Shoplifting means to steal goods from a physical store. When we hear the term we usually think of small items being concealed in clothing and bags and being sneaked out of the store without paying for them. But goods are also stolen in the digital realm. The online version of this theft is called cyber shoplifting, where a bad actor obtains items from either an online store or another website with no intention of paying for them.

There are essentially two main types of cyber shoplifting – the illegal download of digital material, and obtaining products from online retailers.

Illegal downloads

Music, books, movies, software, video games, images and more are available in digital formats. If an item can be downloaded it can usually be redistributed for free. The more common name for this type of theft is piracy. It is a massively complex issue and very difficult to control. People who download items illegally tend to think of it as a victimless crime, but in reality it is not. People who create music, films, books and software do so in order to make a living. The effects of piracy are varying depending on the size of the originator.  For example, a blockbuster from a big movie studio will indeed feel the sting of fewer cinema tickets, DVDs sold, or pay-per-view streams, but they will still have other revenue streams such as merchandising and licensing. On the other end of the scale, a self-published author desperately needs every penny they can get from digital book sales.  Due to piracy more and more software and game creators make their products available as an online subscription service only, with no download options. Other digital products do not have this option and piracy is and will continue to be a major issue for digital offerings.

Product theft

This refers to obtaining products or services from online retailers without having any intention of paying for them. There are several different versions of this type of intentional theft.

Credit Card Fraud

In this type of crime the criminal will use stolen credit card information to make purchases from an online store. Goods are shipped to the criminal who will then resell the items. This type of crime relies on the user not knowing that the card information has been stolen, and that they will only know about it when they get their statements. By then, of course, it is too late and the criminal already has the goods. The legitimate owner can file a chargeback with their bank to get the funds back from the unfortunate merchant, who then has to foot the bill for the goods, the shipping & handling costs, the transaction fees and the chargeback penalties. Not to mention the possibility of the merchant being re-classified as a high risk, or even having payment services terminated altogether. Merchants can take steps to arm themselves against this type of theft by several means, such as using payment providers with excellent security measures including multi-factor authentication and fraud detection services.

Account Takeover Fraud

In this type of crime the criminal will log in to an account using the details of the actual account holder. They will then make purchases using the users stored credit card details, and change addresses and contact information so that the goods will be shipped to themselves instead of the account holder. Again the account holder may only discover this after it is too late, may file a chargeback and the merchant is in the same predicament as with credit card fraud if the chargeback is upheld. Again there are steps that the merchant can take to help mitigate this. For example the merchant can send text notifications every time the account is accessed, require verification before saving any changes on the account and send emails confirming sales and delivery addresses to the account holder. The merchant should also use a payment provider that uses multi-factor authentication on transactions, in addition to other security measures.

Friendly Fraud

Despite the rather cheerful name, friendly fraud is blatant shoplifting. In this type of crime the thief buys goods from an online retailer, and then will file a chargeback for the costs, claiming perhaps that the goods never arrived, or that they were damaged or not as advertised. These criminals know that the chargeback system works to their advantage and use it to scam goods out of retailers without paying for them. They know that the burden of proof is on the merchant, and that the goods do not need to be returned. Again the merchant sits with the problems arising from chargebacks. But again there are steps the merchant can take to reduce the risks of friendly fraud, including having accurate product descriptions, confirmation emails, using shipping providers who require proof of delivery and having excellent record keeping and customer service. The merchant can also use the services of a provider that uses security measures such as databases to cross-check card numbers and cardholders for repeat offenses.

At Baer’s Crest we are well versed in the various forms that cyber shoplifting can take, and we know how damaging this type of theft can be for small businesses. We pride ourselves on our partnerships with security focussed payment providers, so we can offer payment solutions to our clients that bring peace of mind. Contact us about payment solutions for your online business.