“A customer is always right” is a rule that many of us have learned by heart. However, that’s not necessarily true, especially when it comes to scammers.

While all customers should be treated with respect, there are plenty of scammers who take advantage of business owners trying to provide quality service. That’s why every online seller should be aware of common red flags and take steps to minimize their risks.

Some scam methods originate from in-person shopping, while others are only for online stores. The most common scams include refund abuse and credit card fraud.

Read on to learn more about the most popular types of scams and how to prevent ecommerce fraud in your online store.

What Is Fraud?

Fraud is any type of deception or misrepresentation that is used to illegally obtain something of value. In the context of online shopping, fraud can take many forms. Fraud can look like using stolen credit card information to make unauthorized purchases, posing as a legitimate customer returning merchandise that was never purchased, and much more.

Every small business owner should be able to identify the most common types of shopping scams and know how to protect their store from becoming a victim. Read on to find out how to prevent ecommerce fraud.

Overpayment Scams

One of the most common types of scams in online shopping is overpayment.

Overpayment happens when a customer pays more than the agreed price for an item, sometimes with a fraudulent credit card, and then asks for a refund of the difference.

There are three ways to recognize these scammers:

  • You haven’t received any money. The customer claims that the money is being held until you return the extra payment.
  • The receipt looks suspicious—they can send you a fake one.
  • The customer wants you to send the money to a specific bank account or use a wire transfer.

How to Prevent It

A situation like this usually results in you chatting with the scammer personally. As such, it’s hard to miss the signs once you’ve learned about this type of fraud. Here’s what you can do to protect your business from overpayment scams:

Use Trusted Payment Providers

First, always be suspicious of any payments that are higher than the agreed price. If a customer requests a refund for an overpayment, be sure to confirm that the funds were actually transferred to your account.

Second, make sure that you only accept payments through reputable payment methods, such as Stripe, Lightspeed Payments, PayPal, etc.

If you sell with Ecwid by Lightspeed, you can choose from 100+ trusted payment providers from all over the world. You can pick a convenient and secure payment provider available in your region, based on your preferences and location.

If you suspect a scam, you should never send the money back to the customer, especially not using cryptocurrencies, wire transfer, or prepaid cards. It’ll be next to impossible for you to get the money back.

Limit Staff Members in Charge of Payment Operations

If you are a solopreneur, this doesn’t apply to you.

However, if you have a co-founder, an employee, or even a friend or a family member who helps you with customer care, make sure everyone who has access to payments is aware of scam protection methods.


In this day and age, you can buy a fake copy of almost anything—often for a fraction of the price. As such, it’s often quite hard to tell the difference.

Swapping is when someone returns a product but instead of giving you the product they bought, they give you a cheaper or older product. This scheme can be especially dangerous for sellers of expensive items.

This Dolce & Gabbana bag costs $1,298. A fake copy costs $329

Another common type of fraud is when someone replaces a new product with a broken one and tries to return it. Especially if you sell household appliances and electronics, you should watch out for this scam in particular. Scammers will replace a new product with a broken one and ask for a refund.

How to Prevent It

It is not easy to fight “swappers.” A customer may blame you or the courier service for a damaged item. This scam can be difficult to counter if you don’t have proof that it was in good condition when it left your hands. To avoid this, it’s important to take some precautions beforehand:

Check Products Before Sending Them to Clients

Record your product’s finest details so that you can identify any flaws or differences if the product is swapped. Make sure your products don’t have any defects or damages before you ship an order. If selling electronics, always ensure that they work before shipping.

Also, keep documentation or proof that the product was in good condition when it left your hands. This could include photos or videos of the product being packaged and/or shipped.

If you are sure you sent a high-quality product and your customer claims the opposite, you can provide the documentation that proves it or compare serial numbers on the product and in your records. Or you can give them the refund without hassle but put this person on your blacklist so that they can’t shop in your store anymore.

Pack Orders Thoroughly

To prevent damage to your product during shipping, pack it well. This means using high-quality packing materials like bubble wrap, foam peanuts, or eco-friendly options such as recycled cardboard and biodegradable peanuts. Make sure the box is sturdy enough to protect the contents inside.

If you are shipping electronics or other items that could be easily exchanged without you knowing, include tamper-proof packaging or some other way to ensure that the product cannot be easily swapped.

Record Stock

Keep track of your inventory levels carefully. This will help you identify any discrepancies if a product is swapped out and returned to your store.

Use barcodes, universal product codes such as UPC or GTINs, or come up with your own product codes, such as SKUs. You can add the product’s number to the order receipt so that you can confirm the product is actually from you in the case that it is returned.

Plus, with specific codes, anyone can check the products’ authenticity—a delivery person, the postal service, you, and your employees can all make sure it’s legit.

If you sell online with Ecwid by Lightspeed, you can specify product codes when adding attributes in the product details. You can also display SKUs in your invoices.

Create a Return Policy and Instruct Employees

To avoid any confusion later on, have a clear return policy in place from the beginning. This should include what types of products can be returned, their condition, as well as how and where returns should be sent. It’s also a good idea to have a time limit for returns.

Your return policy must be clear—not only for customers but also for employees who process refunds. Give clear instructions to everyone involved and make them follow them strictly. Think through the whole procedure, from determining the legitimacy of the return to refunding customers who have followed the rules.

If your delivery person deals with returns, explain to them how to tell an original product from a fake one before returning the product back to you.


Wardrobing is a popular scheme in the fashion industry, especially among shops that sell evening gowns, accessories, or jewels. A customer can order an expensive dress, wear it to a party, and then return it as if it didn’t fit.

While wardrobing may seem like a victimless crime, it actually causes significant financial damage to businesses.

According to the National Retail Foundation, for every $1 billion in sales, the average retailer incurs $166 million in merchandise returns. Moreover, for every $100 in returned products, retailers lose $10.30 to return fraud.

Not only do businesses lose money when wardrobers return clothes, but they also have to spend time and resources dealing with returns.

How to Prevent It

A professional wardrober can make worn clothes look unused, so it can be very hard to expose them. However, that doesn’t mean you should let things slide.

Call Customers Back

Confirm orders on the phone to ask if the customer chose the right size and color. Personal attention can scare away scammers. You can also call them the day after the delivery to check if they are satisfied with the product.

Use Anti-Wardrobing Tags

Anti-wardrobing tags, or return tags, allow a customer to try on a piece of clothing but are hard to conceal while wearing. Once such a tag is removed, it’s hard or impossible to put it back.

State in your return policy that the tag must not be removed or damaged for products to be eligible for return and refund. This way, you’ll deter wardrobers while still allowing honest shoppers to return a product that didn’t fit.

Think Through Your Refund Policy

It’s likely people will shop again at the store which accepted a product back without a problem. However, in 2021, 60% of online sellers worldwide reported noticing an increase in refund abuse.

Making your return policy a breeze doesn’t mean letting scammers take advantage of you. Specify the conditions for a return and refund: limit the return period, give a list of documents for purchase confirmation, and ask them to fill out a refund form.

You can also decide who pays for shipping expenses in case of a return. One great way to deter returns is by making shipping costs the customers’ responsibility. Paying shipping fees creates a hassle for scammers.

Also, check out your local laws to see what protections you have as a business owner. For example, in the EU, customers can’t return made-to-order or clearly personalized products.

Pretending the Order Didn’t Arrive

Scammers may take advantage of postal services, too. A customer might receive the order but act as if they didn’t, then request their money back. If the store can’t prove that the product was delivered, they have to provide a refund.

How to Prevent It

It is not that difficult to prove the product was delivered. You can:

Track Parcels

Most postal services provide tracking numbers. If you use a major shipping provider, you can check if the order was received on the carrier’s website. This way, no one will be able to trick you or pretend that they didn’t receive the order.

Customers can track their parcels on the USPS website

Providing your customers with tracking numbers for their orders not only helps to prevent fraud but also improves the post-purchase experience of your store. It makes the shipping process transparent. Plus, you’ll have fewer “Where is my order?” questions in your inbox.

If you sell online with Ecwid by Lightspeed, you can add tracking numbers to orders so that your customers can get real-time updates about their purchases on the carrier’s website. You can also use the Aftership or TrackFree app to track all of your shipments in one place, automatically notifying customers of delivery updates via emails or SMS notifications.

Chargeback Fraud

Chargeback fraud, also known as friendly fraud, which occurs when a rightful cardholder places an order and then pretends that their card was stolen. Often, friendly fraud can look believable and honest, so it’s hard to tell when it’s happening.

Typically, chargeback fraud will occur after the product has already been shipped. An online store will get a refund request from the “true” cardholder, who says that it wasn’t them who bought the item.

If the bank takes the customer’s side, you have to pay the money back. A seller suffers double damage because a product is lost, and money has to be paid to the scammer.

Friendly fraud is one of the most common fraud attacks for e-merchants (Source: Statista)

Sometimes chargebacks do happen because of honest mistakes. For example, if you sell products on a subscription basis, some customers might place a subscription order instead of a one-time purchase by mistake. In this case, they might request a chargeback.

To prevent confusion, ensure that you clearly state the subscription terms on the product page.

If you sell subscription-based products with Ecwid by Lighstpeed, all the necessary details about setting up a recurring payment are displayed automatically on the product pages of subscription items.

Customers can see important information about a subscription on the product page

How to Prevent It

The best way to avoid chargeback fraud is by having strict verification measures in place before fulfilling an order. Follow these tips to prevent chargeback fraud:

Confirm Orders Before Shipping

If customers confirm their order by phone or email, they can’t claim that they didn’t buy it. Ensure to clearly describe the payment terms when confirming the order.

However, this type of fraud prevention works best with smaller stores or ones that sell personalized products. If you don’t have a lot of employees but offer a huge inventory, confirming each order will take too much time.

Luckily, there are other ways you can avoid chargeback fraud.

Accept Cryptocurrencies

Accepting cryptocurrencies eliminates chargeback fraud. Once a client has paid for your product or service, the money is and will stay in your account. Cryptocurrency payments are final. Unlike credit card payments, transactions cannot be reversed.

Once a person pays with cryptocurrency, they can usually get their money back only if the person they paid sends it back. So if you suspect a chargeback fraud, you won’t be forced by a bank to make a refund.

If you sell online with Ecwid by Lightspeed, you can accept cryptocurrencies such as Bitcoin, Ethereum, Dogecoin, etc., in your online store from customers all over the world.

Purchase with a Stolen Card

Scammers often pay for orders in online shops with stolen cards. In the US, credit card fraud is the most common form of identity theft.

How to Prevent It

If you accept credit cards, make sure your payment gateway has the following anti-fraud technologies:

Customer Identity Authentication via SMS (3D secure protocol)

3D protocol minimizes the risk of stolen card fraud. Here’s how it works: one more authentication step is added to a purchase payment in an online store. Typically, it is a request to provide a code sent to the customer’s phone. Visa, Mastercard, and American Express use this as a way of transaction protection.

3D Secure аlow (Image credit: By GPayments, CC BY-SA 4.0)

Fraud Monitoring and Detection Systems (AntiFraud)

A fraud monitoring system checks transactions automatically. If it looks suspicious, the system requires a manual check or cancels the transaction.

Transactions are checked in many ways, from the computer’s IP address to a card’s payment statistics. The aim of the system is to confirm that a user is a true cardholder who normally shops at this online store.

For example, if a transaction is performed in the US by a US cardholder, and the order’s sum doesn’t exceed the average order value (AOV) of a shop, then the transaction will be approved. If a customer tries to pay for an order that exceeds the AOV by a significant amount, then the transaction is considered suspicious.

AntiFraud can be used even if you don’t have a payment provider. Create a portrait of your typical customer: age, AOV, location. If some features don’t match with your portrait of your typical customer, it’s best to connect with the customer and confirm the order.

Cash Fraud

Along with other payment methods, you can allow cash payment in your online store. Unfortunately, scammers take advantage of that, too.

For example, a scammer can ask you to meet them in the street (so that they can run away if exposed). They pay, you count the money and notice it’s not enough. The scammer apologizes, takes money back, supposedly adds the lacking banknote, and gives it back to you. Of course, the sum is wrong again because the scammer has already taken some money out or replaced them with fake banknotes.

If you count the money again and detect the scam, a customer will try to leave as fast as possible. But if you don’t count the money again, it’ll be almost impossible to find and blame the scammer.

How to Prevent It

If you decide to accept cash payments, you must treat it with the same seriousness as online payments:

Have Strict Instructions for Cash Payments

It’s best to accept cash payments only for in-store pickup orders. Ask your team to avoid meeting in the street, lobbies, and other places where it’s easy for a scammer to run away.

Also, if you often accept payments in cash, consider investing into a counterfeit money detector.

How to Report Fraud

The most common customer fraud is the abuse of payment for products, like overpayment. Watch out for suspicious orders. If you are in any doubt about a transaction, make sure to gather as much information as possible to establish your customer is legitimate.

You might also be wondering how to report scammers. If you believe you have been the victim of fraud, you should first contact the credit card company to report the fraudulent activity, like if you believe a purchase was made with a stolen card. You should also file a police report or complaint to local authorities.

To Sum Up

Customer fraud can be costly and damaging not only to your business, but the retail industry in general. Retailers have to compensate for the losses caused by scammers, which may lead to increased prices and cost-cutting. That, in turn, can result in more expensive products or job cuts.

Luckily, by taking some simple precautions, you can minimize your risks and help protect your business from fraudulent activity. Remember the information we shared in this article the next time you have a sketchy order, unreasonable return request, or any other suspicious behavior.

Do you want to learn more about cyber security for ecommerce?


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