5 Common Online Marketplace Scams

We live in a time when we can search for anything we need, and within a day or so (sometimes even sooner) it’s at our front door. Online marketplaces like Amazon, Walmart and Alibaba fuel this engine—processing millions of orders every single day. But how many of those orders are legitimate, and how many are scams?

According to research, merchants were estimated to have lost $38 billion to online payment fraud in 2023. The same research forecasts this number will soar to $362 billion globally by 2028.

With new technology, scams are becoming more sophisticated. And with the launch of more shopping platforms (e.g. TikTok Shop), scammers are finding new avenues to reach their next victims. Some pose as genuine sellers to scam buyers, and others pose as genuine buyers to scam sellers. It’s a two-pronged problem.

As an online shopping platform that wants to protect its users from fraud, how can you spot a scammer? And what are some of the common scams to look out for?

Counterfeit Goods

Research from Ofcom showed that counterfeit goods are the second most common type of online scam in the UK (just behind impersonation fraud).

Counterfeit goods are often associated with expensive designer items. Scammers lie to buyers—selling them “genuine designer items” at designer prices, only for them to receive bad quality knock-offs that don’t hold any brand value.

In November 2023, Homeland Security and the New York Police Department uncovered over $1 billion of fake designer goods in what federal authorities called “the largest seizure of counterfeit goods in U.S history”, saving thousands of consumers from fraudulent sales.

But it doesn’t end with fake Rolexes and knock-off Chanel bags. Counterfeit cosmetics are becoming a serious concern on TikTok’s shopping platform. Samples retrieved by the UK’s Police Intellectual Property Crime Unit flagged toxic levels of arsenic, mercury and lead. And in LA, U.S. Customs and Border Protection seized nearly $400K worth of fake Apple products, resembling iPods and Apple Watches.

→ Read our article on the rise of counterfeit goods on online marketplaces.

Fake product reviews

Fake reviews are misleading and deceptive.

The first online reviews started appearing around the late 1990s. They were designed to add an extra layer of protection for consumers in this new, unchartered world of online shopping.

And today, they still work! Genuine reviews are, without a doubt, one the greatest markers of trust for buyers and sellers. It’s why 90% of people read online reviews before making a purchase.

Scam artists know this, and consequently create fake reviews to appear more trustworthy. They pay fraudulent review rings to prop up their products and convince genuine buyers that their order will be honored and their money is safe. Unfortunately, they soon find out this isn’t the case.

→ Read our article on how to spot fake reviews on your platform.

Fake product listings

Fake product listings are exactly what they sound like. The listing doesn't match the product the buyer receives.

In some cases, the photograph looks nothing like the product. It’s often poor quality or it’s damaged.

In other cases, buyers receive something that’s completely different from what they ordered. What was supposed to be an iPad, is actually a heavy book in an iPad box.

Sometimes, scammers are a lot more subtle. They make misleading claims in the product description—promising extra long battery life, or a shampoo that’s “clinically proven” to restore your hairline to its original glory. Needless to say, the product doesn’t deliver on its claims.

But in most instances, customers buy a product from a fake listing and receive nothing in return.

Account takeovers

To combat fraud, many platforms now require ID verification from all of their users.

However, scammers have found ways around this. Most notably, by orchestrating account takeovers (otherwise known as “account hacking”). This is where fraudsters take ownership of buyer (or seller) accounts using stolen passwords and usernames from the dark web.

Quickly, they’re able to exploit that account for their own scams. Sometimes buying high value items with their victim’s stored payment details. Or posing as a legitimate seller to post fake listings. Authorities count this as a serious form of identity theft.

Refund claims fraud

Roughly 10% of all returned goods are based on fraudulent returns and the manipulation of return policies.

There are all kinds of refund fraud. For instance, defective returns. This is where someone purchases something they already own, to then return their old, defective item, instead of the new item they just purchased. Or “bricking” which is when someone strips electronics for valuable components, then returns the unusable item for money back. Scammers are also known to send counterfeit goods in their returns. Often, by the time sellers notice the misdemeanor, the scammer has disappeared without a trace.

In 2023, Amazon acknowledged that one particular refund fraud scam cost them $700,000. A crime ring recruited legitimate shoppers to purchase items, get a refund, but find cunning ways to keep the items or sell them for profit.

13 red flags to spot a scam on your online marketplace

• Sellers offering expensive goods at too-good-to-be-true prices.
• Sellers with multiple listings of the same products.
• They sell a mix of expensive items (e.g. Apple Monitors) and cheap, lower-quality items (this flags an inconsistency).
• Doctored images (although, this is becoming harder to detect with AI image generators).
• The ‘payment link’ starts with ‘http’ not ‘https’ (‘https’ links are encrypted for user security).
• Their IP address doesn’t match where they say they are.
• They have an usually high percentage of reviews for how many items have been purchased from their store, and all of them are positive.
• They have multiple negative reviews from verified buyers.
• The same points or phrases keep coming up in their reviews (e.g. “well-made”, or “looks exactly like it does in the picture”).
• There are suspicious changes on their account — changing a name or address that varies vastly from the original (this could be a sign of an account takeover).
• There are multiple accounts paired with their IP address.
• Buyers consistently return the items they’ve purchased.
• They try to mimic other brands (e.g. Their username is very similar to well-known brands. They might call themselves something like ‘Dior Outlet Official’).

How Pasabi can help you stop scams and protect your users

ID verification is just one part of the puzzle. Pasabi helps you build a picture of user behavior post-onboarding through continual monitoring.

Using AI, behavioral analytics and cluster technology, our scam detection solution flags suspicious activity, such as:

• Bypass
• Fake reviews
• Poor customer feedback
• Suspicious account behavior

From one dashboard, you can detect bad actors and emerging threats on your platform. Armed with this knowledge, your team can then take immediate action to mitigate the biggest risks and protect your users.

→ Learn more about our scam detection solution.