Americans at major risk from online shopping scams this holiday season

American shoppers may need to be extra cautious this holiday shopping season. Comparitech’s analysis of publically-available data indicates that the number of American consumers reporting online shopping scams increased by around 300 percent from 2015 to 2018.  We also found that consumer-reported online purchase scams ramp up notably every year during the fourth quarter, the prime holiday shopping season.

Key takeaways:

  • The number of reported online purchase scams increased by around 300 percent between 2015 and 2018
  • On average, online shopping scam reports increase more than 70 percent during and immediately after the prime holiday shopping season (October through January)
  • As of September 2019, the total reported loss value from online shopping scams reported to the Better Business Bureau was $10 million
  • An increasing number of consumers are reporting financial losses from online shopping scams, as well as a larger total loss value
  • The number of reported online shopping scams is trending slightly downward in 2019, which may relate to a crackdown on scam ads on websites like Facebook

Online shopping scams are a top consumer threat

Consumers often flock to the Better Business Bureau to report all kinds of unsavory business activities. Since 2015, the BBB has also allowed consumers to report various scams.

In all, there are over two dozen different types of scams consumers can report to the BBB. Comparitech analyzed the data submitted to the BBB and we found a few trends hidden in self-reported data that may put some consumers on alert.

For example, we found the most commonly reported threat in the BBB’s system is online shopping (or online purchase) scams. These represent just over 15% of all scams reported to the BBB’s scam tracker tool, just ahead of phishing scams.

While online shopping scams don’t represent the largest total loss value for consumer-reported scams (that title goes to Nigerian/Foreign Exchange Transfer scams), the total year-over-year loss values for online shopping scams are on the rise, even as the median has fallen.

online shopping scams by year

 

Our analysis of self-reported 2018 online purchase scam data shows the median loss value of online shopping scams nearly doubled in 2018 versus 2017, from $75 the year before, to $137.5.

Holiday shopping season proves to be the worst for consumers

Thanks to streamlined payment methods like PayPal and auto-fill for billing and credit card information, online shopping is easier than it’s ever been. That convenience may also be responsible for a rise in impulse buying and may be directly related to an increase in reported online shopping scams.

According to a 2018 survey from Slickdeals.net, Americans spend around $450 each week in impulse purchases. And while most of those unplanned purchases go toward food, over 64 percent of surveyed respondents noted that the primary reason for impulse buying was advertised deals.

The holiday shopping season is prime time for both physical and online retailers to offer critical shopping deals. It’s also the best time of year for scammers to set up low-quality, fly-by-night shopping websites designed to capture a portion of those impulse purchases.

The BBB’s scam reporting data confirms this, as well. Between 2016 and 2018, the number of reported online purchase scams increased an average of 73 percent between Q3 and Q4.

online shopping scams by quarter

 

The chart below shows the total number of scams reported by day. The volume of reported scams jumps notably each year around the holiday shopping season.

The 2018-2019 holiday season was financially damaging to consumers as far as online shopping scams are concerned. Over 100 online shopping scams were reported to its system on December 20 alone, with a total loss value of around $64,000. Those reporting scams on that date lost an average of around $640 each, revealing just how much loss potential exists during the holiday shopping season.

We conducted our analysis covering the BBB’s data up until the beginning of October 2019. Based on past behavior, it’s reasonable to assume that there will be a jump in scam reports this year, as well, with the expected spike in reports immediately following the holiday season in January 2020.

Facebook’s leading role in online shopping scams

Thankfully, the number of online shopping scams reported to the BBB has fallen in 2019, compared to 2018. Consequently, this may be related to Facebook’s increased removal of scam ads. The company chose to settle a court case in early 2019 after it was accused of turning a blind eye to advertisements purchased by scam artists. Part of that settlement included paying nearly $4 million and offering a new reporting tool on its site for users to report scam ads. 

online shopping scams facebook ads
Source: Facebook

There’s a good reason to believe Facebook is the key figure behind both the rise and fall of scam ads reported to the BBB. Facebook boasts around 1.6 billion users worldwide, over 200 million of which are in the US. Consumers in the US can encounter advertisements for fraudulent shopping sites almost anywhere online, but Facebook offers an easy and inexpensive medium to run advertisements to targeted groups. 

Additionally, a 2019 Pew Research survey found that 69% of US adults use Facebook and 37% use Instagram (which Facebook also owns). Only Youtube holds a higher percentage, with 73% of Americans using the video platform. However, YouTube’s design makes it particularly difficult to run advertisements for scam shopping sites. It’s much easier to run a static ad on Facebook and target its millions of daily active users.

Glaring holes in Facebook’s ad approval process likely resulted in numerous scam shopping ads slipping through users. Despite the criticism, many observers still find the company’s ad approval process wanting. Facebook is currently being criticized for allowing misleading political ads to be accepted on the platform. Buzzfeed also reported on extensive abuse of the Facebook ads that led to millions of dollars in losses users. 

For its part, Facebook has fairly restrictive language on its ad policies page. Despite that, the company has taken a lax approach to its enforcement of these policies, to the point of allowing scam websites and copyright-infringing services to purchase and run sponsored ad campaigns. 

The number of scam shopping ads running on Facebook may have fallen, but it’s still easy to find scam shopping sites and fraudulent sellers running ads.

Facebook scam ad cowboys
Source: Facebook

This sponsored (e.g., paid for) Facebook ad, for example, is advertising Dallas Cowboys jerseys for sale. And according to Thomas Sadler of Virginia, who submitted this example to Comparitech, “Number 21 is Zeke Elliot. Not ‘Sanders’. And jerseys are $100-$120. Not $29.”  

Even with a downward trend in 2019, shopping scams remain a major threat to consumers. Scam shopping sites, misleading product pages, failed deliveries, and false advertising remain among the top purchase scams consumers report to the BBB’s scam tracking system. 

Online shopping scams are a nationwide problem

Our analysis of data scraped from the BBB’s scam reporting tool also reveals a few other interesting facts about where scam reports are generated. For example, while the average loss value is comparatively low nationwide, a few states produce an astoundingly high number of reports, with far higher loss values reported.

online shopping scams state map

Our analysis indicates that consumers in Colorado have reported the most amount of money lost, at over $1.6 million since 2015. Meanwhile, there are no surprises among which states lead the US in the total number of reported online shopping scams. This mostly corresponds to population size. As of September 2019, Californians reported the largest number of online shopping scams (2,458) followed by Texas (1,655), Florida (1,152) New York (1,141) and Michigan (1,001). 

Nevertheless, some states’ shoppers report online shopping scams at an above-average rate. According to a 2018 NPR study, two-thirds of all Americans report shopping online. Based on those numbers, 1 out of every 25,000 American online shoppers has reported a shopping scam. Notably, that means Californians were more than twice as likely to report an online shopping scam, (9 out of every 100,000 shoppers in the state reported a scam). Coloradans, meanwhile, were about 75 percent less likely to report a scam to the BBB, despite having the highest reported loss values. 

How to spot an online shopping scam

It’s time to come clean: I’ve been fooled by online shopping scams. In fact, I’ve fallen prey to the siren song of cheap products on more than one occasion. I like to consider myself a wiser man at this point, but cheap goods that look like something I want still pull at my consumer heartstrings (boots and jackets are my weakness).

slim fit jackets online shopping scams
Cheap slim fit jackets?! My heart says “yes”, but my scam radar says “no”.

In fact, it took several rounds of purchasing cheap products from seemingly legitimate websites before I finally got the idea into my head that I was throwing my money away.

To be fair, the issue was not always failed delivery, although that has certainly happened a few times. Many of the cheap products I purchased did (eventually, sometimes months later) come in the mail. Far too often, it was the quality of the products I received that led me to believe I was scammed. 

Many Americans, like myself, also feel that way—at least according to our analysis of self-reported scam data and posts of popular scam discussion forums, like Reddit’s /r/Scams

Most online scams share similar DNA or follow the same pattern. Those scammed often come across too-good-to-be-true discounts through targeted ads on websites, or through sponsored and paid-for ads on social media platforms like Facebook or Instagram. The websites are usually designed to look trustworthy. Some may even have fake trust badges on the site to increase consumers’ level of confidence in making a purchase.

Eager buyers, looking for a deal they’d never find in a brick-and-mortar store or through a name brand, add items to their online carts and click “buy”. That’s when the trouble starts. 

At times, you’ll get no shipping details or purchase confirmation emails. The support email addresses (if any) on these websites often don’t work, or nobody responds. Or, you may wait weeks or months to receive the product you purchased, only to find it oddly misshapen with weird chemical smells and stitching that ultimately makes it look nothing like the product’s picture that prodded you to purchase.

Although Facebook reportedly cracked down on scam websites, we were still able to locate several suspicious sponsored ads on the site.

For example, we located the following sponsored ads generated by three different “companies”:

Each of these ads leads to a different website. Each of these websites was registered within the past few months (two in September, one in June). And each has the same information copied and pasted onto it’s about us page. One of the sites also shut down between the time we wrote the draft of this article to publishing.

These are all red flags that should give any online shopper pause. However, each of these sites is operating through Shopify, a well-known e-commerce platform. Carrying the Shopify-branded name likely removes some of the apprehension buyers may have, making it easier to push past the unease to continue making the purchase.

How to avoid online shopping scams

1. Check for a secure connection (HTTPS)

Make sure the online shopping website uses HTTPS and not HTTP. A website is secure if it has a lock symbol next to the web address in your web browser. HTTPS ensures no third parties can snoop on the connection between your browser and the site.

online shopping scams https

Any website that collects personal information, such as credit card details, addresses, and passwords, should have an HTTPS certificate. That said, even most scams sites now have HTTPS, so only using secured sites is no guarantee consumers will avoid online shopping scams.

2. Check the website’s ownership and registration information

Use a free WhoIs lookup tool to check the website’s registration and ownership information. Consumers should try to identify when the website was created, and whether or not any of the owner’s information is publically available. More trustworthy websites will have the owner’s information listed, including contact information. Sites that hide contact or ownership information may not always be untrustworthy but should be dealt with more cautiously.

The age of the site is also a trust factor and is also information you can glean from a WhoIs site lookup. Newly-created websites may be legitimate, but most scam websites are created and operated for only a few weeks before getting shut down.  You’ll even find some scam sites advertising “store closing” sales with large discount offers (50-70% off), even though the website was registered just a few weeks or a few months prior.

3. Look for trust badges or trust seals

Trust badges or seals are issued to e-commerce websites by various privacy and security organizations, or by payment processors like PayPal. These badges or seals are designed to indicate that the shopping websites you’re visiting offer some form of shopping protection and requisite online security measures. Research indicates trust seals do work to increase sales for websites. 

online shopping scams trust seals

Shopping scam websites rarely carry these seals. However, some may fake these seals and place them on the website to give the appearance of trust. Consumers should make sure to click on the trust seal to verify it’s real and not just a static image. Additionally, trust badges and seals are not entirely difficult for a website to obtain, and some badges or seals don’t require much verification (if any) that the website is legitimate.

4. Check the website’s “About Us” and other pages for errors

Most scam websites are low-effort attempts to trick consumers. In most cases, you’ll find the website’s main pages, including its About Us and Contacts pages, carry grammatical errors or other suspicious content. Consumers should review these pages to look for inaccuracies, errors, or missing contact information.

As well, review the structure of the website. If it’s poorly designed and looks unprofessional, it may be better to avoid shopping through that site.

5. Look up information about the website on forums or the BBB

Consumers may want to cross-check a website against forums where such reports exist or use the BBB’s online resources. A quick web search about the website, such as “is [x] a scam?” may reveal some online chatter. Consumers can also use the BBB’s website to look for a company’s name or web address to see if any other consumers have reported it.

If no information appears in either a web search or through the BBB, the website may be too new to have been reported by anyone.

Trust your instincts to avoid shopping scams

Consumers should ultimately go with their gut. If a website appears dubious, it’s likely better to find your product elsewhere. It’s often hard to pass up what appears to be a great deal, but the old adage usually rings true: “You get what you pay for”. 

image credit: Jacket vectors by Vecteezy