3 Shipping Scams That Are Killing Your eCommerce Profits

3 Shipping Scams That Are Killing Your eCommerce Profits

Many merchants have been gearing up for the holidays for months, and the time for Black Friday and Cyber Monday rushes is upon us. These merchants have to deal with many roadblocks and headaches along the way, like return scams and the like. Unfortunately, the abuse doesn’t stop at your return policy… With the holiday season in full effect, killer customers are on high alert and merchants should be too, considering record numbers for online shopping are expected this year, 166.3 million shoppers are expected to buy online just this Black Friday and Cyber Monday weekend. We teamed up with our fraud prevention partner Signifyd and the team at ShipStation to help online merchants stand clear of the 3 most common shipping scams killing eCommerce business profits this year.


1. Package Rerouting


Fedex truck on street with smoke on the side


Package rerouting commonly occurs when a customer commits payment fraud and uses a stolen credit card to make an online purchase. In most cases, the transaction is cleared because the legitimate cardholder’s address is used without being flagged. However, once the customer receives shipping confirmation and the package is en route, the original address is changed.

In another case, the customer purposely provides a false shipping address and monitors the package through the online tracking information given upon confirmation. Once they’re notified that the package is undeliverable, the customer contacts the shipping company to provide a new delivery address. Unfortunately for merchants, additional fees may occur when the package is successfully rerouted.

Lastly, a customer can make an online order and after confirmation, call the merchant to ask if their preferred shipping service can be used. Most likely, these customers have an established relationship with outside shipping services and are confident about receiving shipped items unflagged, making it harder to track and prove the package was ever delivered.

In all three cases, by the time the legitimate cardholder notices the unauthorized purchase, the scammer’s already enjoying their products free of charge. These types of fraud leave the online business with losses up to $10,000 in shipping fees, lost product, and lost profit… so now what?


Preventing Package Rerouting

Solving this issue requires a multi-step approach. First, it’s important to note not all customers have malicious agendas. In fact, many may have good reason to reroute a package. To avoid upsetting or offending legitimate customers, merchants should start with a clear shipping policy stating there’s a zero-tolerance for package rerouting on their website, social media profiles, and email confirmation.

Creating detailed shipping terms and conditions that address various errors that arise during shipping is important when dealing with customer claims. One major way to gain clarity into issues is to offer tracking. Tracking lets you know that an item has been delivered.

                                                            -Jennifer Ruben, Partner Marketing Manager, ShipSation.


In addition to providing these details, make sure a customer’s zip code and address are validated before shipping. Lastly, be sure to ship only to the original address provided in the confirmation details, especially for a large order.


2. Item Not Received 

by Mike Cassidy at Signifyd


4 Wrapped gifts on doorstep


One of the most insidious shipping scams occurs when the item marked ‘not received’ actually was received. False INR claims cost retailers millions every year, but they also cost merchants their reputation. Once word’s out that a retailer tends to give in to INR claims, be it via social media, dark web forums, or even a legitimate publisher, similar claims will flood in.

The scam is popular because it’s easy. No need to commit online identity theft by stealing someone’s personal information, or hack into a customer’s retail account. All abusive customers need is the will to cheat the system without care.

To put it simply, scammers accomplish this by ordering a product, bringing the product into their homes, and then telling their credit card companies their orders never arrived. Such claims create one of the thorniest situations in the retailer/customer relationship.

If the retailer challenges an item-not-received claim and it’s legitimate, chances are the retailer just lost a customer for good. Signifyd’s consumer survey, conducted by market research firm Survata, found that nearly half of consumers will endure no more than one bad experience before abandoning a retailer for good. Let’s agree that being called a thief by a retailer counts as a bad experience.

On the other hand, if a retailer accepts the INR claim and it’s not true, the merchant is out of the goods and the revenue it would have received. You can up your fraud protection game, by adding a few things to your to-do list.


Preventing INR Claims

The first step is to make sure your return policy is clear, and that your return process is easy. You also want to be clear in your descriptions and presentations of the products you’re selling. Not only does this provide your customers with a better shopping experience, but it also reduces the possibility they’ll be unpleasantly surprised when their order arrives.

Some consumers become frustrated with the work required to return a product and decide to get a refund by claiming the product never came. Being clear about returns and the products you’re selling helps reduce the incidence of unhappy customers who suddenly feel entitled to game the system.

There are also ways to challenge an INR claim, of course. Finding photos on social media of a customer with a product they claimed they never received, for instance, is fairly strong evidence that the item was received — as is a customer’s signature accepting the order. (It happens.)

Dealing with INR claims will never be pleasant, but with some forethought, it can become much less of a chore.


3. Hijacked Shipping Accounts


Shipping railroad tracks with multiple trains during sunset to represent hijacked shipping accounts


Nothing’s off-limits when it comes to fraudsters, not even shipping accounts. If your company’s shipping account is online or accessible to the public, you should keep reading.

Hijacking shipping accounts is a free and undetectable way to use a stolen shipping account number to make large shipments. Once these account numbers can be accessed, they are often used in the same manner as stolen credit cards and become can punch your profits in the gut.

In less severe cases, employees use their company’s account number to ship personal packages from time to time. In the worst case, these stolen accounts are used to ship drugs, stolen goods, or fake checks long distances, sometimes across the country.

Take Montana State University for example, in 2010 the school had a $180,000 pile-up in fraudulent shipping costs after more than 9,000 consumers received fake checks. Fake checks are normally used to trick recipients into wiring money for a small fee.

Businesses of all sizes are easy targets, as their shipping bills typically aren’t monitored close enough. However, with little knowledge of who’s accessing your account, it becomes harder to track down the culprit.


Preventing Hijacked Shipping Accounts

In order to properly prevent hijacked shipping account numbers, there must be a central management system that includes these features:

  1. Make account numbers accessible only to specific and trustworthy employees. Remember, less is more.
  2. Implement a reporting system that allows these users to be able to regularly schedule pickups and track packages, without constant authorization needed.
  3. Monitor frequently. With a tracking system in place, data can be used to track users’ activity for cross-reference purposes.


Final Thoughts

Tracking down evidence of fraud (be it wire fraud or shipping) takes time and not many merchants want to get into the business of becoming Sherlock Holmes. However, without proper detective work, shipping scams can be a legitimate threat to merchants, their customers, their reputation, and their profits. Luckily, there are fraud-protecting and chargeback-management solutions that highly automate the INR dispute process and some also eliminate the merchant’s risk. Ask us more about INR Protection here. 


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Not All Chargebacks Are Created Equal… Here’s Why.

Not All Chargebacks Are Created Equal… Here’s Why.

If you read the last two articles in this series, you know “killer customers” often take advantage of DTC companies’ return and shipping policies. By now you’re probably thinking “What else can go wrong?” Well, we’re sorry to say, the list is quite long.

In 2018 Chargebacks 911 reported chargeback fraud cost merchants up to $40 billion per year. With increase in eCommerce activity over the past 2 years, we can expect that number to be even higher today. While the holiday season is behind us, the chargeback season has just begun. Continue reading to learn 2 more ways abusive customers attack your profits and how you to prevent them.

1. Friendly Fraud


woman looking at computer and smiling possibly committing friendly fraud


“Friendly Fraud” is when a customer files a refund or dispute with the bank instead of with the merchant. Committing friendly fraud involves no malicious intent and can be easily overlooked by the customer. In many cases, a customer may notice an unfamiliar purchase, receive an item that doesn’t match the description, or can’t reach a customer representative.

Friendly fraud may sound harmless, but it can severely threaten your bottom-line. In fact, the method accounts for 86% of all chargeback volume and is difficult to identify.

Preventing Friendly Fraud

Most customers don’t understand the negative effects a chargeback has on merchants. Therefore, preventing friendly fraud requires a multi-step, ‘nip it in the bud’ approach. Here is how it’s done…

      1. Make it easy for customers to quickly contact you.

Don’t give your customers a reason to go to their bank to file a dispute. Your customer service contact information should be accessible to anyone at any time. Include this information in all communication correspondence and social media platforms. Proving 24-hour support via phone or live chat (with these options clearly visible on your site) are great ways to ensure your customers come to you first.

      2. Provide clear product descriptions.

To prevent unnecessary chargebacks and increase conversion rates, customers should receive the same product described in the product description. Making sure your product descriptions are detailed and accurate can save you major losses.

By centralizing complete product data and then enriching product descriptions and specifications, product information management systems help reduce the chances of errors across multiple channels. This results in more users getting exactly what they are looking for.

–– Lynn Torbert, Director of Sales, Jasper PIM

      3. Verify all shipping and tracking information.

With all so many reports about new shipping scams, it’s important to create detailed shipping terms and conditions. Once tracking information is verified and the purchase is complete, customers should also receive a copy of all shipping and tracking information. This could come in hand in case a customer claims an unauthorized purchase. However, that’s another, more malicious type of fraud…

2. Deliberate Chargeback Fraud


Woman holding cash after commiting Chargeback Fraud


Opposite from friendly fraud, deliberate chargeback fraud is when a customer contacts a bank with the intention of disputing a purchase. Similar to an “Item Not Received” scenario, a customer intends to obtain the product or service for free. This type of online fraud is equivalent to brick and mortar shoplifters, accounting for 35% of all fraud losses.

In less extreme cases, chargeback fraud occurs when a customer experiences buyer’s remorse. They don’t want to confront the merchant, so they dispute the charge with their bank instead. In extreme cases, customers may dispute large orders by claiming they are fraudulent charges. This hurts the retailer’s reputation with the bank and pulls profits out from under them.

Providing a fast and frictionless customer experience is a priority for merchants, but can be costly without the right considerations. For example, most sites allow customers to file a dispute with one click. This makes it difficult to prevent chargeback fraud and leaves merchants empty-handed.

Preventing Chargeback Fraud

Since deliberate chargebacks and friendly fraud both heavily impact profits, your best option is to get customers to handle their disputes with you, rather than their bank. Whether it’s buyer’s remorse or an unauthorized purchase claim, you need to protect your bottom line. Consider implementing the following defense mechanisms on your online store…

       1. Provide a clear and flexible return policy.

Customers should know what items they can return and how to go about returning them. For example, add a 30-day deadline on returns and provide return labels with all online purchases. With this flexibility, customers are more inclined to resolve their return issues with you. Also, this will make customers less likely to take advantage of your return policy.

       2. Be prepared to fight back

For customers who claim an unauthorized purchase, evidence is key. There are many places you can acquire proof of purchase to protect yourself, especially during the checkout-process. Double-check shipping and tracking information, replay phone conversations and track down social media accounts if you choose to fight a fraudulent chargeback. This information can be the difference between saving your profits or watching money walk out the door.

Final Thoughts

Modern merchants need to understand the differences between deliberate chargebacks and friendly fraud. To protect customers and your relationships with them, you must successfully weed out the bad actors who purposely seek to defraud you. Remember, your goal is to protect your merchandise, revenue, and profits. Finding the proper fraud defense can be time-consuming, but we’ve done our homework to make it easy for you. If you’re interested in learning more about Redstage’s Security and Maintenance Bundles to help you strengthen, monitor, and maintain your site, schedule a FREE consultation today!  

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