If you run an internet business, whether it’s an auction store selling home built pedals from your garage or a large commercial enterprise, sooner or later someone is going to try to scam you. Here are a few or my favorites from over the years and some suggestions on how to be prepared for them.
These are all based on genuine cases that have been attempted on me at one time or another. I divided them into two categories: Outright Scams, and Unreasonable Requests. The first is pretty self explanatory. These are perpetrated by people who are not your customers and are just trying to deprive you, and likely many others of product or money. They are aware of exactly what they are doing, and are sometimes part of organized criminal gangs. The second category covers not so much scams, as requests from existing or potential customers that are unreasonable, inappropriate, or even illegal. The latter cases require some care, as the people you are dealing with are your customers and not always aware of the seriousness of what they are asking. Maybe not everyone even considers them unreasonable. Anyway, the key to dealing with all of these either way, is proper preparation, so let’s get started.
- The Advance Replacement
In this scam you receive an email or call from a customer who has one of your products that needs repair. Often the communication is from overseas. They tell you that they use the product all the time and need it urgently. They ask could you ship an advance replacement? i.e. you send them a new product while you wait for the old one that they return to arrive. They may use a story specific to the type of product, for example for musical equipment they may tell you they are in a band about to leave on tour. At some point they may tell you that they have already shipped the original product back to you and that the shipper has told them it may be several weeks or months until it arrives. They may send you confirmation of the shipping, which will be an official looking document likely in a language they expect you not to speak. The scam, of course, is that they have never had your product, never shipped anything to you, and the shipping document is a forgery.
In your response, ask for details of the product such as serial #, build date, or details on where the product was purchased from. If it’s a scam, they won’t have these and will have to provide an excuse which will help clue you into the scam. They may tell you that since they already shipped it back, they can’t check the serial #. They may say they don’t recall where they bought it, or it was a gift and they cannot contact the person who gave it to them. They may just make up the name of a store, or use the name of one of your distributors listed online.
The best way to deal with this scam is to have a robust returns policy in place, and make sure that it is defined in your terms and conditions of sale. Then you can just refer them to that and you will not have to waste any more time. I cover how to prepare these later in the post. Be polite in any conversation, even if you are 90% sure it’s a scam as you never know where your conversations may end up. Having consistent identifying marks on your products such as a serial # and build date is always advisable, as it allows you to more easily process legitimate returns as well as deal with the fraudsters.
- The Check Clearance
In this scam, our rogue customer places an order with you and says they would like to pay by bankers check. You receive the check overnight by courier and it looks very official. You deposit the check, and the cash appears as available funds. You ship the order. Sometime later you are contacted by your bank as there is a problem with the funds.
This scam takes advantage of varying banking policies. Certain banks, if you have a good history with them, will make funds up to a certain amount available to you immediately after depositing a check. It appears on the bank record as if the check has cleared, but in reality it has not passed through the full process. This is fairly straightforward to deal with. Check with your bank on the clearance period for any deposit you may be concerned about. Make sure to speak with a representative from your bank in person to be sure a suspect check has cleared before shipping anything. Be clear in your terms and conditions of sale on what your check clearance policy is.
- The Stolen Card
A potential customer contacts you to ask if certain products are in stock. They are often from overseas. They may ask additional questions such as can they pay by credit card, and what are the shipping times. In particular they may be concerned about how quickly the products will ship. They place the order and their credit card is successfully processed. Later on you hear from an individual, bank, or your processing company that the order was not authorized by the credit card holder and the card was likely stolen.
These can be difficult to spot as they can appear like legitimate orders, and the payments can be processed without issue. If you receive a lot of orders that are typically processed electronically, there may not be anything that indicates a problem until after the fact. There are still some things you can do though. Look for unusual patterns in orders such as much higher than normal order value, or products that are not typically ordered together. The scammers will often select high value items for purchase in order to maximize their take, but may not know much about what they are ordering other than the price. An order with several of your highest value items that no one would ever use together is a big red flag. If you process orders manually, you can check them yourself or train your staff on red flags to look for. If orders are processed electronically you maybe able to use software to set red flag conditions that put an order on hold until someone has checked it out. If an order looks suspect, Google the shipping address and see what you find. If anything concerns you that it might not be legitimate, contact your payment processing company immediately and ask them to investigate the transaction.
- The Gift
An international customer requests that you write a reduced value and/or list a purchased product as a gift on export documentation in order that they can avoid import duties.
This is a common request, and I suspect this is because most people are not experts in import/export regulations (why should they be) and maybe don’t realize the the possible serious consequences of what they are requesting. At least I am willing to give them the benefit of the doubt. International export regulations are complex and differ across borders, but most countries have some degree of regulation governing import duties, VAT, and other taxes. Incorrect declarations on customs documentation is often considered a serious offense resulting in fines or even jail time. In the US, imports and exports are controlled by the Department of Homeland Security Customs and Border Protection.
If you ship products internationally, make sure you have clearly defined policies in your terms and conditions of sale. Explain that you will always include the correct value of the shipment on customs forms. Keep a link to the terms an conditions on your web store so that you can easily refer customers to it when this question gets asked.
- The Missing Package
A package is listed as delivered by the shipping company, but the customer says they never received it. They request that you send them a replacement at your cost.
In the majority of these cases, the ‘missing’ package normally shows up. Often delivered to a neighbor, another entrance, or collected by a friend or family member. You may want to publish some steps for locating a missing package on your website to help customers out. Again, make sure your shipping process is clearly defined in your terms and conditions. If possible put a tick box on your e-commerce system to make acceptance of terms and conditions a requirement to place an order. If you can, give customers a choice of shipping options including insurance and signature verified deliveries, especially if you are selling high value products. That way they can decide on which delivery method suits them best.
- Review Ransom
Someone threatens to write bad reviews of your products or services unless you send them free or discounted products. This can fall into either category originating either from a random scammer, or someone who was not happy with a particular response they received.
I don’t have a simple answer to this. Thankfully they have been extremely rare in our case and resolved by dealing the specific individual issues. Again, making sure your terms and conditions are clear, and in line with your industry, as well as treating people with honesty and respect will give you the best chance to reduce your likely exposure this one.
If you have a web site with a community, or where people can leave comments, make sure you have defined terms and conditions for the use of the site. Make sure you have a link to the terms clearly visible.
If you sell products from a web store, create a terms and conditions of sale document and link to it. If possible, put a check box on your check out page that requires customers to accept the terms to place an order. Include a link to the terms on any confirmation or invoice that you send to them.
Check out the terms and conditions of other companies in your line of business to determine what is typical for your industry. If you don’t have your own legal counsel, online legal services like Rocket Lawyer have tools available to create terms and conditions documents for a small fee.
If you have multiple people working with you, make sure you all understand your terms and conditions, and where to find them. Scammers frequently rely on social engineering to get people to comply. By having your processes clearly documented, and referring them directly to the appropriate documents, you can avoid much of the uncertainty that the scammers rely on.
Put identifying marks on your products such as serial numbers, build dates, or other marks that will allow you to trace a product. Define an RMA (Return Materials Authorization) process and document it in your terms and conditions. Require people to provide the identifying information when requesting to return products. For high value products, you may want to keep a record of which serial number was sold to which original customer in order that you can track it’s history.
If you provide a warranty on your products, document it and place a link to it on your website. Include details on duration, items covered, and whether the warranty is transferred when the product is sold on. Review warranty terms of similar products to yours to determine what is typical.
If you sell products via a reseller or distributor, have a resale agreement in place that documents who is responsible for handling returns and warranty repairs.
Put these tools in place, and you will have a robust system not only for dealing with the occasional scam, but more importantly for handling the hundreds and thousands of legitimate customers, orders, and products that your business will deal with every day.