Tom-Chris Emewulu
Chargeflow's Digital Evangelist
Table of contents

The peak season is around the corner. And with that comes a higher probability of eCommerce fraud.

But you already know that. A Bloomberg report said PayPal had to shut down 4.5 million accounts last year after discovering scammers had hacked their incentive and rewards program. A recent publication suggests merchants could pay over $100 billion in chargebacks this year alone, with friendly fraud accounting for 61% of all chargebacks. On the other flank, account takeover fraud increased by 131% in the second half of 2022 compared to H1 the previous year. T2 2022 ESET Threat Report uncovered a six-fold increase in shipping scams in 2022.

Hence, my goal for this piece is to equip you with the knowledge and strategies to safeguard your business against shipping scams. We'll explore the types of shipping scams, warning signs, and shipping scam red flags you should know.

Understanding Shipping Scams

Shipping scams are fraudulent schemes where individuals or organizations manipulate the shipping and delivery process to access your private information or intercept merchandise. These scams take various forms but generally result in financial loss or personal information theft.

Shipping scams affect both merchants and their customers. In some instances, the fraudster can pose as an agent of a delivery company like UPS, USPS, or FedEx. They’ll then try to persuade the target to provide additional information to complete the shipping or delivery process.

For example, the fraudster may call, email, or send an SMS to you or the customer asking for specific verifications of private details or credit card information. The request is unrelated to any actual orders or transactions, as the person on the other end of the conversation is a con artist trying to obtain the personal information to commit identity theft or other financial fraud.

Email or SMS messages might include a phony tracking link that leads to a fake version of the shipping company’s official website. But in reality, it’s a phishing site. And with the proliferation of AI tools nowadays, scammers can effectively create convincing landing pages to deceive unsuspecting individuals.

If you want to beat the scammer in their game and safeguard your sales this peak season, you must understand the types of shipping scams that might come your way and how to avoid each scenario.

Types of Shipping Scams

Shipping scams have become increasingly sophisticated, just like other eCommerce scams. Fraudsters are progressively upscaling their tactics with legitimate-sounding requests for people's personal and financial information. New scams are constantly emerging, each more convincing than the last. Be aware of the following scams to avoid falling victim to con artists.

Shipping Scam #1: Fake Shipping Companies

In today's digital landscape, fake shipping companies are a significant concern for all merchants. These scammers create an illusion of legitimacy through enticing websites and social media profiles. They lure unsuspecting merchants with promises of unbeatable prices and exceptional service. However, you'll encounter numerous issues once you engage the services of these fraudulent companies. Standard attributes of fake shipping companies include:

  • Phony Websites and Social Media Profiles: Scammers often create fake websites and social media profiles that imitate trustworthy shipping companies. They use deceptive tactics such as logo imitation, industry jargon, and fake testimonials. Please exercise caution and thoroughly research any shipping company before using their services.
  • False Promises and Unrealistic Prices: One of the primary tactics of fake shipping companies is offering meager prices that are too good to be true. These scammers aim to attract merchants, promising to save them money on shipping expenses. If a shipping quote appears excessively low compared to other reputable providers, investigate further before committing.

Shipping Scam #2: Package Interception and Theft

Package interception and theft is another prevalent shipping scam that can impact your businesses adversely. Criminals, such as porch pirates or individuals with insider access to shipping facilities, exploit vulnerabilities in the shipping process, leading to the loss or theft of packages. Package interception or triangulation scams can occur in any of these ways:

  • Porch Pirates and Mail Theft: These criminals target packages left unattended on doorsteps or porches. They monitor delivery schedules and seize opportunities to steal packages, causing frustration and financial loss for you and your customers. The buyer can hit you with "order not delivered" chargeback when that happens.
  • Insider Involvement and Shipping Mishandling: Unfortunately, some shipping scams involve insiders who intentionally divert packages to alternate addresses or mishandle shipments. Ideally, you should regularly evaluate the security protocols of your shipment partner to reduce the chances of insider involvement.

Shipping Scam #3: Phishing Scam

Phishing, as we intimated earlier, is one of the most prominent forms of shipping scams where the scammer pretends to be a well-known shipping company employee and asks for sensitive information through email or text. Sometimes, the scammer may encourage the victim to click a link to update payment details or delivery address.

If you receive such notification, never click the links or provide sensitive information, even if you're sending or expecting a package through a similar company. If you need clarifications, always contact the trusted shipping company to verify any package or delivery updates.

Sample of phishing scam text

Securing Your Shipments: Vital Tips that Save You Money

Protecting your merchandise against shipping scams is crucial for your business integrity and financial sustainability. Data from the Federal Trade Commission (FTC) shows a 30% increase in the money lost to fraud in 2022 compared to the previous year. Shipping and delivery fraud are categorized as "imposter fraud," where the scammer falsely claims to be associated with a renowned company or government organization. The FTC data cited above suggests imposter fraud is responsible for a $2.6 billion loss to U.S. residents.

Analysts argue the actual cost can be much higher as many cases go unreported. Hence, you do yourself a disservice if you don't have security measures to limit exposure to losses during shipments.

Here are some recommendations to consider:

  • Start by choosing a reputable shipping services

Lesser-known agencies might offer cheaper options, but the risk of dealing with charlatans is higher than any ROI benefit. Do your due diligence before engaging with such companies. Opting for well-established and recognized courier services and carriers is always the best bet, as these companies have a proven track record of reliability and security. By partnering with trusted providers, you enhance the chances of a smooth and secure delivery process.

  • Ship orders with insurance

Protect your shipments by obtaining adequate insurance coverage. Insurance provides financial protection and peace of mind in the unfortunate event of loss, damage, or theft. Assess different insurance plans available and select the one that aligns with your shipping needs.

  • Always include order tracking

Take advantage of advanced tracking technologies offered by shipping services to help customers know the status of their orders. Real-time tracking enables you and your customers to monitor the progress of each shipment. This transparency instills confidence and allows for timely intervention for unexpected issues.

  • Follow industry best practices to limit fraud exposure

Aside from the above standard shipment protection due diligence, one key industry best practice to limit fraud and order interception is to require a signature upon delivery. This ensures your packages reach the intended recipients and are not left unattended. Additionally, you can provide specific instructions for restricted delivery as an extra layer of security.

  • Use tamper-evident packaging

Tamper-evident packaging provides crucial insurance against unauthorized order access or tampering with the product. There are different kinds of tamper-evident packaging. These include seals, bands, or labels that break or show clear signs of manipulation when a third party attempts to open the package. Other tamper-evident mechanisms may be specialized closures like shrink bands, breakable caps, or indicators that change color when exposed to specific conditions.

  • Train your employees on shipping best practices and fraud tactics

Train your employees to ensure your inventory records are accurate and up to date. By closely monitoring stock levels and conducting regular audits, you minimize the risk of shipping incorrect or missing items. Precise inventory management contributes to a smooth shipping experience and reduces the likelihood of disputes.

Further, ensure you have standardized fraud reporting and dispute handling processes. For example, you can establish a reporting system for failed shipments so junior staff are not tricked into sending shipment details to scammers.

  • Keep Communication Open

Maintain open lines of communication with your customers throughout the shipping process. Provide them with tracking information, estimated delivery times, and any necessary updates. By staying in touch, you enhance customer satisfaction and address any concerns promptly – meaning they can always talk to you before seeking remediation from their bank.

In the final analysis, whether you're a seller or buyer, your common sense is your first defense in avoiding online scams and thefts. Do not share any personal information with unsolicited messages or phone calls. Always obtain tracking numbers and keep an eye on the progress of your orders. Be wary of suspicious email links or attachments, and do not click on them. Verify the authenticity of any delivery messages with the actual carrier to avoid being deceived. By not leaving packages on the doorstep, you can prevent porch theft.

How Shipping Scams Lead to Chargebacks

Order shipment issues are the leading chargeback reason code today. That means shipping scams are a significant contributor to post-purchase chargebacks.

To understand: chargebacks happen when customers dispute transactions with their card issuing banks, leading to funds reversal from the merchant's account (and penalties charged to the merchant). In terms of shipping scams targeted at merchants, there are four ways the issue can lead to a chargeback:

  1. Non-Delivery of Goods: If the merchant uses a fake shipping company to send the order, the customer will file a chargeback when the delivery timeline elapses and they don't receive their order.
  2. False Claims of Defective Products: Some scammers may exploit return policies by falsely claiming the received products are defective or not as described. They may manipulate the situation to get freebies through a chargeback, even if the seller delivered the product right.
  3. Stolen Goods through False Claims: Scammers may deliberately misrepresent the quality or condition of delivered goods to claim a refund or replacement through a chargeback. Scammers use this tactic in schemes aiming to receive products legitimately without paying for them.
  4. Unauthorized transactions: Scammers may stick failed delivery notices on the business's front door or use phishing to trick the seller into providing private order data from a corporate card. They'll then use the obtained card details to make unauthorized transactions. When the actual owner realizes the unauthorized transaction, they will file a chargeback, and the merchant will incur losses.

This is not exhaustive by any means.

So, you must implement stringent fraud detection measures, closely monitor suspicious orders, and establish clear refund and order handling policies to ensure transparent communication with customers. Equally vital, use chargeback alerts to stay ahead of scammers. With chargeback alerts, you can effectively stop disputes before they happen and avoid all the headaches of dealing with chargebacks.


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