Rochelle Blease is the president of G2 Risk Solutions, a global risk management firm.
E-commerce has undoubtedly transformed the way people shop. While this is nothing new, we have seen a significant uptick in the past year. For example, during Amazon’s 48-hour Prime Day window, U.S. consumers spent more than $14 billion, an 11% increase year over year.
This has created unprecedented opportunities for everyone. As people gain more convenience and choice in their shopping experiences, businesses expand their target market reach.
However, as transactions continue migrating to digital platforms, there’s also a greater risk of fraud and online threats. Online marketplaces find themselves at the epicenter of this challenge as they grapple with bad actors seeking to exploit platform vulnerabilities.
As a result, global regulators have stepped up online marketplace compliance standards through engagement rules such as the European Union’s Digital Services Act and the United States’ INFORM Consumers Act. New rules place a greater onus on the marketplaces themselves to monitor online transactions and proactively take down illegal content—or face significant penalties.
To successfully navigate today’s more risk-intensive digital environment, here are trending online schemes e-commerce marketplaces should closely watch for:
Counterfeit Goods
Counterfeiters have been around as long as people have conducted business, but it’s now grown into a massive global problem. Each year, approximately $2 trillion in counterfeit products are sold to consumers in the U.S.
Not only do fake goods erode customer trust, they also infringe on the intellectual property of legitimate brands. This can lead to legal repercussions for online marketplaces. As a result, platforms must implement stringent verification processes for sellers and watch for the following “tells”:
• Products are described as “cheap,” “AAA,” “1:1,” “mirror image” or “UA.”
• The phrase “high-quality” is used instead of authentic.
• Seller emphasizes that the products are authentic because they use “top-quality materials” or were “made in a state-of-the-art factory”—not because they are authorized.
• Product description uses abbreviated or misspelled brand names.
Shady Drug Sales
The internet’s convenience has provided a haven for drug transactions with greater anonymity. To evade detection, illicit merchants often use code terms to list drugs on online marketplaces. Here are some trendy drugs and the terms used to disguise them:
• GLP-1 agonists have sparked an online frenzy as popular brand-name drugs, such as Ozempic, surge in demand. Merchants are using marketplaces to “sell substandard or falsified” GLP1 agonists of these sought-after weight loss drugs. They may attempt to disguise the product by using slang terms, including “tirz,” “sema,” “reta” and “triple G.”
• Poppers are recreational drugs that are often marketed as “leather cleaner,” “room deodorizer” and “nail polish remover” to evade drug laws.
• Apetamin is commonly sold through classified listings and on social media. It contains cyproheptadine, a prescription-only antihistamine that increases appetite and causes users to gain weight. Sellers often use phrases like “vitamin syrup” and “slim-thick drink.”
• Melanotan 2 is a synthetic peptide that induces rapid-onset tanning. It is not FDA-approved and comes with significant side effects. Melanotan 2 is often sold as an injectable research chemical, nasal spray or by the acronym “MT2.”
• Mimosa hostilis (or mimosa tenuiflora) is a psychedelic botanical and a controlled substance in some jurisdictions. Sellers on online marketplaces may try to disguise it under the terms “MHRB,” “Jurema” or “Aya plants.”
Sham Digital Storefronts
Sham digital storefronts are disguised as legitimate businesses to trick victims into entering sensitive information that can be exploited for financial loss, identity theft or other fraudulent activity. Earlier this year, for example, 850,000 credit card numbers were stolen by the “BogusBazaar” ring.
These storefronts are often convincingly crafted facades accompanied by enticing offers to lure consumers. Sometimes, they collect payment and never deliver the item. While sham storefronts aren’t always obvious, there can be telltale signs:
• The absence of validating information, such as a website or social media presence.
• No reviews, seemingly fake reviews or bad reviews.
• The products appear copied and pasted from another website.
• The seller’s name seems to be auto-generated.
• A random assortment of products that wouldn’t normally be sold by a single seller.
• Pricing that feels too good to be true.
Fraudulent activity like fake digital storefronts can cause serious credibility issues for legitimately operating marketplaces. This is why marketplaces need to take swift action to avoid negative impacts on future business longevity.
Fake Reviews
The proliferation of fake reviews has become a significant obstacle to online marketplace integrity. When merchants acting in bad faith artificially inflate their product or service ratings, they harm legitimate businesses and decrease trust across the entire marketplace. This problem is not isolated to mere occasional bad actors.
Alarmingly, there’s been a rise in the fake review industry. Between the 200 million possible fake reviews Amazon blocked last year and the 115 million rule-breaking reviews left on Google Maps in 2022, this new industry has seen a 20% year-over-year increase between 2021 and 2022. Online platforms must continue to combat fake reviews to create more transparent and trustworthy marketplaces.
Red flags to watch for include:
• Generic reviewer profiles.
• Reviews without verified purchase badges.
• Low-quality review content with only a few words.
• Poor grammar and spelling.
Building Trust While Capturing Opportunities
Bad actors present complex challenges for online marketplaces that strive for a safe shopping experience. As illicit sellers become more sophisticated, so should online marketplaces.
While there’s no clear-cut way to completely stop illicit sellers, marketplaces must remain vigilant, enforce robust security measures and build strong partnerships to keep consumers safe, meet regulatory requirements and earn trust.
Technology will also play a role. AI, for instance, can analyze new merchants to help stop bad actors from onboarding. Of course, it’s crucial to include human intelligence in your marketplace merchant monitoring strategies, as well, as this can help find the right balance between accuracy and scale.
The key is to take proactive steps to demonstrate that marketplaces can maintain safe online commerce environments for greater consumer trust while capitalizing on the immense opportunities of the digital economy.
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