping both refunds and authentic products, which they can resell for a profit.
This scam predominantly targets sellers, costing the online store a lot of money. They’ll need to cover the return shipping fee and the refund and lose the authentic product to the counterfeit return. Additionally, the counterfeit returned items can be mistakenly returned to store inventory, risking the unintentional sale of fake goods to other customers.
6. Fake Purchase Order Scheme
This scam involves a fraudster acting as a buyer. They send a fake, though seemingly authentic, purchase order from a seemingly real company. Often, they’ll ask for rush shipping to create a sense of urgency, which should alert the seller to exercise extra caution.
Upon receipt of the product, the store will discover they cannot withdraw the funds because the payment was made using a stolen card or other fraudulent means.
In another version, scammers may go even further by deceiving sellers into believing that they made an overpayment for their order. They request a refund for the overpayment. If the seller issues the refund before noticing the initial payment was fraudulent, they suffer a financial loss and lose their stock.
How to Identify Shopify Scam Stores
When shopping on Shopify or any other online platform, identifying potential scam stores is crucial to protect yourself from fraud. Whether you’re shopping as an individual or conducting a B2B deal, here are some key indicators suggesting a store is not legitimate:
- Lack of Contact Information. Legitimate stores usually offer straightforward ways to contact them, including email addresses, phone numbers, and physical addresses. If this information is missing, or there is only a contact form, it’s a red flag.
- Too-Good-to-Be-True Offers. If a store offers discounts or deals, such as extremely low prices on high-value items, it could be a tactic to lure in unsuspecting customers. Be wary of stores offering bulk items or wholesale deals at prices that appear too good to be true.
- Unverified or Uncommon Payment Methods. Be cautious of stores requesting payment through unverified methods, wire transfers, or other non-standard forms of payment that don’t offer buyer protection.
- Pressure Tactics. Creating a false sense of urgency, like claiming limited availability or time-sensitive discounts, can be a tactic to rush customers into a decision without proper consideration.
- Suspicious URLs. Check the store’s URL for subtleties like misspellings or unfamiliar domain extensions that mimic legitimate websites. Make sure the store’s URL begins with https:// and displays a padlock icon, indicating it has an SSL certificate.
- Absence of Social Media Presence. A legitimate store often has social media profiles to engage customers. A scam store might lack these or have profiles that show no real customer interactions.
- Short History. Newly created stores might not be scams, but if a store appears overnight and claims to have a huge array of products and reviews, it deserves scrutiny.
- No Returns or Refund Policy. A legitimate store should have a clear returns policy. Scam stores might have vague policies or none at all.
- Inconsistent Branding. Genuine businesses usually maintain consistent branding across their content, including online marketplaces, websites, ads, and social media. Inconsistencies might suggest a hastily put-together scam site.
Protecting Your Brand From Identity Theft On Shopify
There’s no magic cure-all for these scams; constant vigilance is essential. But to help safeguard your brand from identity theft on Shopify, try implementing the following strategies:
- Trademark Your Brand. Register your brand’s name, logo, and unique product designs with relevant authorities to ensure legal protection against counterfeiters.
- Custom Domain. Use a custom domain for your Shopify store, which can establish brand identity and trustworthiness.
- Strong Passwords and Two-Factor Authentication (2FA). Protect your Shopify admin by using strong, unique passwords and enabling 2FA for an additional layer of security.
- Monitor Your Brand. Regularly search for your products and brand name online to catch fake listings early. You can use tools designed to monitor the web, which automatically notify you of copied content or unauthorized use of your brand.
- Educate Your Customers. Create educational content for your customers on how to identify authentic products and encourage them to buy directly from your official Shopify store.
- Legal Action and Takedown Notices. If you find unauthorized use of your brand, be prepared to take legal action. Sending takedown notices when you find infringed content can be an effective first step.
- Collaborate with Shopify. Work with the Shopify support team in identity theft cases to address the situation. They can assist with taking down counterfeit stores or products.
- Customer Service. Maintain an active presence when dealing with customer service issues to quickly address concerns related to identity theft.
- Privacy Policy and Terms of Service. Your privacy policy and terms of service should be clearly stated on your website to set the legal groundwork for protecting your brand.
What Steps to Take if You’ve Been a Victim of a Scam Store
If you have been a victim of a scam store on Shopify, take the following steps to address the issue and minimize the impact:
- Report the Store to Shopify. Contact Shopify support immediately to report the fraudulent store. Provide all your details, including any communication with the store, proof of purchase, and reasons why you believe it is a scam.
- Contact Your Payment Provider. Inform your bank or credit card provider about the fraudulent transaction. They may have procedures for disputing charges and could potentially reverse the transaction or issue a chargeback.
- Change Your Account Details. If you provided a scam store with your account details, change your passwords and security information for those accounts to prevent further unauthorized access.
- Document Everything. Keep records of all interactions with the scam store, including advertisements that led you to the store, correspondence, and transaction receipts.
- File a Police Report. Reporting the crime to local law enforcement can be necessary for an official investigation and may help recover lost funds.
- Alert Others. Consider sharing your experience on social media platforms, scam alert websites, and Shopify community forums to warn potential customers of the scam store. If your store has been cloned, or someone is posing falsely as your brand, alert customers immediately.
- Consider Legal Advice. If the scam has resulted in considerable financial loss, you may want to consult a legal professional to understand your options for further action.
- Review Personal Security Measures and Monitor Your Accounts. Monitor your financial and personal accounts for any unusual activity, as scam stores may use or sell your information.
How Does Shopify Address Scams?
Shopify provides built-in tools to secure your eCommerce store and minimize risks. These tools aim to provide a secure online environment for your business and customers.
For example, Shopify uses sophisticated algorithms to evaluate and score the risk of orders by examining transaction records, customer habits, and order specifics. This process flags potential fraud and unusual activity, allowing you to investigate and respond appropriately to prevent Shopify scams.
Shopify also connects with reliable payment gateways with top-tier security measures and fraud detection tools. In addition, Shopify meets PCI DSS requirements, guaranteeing secure information handling through encryption and robust security protocols.
The platform provides other tools that can help authenticate orders and customer details. For example, address verification services compare the customer’s address against the payment provider‘s records, helping to confirm order validity and minimize the risk of shipping to fraudulent locations.
Navigating Shopify Scams With Confidence
Unfortunately, digital convenience for consumers makes it easy for scammers to operate. If you’re a small or medium business owner, payment security should be a priority when selecting a payment service provider.
As a merchant services provider, PaymentCloud offers advanced tools to effectively detect and defend against credit and debit card fraud and online transaction risks. We assess the threats to each merchant account to provide tailored fraud protection solutions.
PaymentCloud provides free fraud prevention tools with every merchant account, including PCI compliance, automated fraud detection, consumer data tracking, address verification, and customizable volume and threshold filters, ensuring you are equipped with top-notch security strategies at no additional cost.
Learn more about our integration with Shopify and start taking secure online payments today.
