How to protect yourself from fraudulent buyers in online retail

It is interesting that while researching this article, I found that there was no dearth of articles providing tips to the online buyer to be safe from the fraudulent seller, but there wasn’t much on the opposite scenario. Why is this so? Are sellers inherently more fraudulent than buyers? I don’t think so.

Or, it can be a numbers game – there are many more buyers than there are sellers. It makes sense then that the number of buyers getting duped would also be higher. Thirdly, we should not ignore the fact that online retail, for the most part, is a buyer’s market. The online retail channels and marketplaces are ideally middlemen whose job consists of providing security to the buyer. But all this does not mean that sellers are not regularly cheated on online marketplaces.

With every new technology comes a way with which it can be misused. When the online retail boom first took place around the year 2000, a UK based survey commissioned by Experian showed that 9 out of every 10 credit card fraudsters got away with their crime. One of the reasons for this was the fact that there were insufficient legal means to investigate crimes like online payment fraud. Of course, things have changed now. Stricter policies and regulatory technologies are in place, but the criminal techniques have also evolved with time.

This article deals with protecting your interests as an online seller from fraudulent buyers on online retail forums.

How to Protect Yourself as an Online Seller

1. Be Extra Careful with Credit Cards

Credit card fraud is probably the most common scam that one comes across on the internet. From Nigerian princes promising you millions of dollars to the so called income tax department asking for your credit card number, credit card fraud is everywhere. Most online retail channels process payment through gateway channels like PayPal, PaisaPay, etc. The idea is that the customer pays for the product, the retail channel holds the money, once the delivery is confirmed, the retail channel pays the seller.

Although this system sounds like it is fair to the customer, it has its problems. Since the money and the product have to change hands multiple times to reach their rightful owners, it is difficult to track down fraud. For example, if a purchase is made through a credit card, and after delivery, the buyer ‘charges back’ the amount, claiming that they never made the particular purchase, the buyer may lose both the product and the money. This is a common scam, and one way to protect yourself is to always be extra careful when it comes to credit cards. Checking small details like whether the delivery address matches the address on the card, etc. will help you save a lot of time and effort proving your case later.

2. Returns Policy

Returns policy is another way through which a seller might be easily defrauded. This is a bit of a catch 22 situation for the seller, because if they don’t provide a returns policy, it reflects on their reputation and growth of business. If they do, they are liable to be defrauded. How do returns scams work? Ideally, if the seller delivers a faulty product, then the buyer has the right to return the product within a given time limit. But returns fraud is one of the oldest tricks in the book. One might switch a fake or stolen item to the seller, retaining the original. One might use the product and put it through wear and tear before returning it (what is basically known as free renting.) One might switch invoices, receipts or prices to defraud the seller.

3. Cash-on-Delivery

Most online retail channels have started offering cash on delivery services for their products. This is another area where the seller ends up taking a high amount of risk. This is because in this case, the buyer receives the product without having to send the money across first. This means that there is a chance of the seller being defrauded if the buyer refuses to pay the amount in cash. It should be noted here that the cash on delivery policy is applicable only for select products and areas. The decision to offer a product under the cash on delivery policy lies with the seller, and one should be very careful in making this decision.

4. Auction Sites

Auction sites like eBay work on a simple principle – potential buyers bid on a particular product, and the buyer with the highest bid wins the transaction. This system can also become quite risky from the seller’s perspective. It is not uncommon for buyers to scam sellers by claiming to not have received the item, leveraging small sized sellers by threatening to post bad reviews and returning false items.

Since sites like eBay and Etsy often have small and medium sized sellers who can’t afford the overhead or the loss of reputation, they become especially vulnerable targets. Many sellers have learnt the hard way to always triple check whether the payment is received before shipping products, being firm but polite about policy and the importance of vigilance while dealing with buyers.

5. How to Cope with Fraud

Finally, a word to the wise. Fraud and scams are a part of every business, not just online sales. It is something that can never be abolished, either from the buyers’ side or the sellers’. It is, therefore, important to accept that there is always a chance that you might be defrauded, and not be bogged down by it. One can play extremely safe and make sure that they are not being cheated, but this approach amounts to slow progress and extinction.

It is important to take calculated risks, and hope for the best, as much as it is important to make sure that your assets are safe. Every business has a margin of around 7-10% that accounts for fraud, theft etc. There is no reason to be disheartened by it.