From its humble beginnings as an innovative method of retail shopping, eCommerce has now established itself in Australia’s commercial and consumer marketplace. Its presence has become a formidable force, transforming the way retailers and consumers connect.
For small businesses, the current eCommerce boom poses a massive opportunity, allowing access to new customers all over the country or even the world.
But there are also massive risks. Where transactions are faceless, fraudulent activity is rife. In this article, learn all about eCommerce fraud and how to protect your online business, plus explore some effective ways to reach new customers and expand your brand.
The rise of eCommerce in Australia
eCommerce has gone from being a novel concept to an industry powerhouse and is now the driving force behind booming online purchases. As shoppers become increasingly comfortable with buying goods digitally, this trend is only expected to grow in upcoming years.
In 2021, Australians spent a record $62.3 billion ordering physical goods online. One in five households (about 5.4 million) engaged in online shopping – up 39% compared to 2019.
Predictions suggest eCommerce usage will only continue to increase, albeit at a slower pace than was seen in 2020-21. For small businesses starting out online, the opportunity has never been greater.
What is eCommerce fraud and why is it on the rise?
eCommerce fraud is any type of fraudulent activity that occurs on an eCommerce platform. It’s not always the retailer being defrauded directly, however even if the customer is the defrauded party (credit card fraud, for example), it’s the retailer that inevitably loses out anyway.
With the increase in eCommerce spending has come an uptick in eCommerce fraud.
In the 2022 financial year, fraudulent card payments in Australia totalled almost $500 million, with the vast majority of those made online.
If your business is targeted by cybercriminals and fraudsters, that’s going to cost you money and time. But it can also have a negative impact on your brand and your reputation, which can severely affect future growth.
How to grow a successful eCommerce business
There are many ways to boost the growth of your eCommerce venture. But it’s important to keep fraud prevention and cybersecurity in mind at every step, making sure your brand and business are protected, and that your growth is optimised and sustainable.
Here are a few critical areas to focus on:
Brand
A strong brand identity can help you to stand out from the crowd and connect with your target customer base. Consider investing in marketing, including on social media. Find out where your customers are online and meet them there.
Your website should also be visually appealing, with the same aesthetic and colour palette linking your whole online presence. It’s important to build trust into your brand, and every touchpoint with your customers will play a role in that.
However, strong branding can be easy to imitate. Another vendor may try to sell lesser-quality products under very similar branding, in a bid to dupe shoppers. Worse, they could create scam emails appearing to be from your business, to scam your customers. Where possible, provide resources to customers when you’ve identified a copycat scammer to help them avoid mistakes.
Product
The most important part of building a great brand is building a great product. The best marketing and branding in the world means nothing if the product doesn’t live up to the hype.
Before you launch, do as much real-world testing as possible. Seek genuine feedback from your target audience and act on any reasonable advice they give you.
After launch, keep that feedback loop going. Encourage customers to share their experiences and opinions, either privately through a feedback form, or through online reviews. Research has shown 98% of Australians read online reviews before they make a purchase, and 94% believe them to be trustworthy.
Look out for recurring issues or challenges highlighted and try to address them openly.
Customer service
Online, good customer experience means good user experience. Spend some time using your site as if you were a customer, and make sure it’s easy to navigate.
Customers should be able to browse and add items to their basket seamlessly. The checkout process should be quick, frictionless and trustworthy, with various payment options (it’s estimated that around two-thirds of carts are abandoned, with user friction being a major factor in this behaviour.
Consider having dedicated pages for things like FAQs or sizing guides, to ensure customers have all the information they need at their fingertips.
It’s when things go wrong (which they inevitably will) that customer experience turns into customer service. Common mishaps in eCommerce can include products arriving faulty or damaged, or not arriving at all.
Respond to any negative reviews politely, and with intent to solve the problem. This shows there are humans behind the business, and that those humans prioritise customers’ needs.
A negative experience turned into a positive one is often more powerful than a positive experience in the first place, and a customer who ends up satisfied can become your biggest brand advocate.
Shipping
Shipping plays a huge role in customer experience, but in most cases, you’ll be using third-party providers, so it’s important to control what you can – particularly the quality of your labelling.
Consider investing in technology for printing reliable, accurate labels, and make sure your labels are compatible with the courier you choose. You should also be able to print fast enough that you don’t create a bottleneck.
A powerful device such as the Brother QL-1100NWB can make a world of difference to your online operation if you’re printing up to 60 labels a day. With Bluetooth and wireless connectivity, the QL-1100NWB can print shipping labels up to 10cm wide from popular eCommerce platforms like WooCommerce, Shopify, eBay and more.
If your online operation is expanding and business is picking up, then a direct thermal label printer such as the Brother TD-4550DNWB can get the job done. With a print capacity of up to 5,000 labels a day, it can easily handle your shipping label requirements, and can be seamlessly integrated into existing and future workflows.
Financials
As your eCommerce business grows and sales volumes increase, things can change quickly. That’s why it’s so important to stay on top of your numbers.
Make sure your sales and inventory are well organised and synced in real-time (software such as HARMONiQ and Xero can help) so you’re not selling items you don’t have ready to ship, and so you know when to re-stock.
Use analytics to understand how your customers are finding you, so you know where to re-invest in marketing.
Make sure your prices cover your overheads (which can build up fast), including any absorbed costs such as shipping. If you’re offering free shipping for orders over a certain amount, make sure the numbers add up.
Payment and data protection
Your checkout experience should be secure, reliable and easy to use. Offer a selection of payment methods such as PayPal, buy-now-pay-later and Apple Pay, but not so many that your page appears cluttered and spammy.
Also consider data protection, and where customer data is stored (securely and in line with, or exceeding, regulations where you’re operating). Failing to properly protect customer data puts your business at higher risk of a data breach, which can be catastrophic in terms of financial and reputational damage.
You should also be able to direct customers to information on your data management practices. People want to know their card details and identifying information is safe – and that you have the means to delete it if requested.
Protecting your eCommerce business as it grows
As your business grows and your brand becomes more recognisable, you will, unfortunately, become more at risk of fraudulent behaviour.
Being aware of the types of fraud you might face is the first step towards protecting yourself.
Common types of eCommerce fraud
Online fraud is complex and ever-changing, with new types of schemes and scams constantly emerging. However, eCommerce fraud typically falls into one of the following eight categories:
- Credit card fraud: Also referred to as ‘card not present’ (CNP) fraud – is often what springs to mind when you think of eCommerce fraud. Typically, criminals won’t have the physical card, but its information accessed via a security breach or purchased on the black market, which they can use to purchase goods online. While card owners are usually refunded by their bank or card provider, this often only happens once the goods have been shipped or services provided, meaning it’s merchants that end up out of pocket
- Card testing fraud: Card testing fraud happens when a criminal with access to multiple sets of credit card details makes small purchases on each, to see which work and which don’t. The cards that work will then be used for bigger-ticket purchases
- Interception fraud: Interception fraud is where a criminal places an order with a stolen credit card, using genuine shipping details that correspond to that card. They then find a way to intercept the package before it’s delivered. Fraudsters may contact your business asking for the shipping address to be changed. However, people have even been known to wait near the delivery address and take packages from the doorstep
- Refund fraud: Refund fraud is yet another type of credit card fraud. In this instance, a criminal makes a purchase using stolen credit card details, then contacts the business to request a refund. They’ll ask for the refund to be made into a different account, claiming there is some issue with the one they paid with. The sale amount is credited to the fraudster, but the business will also be liable to refund the original fraudulent payment
- Fraudulent chargebacks: Sometimes called ‘friendly fraud’, fraudulent chargebacks are where a seemingly legitimate customer makes a purchase and then requests a refund – or chargeback – from the payment processor, usually their credit card company. Customers could tell the processor they didn’t receive their goods or services when they actually did, or falsely claim they cancelled or returned the order. Either way, the payment is deemed invalid, and the money refunded, leaving the customer with both the goods and the money
- Account takeovers: An account takeover is where a criminal accesses the account of a legitimate customer, getting their username and password through a phishing attack, or using leaked or stolen data. Criminals can then log in to the customer’s account, change the delivery address and make purchases using saved details. Depending on the type of business, they could also access additional information about the customer, or even withdraw funds
- Triangulation fraud: Triangulation is an elaborate way for criminals to gain access to working credit card details and commit credit card fraud. A criminal will set up an online store selling in-demand items at competitive prices. When customers buy those items, they also hand over their credit card details, which are used to purchase the products at a legitimate eCommerce store, which ships them to the customer. The customer gets the product they wanted but pays more than expected. The criminal gains access to their credit card details, and the eCommerce store will likely not receive any payment for the fraudulent purchases
- Cyber threats: Cyber security is much broader than just preventing fraud. Any business that operates online is also susceptible to hacking and data theft, Distributed Denial of Service (DDOS) attacks, ransomware and more. These can be debilitating, leading to reputational damage and loss of earnings that can have long-term effects. Even very small businesses should have an evolving cybersecurity strategy, and a plan of what to do – and how to minimise the damage – if they face a cyber attack
How to protect your eCommerce business from fraudulent transactions
When it comes to protecting your business from fraudulent activity, the first step is awareness. If you know what to look out for, you will be much more likely to identify fraud and put a stop to it.
Telltale signs of eCommerce fraud can include:
- Multiple orders from multiple credit cards, either from one account or accounts with the same identifying features (delivery address or IP address, for example)
- A fast string of orders from a single customer, or multiple orders to different addresses
- Inconsistencies in data, such as a mismatch between the postcode and city
- A sudden influx of orders to ship somewhere unusual (for example, a country you have never shipped to before)
- An existing customer ordering to an unusual location, or from an IP address in a very different location
- An existing customer making a much larger purchase than usual
- Multiple declined transactions from a single account
If you suspect a transaction could be fraudulent, it’s best to try to verify the customer’s identity before completing the order.
Check whether the IP address matches the billing address, and that the billing address and shipping address match.
If possible, see if the customer recently made changes to their contact details or shipping address.
If they haven’t, and you’re still suspicious, reach out to the customer via phone or email. In most cases, even if the transaction is legitimate, they’ll appreciate you checking in.
8 ways to help prevent fraud in your eCommerce business
It’s even better to prevent fraudulent eCommerce transactions in the first place. Unfortunately, there will always be bad actors out there, and small businesses operating online will always be vulnerable to some extent. But there are ways to protect yourself and your customers.
- Choose good providers with fraud support: When choosing providers, such as banks or software services, look for those that offer additional cybersecurity and fraud support. If that support is tailored to eCommerce businesses, even better
- Prioritise security when running your business: Make cybersecurity and fraud prevention a priority in the day-to-day running of your business, rather than an afterthought. And don’t skimp on services that can help you out
- Create a blacklist of offenders: Create and maintain a blacklist of repeat offenders, and don’t be afraid to ban customers from returning or purchasing again
- Stay up to date with compliance requirements: Make sure you remain compliant with the Australian Payment Card Industry Data Security Standard (PCI DSS), set by the PCI Security Standards Council is the governing body setting the compliance framework. Small businesses are generally not required to prove compliance but can choose to – and this could put you in good stead regarding both fraud prevention and future growth
- Identify when risk is at its highest: The risk of fraudulent activity is often higher during peak shopping periods – think Christmas and Black Friday – when shoppers and retailers are more likely to be preoccupied and let their guard down. Know when you’re most at risk and be extra vigilant
- Stay educated: As we know, knowledge is power, so try to stay on top of all the latest tricks, scams and schemes that fraudsters are employing. Upskill yourself to identify suspicious activity, and remain vigilant, always. If something doesn’t feel right, trust your gut
- Educate your customer base: If you have a strong relationship with your customers, it doesn’t hurt to try to educate them about fraud in eCommerce, too. Offer advice on how to protect card details and passwords – ultimately protection for them means protection for your business
- Invest in fraud detection and prevention tools: As your business grows, it will become harder to monitor all transactions yourself, so consider investing in fraud detection and prevention software. Think about the potential financial and reputational damage fraud can cause – specialist tech may cost you less in the long run
Setting your eCommerce business up for success
In today’s digital world, eCommerce security is paramount for the growth and success of any online business. Consumers are becoming more aware of the risks associated with online transactions and want to be assured that their personal information is kept secure. Investing in fraud prevention measures not only protects your bottom line and customers, but it also gives you peace of mind so that you can focus on growing your brand.
Furthermore, ensuring a secure checkout process provides customers with the confidence to make purchases, thus boosting sales and revenue.
A labelling solution is another critical aspect of eCommerce, where business owners can quickly and easily create an array of labels on demand. Whether it’s shipping labels, barcodes, QR codes, logos or graphics, Brother is always at your side to help make labelling a breeze.
No matter where you are in your eCommerce journey, Brother offers systems and products designed to save you time, energy and costs so you can focus on the growth of your business. To learn more about how deploying a connected device and software solution can help support your operations, contact Brother today.
