How Fake Products and E-commerce Fraud Work through Online Advertisement

by Ben Hartwig Published on June 9, 2020

E-commerce fraud and fake products are rampant. Online shopping and the anonymity of the internet is partly why this is the case. Read on for details and solutions.

E-commerce sales could make at least $600 billion by the end of this year. Unfortunately, where there is gold, there is bound to be “looting”. The culprits: fake products and e-commerce fraud. Both of which are found in online advertisements. This is not surprising considering the massive uptake of internet use.

E-commerce fraud is worth around $3.8 trillion dollars. This is an increase of over 49.6% over the past 10 years. It makes up 7% of the world trade, to the tune of $600 billion. The sales of fake goods amount to $4.5 trillion! Fake luxury goods make up to 70% of that.

What Can Be Done?

Last month alone Google blocked and removed 2.7 billion bad ads. That was at a rate of more than 5,000 bad ads per minute. The search engine also suspended nearly 1 million advertiser accounts for policy violations.

During Dec 2019 Facebook removed 132.2K pieces of content. This was in response to about 5.9k counterfeit reports. They’ve even banned ads promising to prevent, cure, or in any way incite panic around COVID-19.

By 2022, it’s thought that fraudsters will steal between $44 billion and $87 billion. This refers to theft from the digital ad marketing industry. This is through fake advertising online. It’s so important for companies to be able to protect against this.

How E-commerce Fraud Works through Advertisement

Firstly, we have a rise in “Ghost Sites’’ on the internet. They have actual content and look very real. But in fact, they are just duplicates of genuine sites. They are only created to defraud website visitors with false advertising.

Let’s also consider platforms like Google, Facebook, and Instagram. How does e-commerce fraud work on those platforms? Well, there are 2 types. These are account takeovers and Identity theft. These are common to websites and email in particular.

Account Takeovers: Storage of customer information is a huge problem. Many of us have at least one e-commerce membership account. It’s a convenient way to shop. It makes for easy checkout, which we all love! Yet this comes at a price. Fraudsters hack into these accounts and send fake ads to customer emails. Customers are then tricked into providing their logins. These are then used to make illegal purchases. To be aware of this type of phishing you can check the owner of the email address before opening the email from an unknown person.
Identity Theft: Social media platforms do their best to protect their customer’s data. Yet, database breaches still happen. Hackers steal personal details like passwords and credit card information. Like account takeovers, hackers use sinister spam email to do their dirty work. This includes selling people’s personal ID for illegal means.

How Big Companies Fight Counterfeit Products

Luxury brands have always been the target of counterfeiters. There is simply too much demand for fake brand replicas. For years, big companies threw money at the problem. They had the latest security, lobbied government and sued like no man’s business. Not much came of it. Here are a few more effective ways:

● A return to “meaning”:

Luxury brands have lost their way. They need to give people a reason to buy from them. High prices make it too tempting for people to buy fakes.

Big companies need to stand for something bigger than their price tags. They could make a connection with their hometown. They could try and align with the environment. Companies could use local materials in their product, making it hard to copy.

These companies need to find out what that special ‘something’ is. This is an effective way to capture people’s hearts. A captured heart makes for a loyal customer.

● Monitoring Distribution Chains:

Luxury brands mostly manufacture in other countries. This is for reasons like cheap labor and less tax! But this has come at a cost. For example, the use of overseas factories has resulted in excess product. These have then found their way on to the streets. This may not be so easy if factories are brought back. Localization brings about more control and oversight. In return, hopefully much less counterfeit goods!

● Extra Security in the Packaging:

This means putting in a feature in a product that’s hard to copy. They can do this by using radio frequency identification technology (RFID). This is very similar to bar codes. RFID devices are put in their products which generate radio waves. These radio waves transfer data that identifies it. When this is done, it shows that the product is genuine. This has already helped to reduce the spread of counterfeit products.

How to Protect Your Brand from Counterfeit Products

There are various ways to protect your products from counterfeiters. We will focus on 3 solid ways below:

● Develop a Brand Strategy:

Create a strong brand and use digital marketing to connect with your customers. The name you select for your brand should not resemble other brands. It should be unique, with a distinct feature. This could prevent customers from getting misled by counterfeits. Cement your brand into people’s minds. You should also stand behind your brand.

● Create Brand Guidelines:

Make sure to set rules and guidelines for your brand. Educate everyone on how to use your brand name and logos. Use social media to educate your followers. This builds brand awareness and increases sales.

● Have Brand Consistency:

Don’t change your branding too often. This only encourages brand confusion. Many iconic brands tweak their logos only slightly. Also, they do so after long periods of time. You need to have customers get used to your brand. This may increase the chances they will spot the counterfeits.

E-commerce shopping is growing fast. As we have seen, this is a good and bad thing. It’s easier for fraudsters to defraud people online. The horse has bolted. All we can do is educate ourselves on how to fight e-commerce fraud. This starts with being vigilant and observant. It also requires a proactive approach like researching suspicious activity. This applies to both the consumer and e-commerce store owners.

Author

Ben is a Web Operations Executive at InfoTracer who takes a wide view from the whole system. He authors guides on entire security posture, both physical and cyber. Enjoys sharing the best practices and does it the right way!