Retail Scams During the Holiday Season

As we’ve entered the final month of 2020, retailers find themselves facing the double whammy of still dealing with the effects of Covid and the 2020 holiday shopping season. 

It remains to be seen whether 2020 will match, or surpass, sales last year, but it’s fair to say that more consumers than ever before will be doing their shopping online. In fact, the NRF reported a record-breaking 100 million Black Friday shoppers went online this year, up eight percent.

Online retail was hot in 2019 and likely to be even more so in 2020. That’s good news for retailers, of course. Unfortunately, it comes along with some potentially bad news: These high traffic numbers motivate retail scammers to take advantage of the situation, and retailers may be caught unawares.

From worthless gift cards to bogus promotions, the retail industry is hit hard with fraud. Here we look at some of the more common types of retail-related scams shared with us by some of our customers.

Gift Card Scams

Gift cards are go-to gifts for many during the holiday season, and 2020 will be no different. But gift card scams can impact retailers in both brick-and-mortar and online. 

In-store where retailers often display gift cards on a rack, bad players can easily write down card numbers and toll-free phone numbers or scan magnetic strips with portable scanners. Then, all it takes is dialing the toll-free number every day or two, entering each card number, and checking the balance. Once a customer buys the card, loads it with money, and activates it, the crook is free to easily redeem the card shopping online, draining the balance in minutes. 

Sales clerks also represent risk for retailers. A deceptive clerk might keep a stash of used, inactive cards at the register. When a customer buys a card, the clerk takes the payment, activates the new card but returns a worthless blank card to the customer. Or, when a customer attempts to use a gift card, the clerk may pretend the card holds a zero balance, offering to throw it away. After the customer leaves, the clerk slips the card into their pocket for later use. 

Sites like CardCash.com and GiftCardRescue.com are popular as places to sell or exchange gift cards that may have been sitting unused in sock drawers. About $3 billion in gift cards is expected to go unspent in 2020. It’s a situation that scammers are alert to. Seeing an opportunity, scammers will use stolen credit cards to buy a bunch of prepaid gift cards and then flip them on the card exchange sites. 

Even more sophisticated scams have emerged in recent years. 

Scammers will go so far as to set up fraudulent Facebook pages with phony gift card giveaways, using logos from trusted companies like Best Buy, IKEA, Walmart and Whole Foods, to entice victims to become fans in order to win cards. These registration links often direct users to affiliate marketing sites that collect personal data.

Typosquatting also is a prevalent ploy. In this scenario, scammers set up a fraudulent site, using a domain name that’s just a character or two different from a legitimate company site. When a person accidentally mistypes the web address (domain name), he or she is inadvertently directed to the fraudulent site, which looks very much like the bona fide intended site. The user is asked to complete a survey that gathers the person’s name, address, phone number, and other personal information. Upon completion, the person is promised a free gift card. The person, now a victim, either never receives a card or receives a worthless one. 

Promotion Scams

Another type of retail fraud is a promotion scam where perpetrators send phishing emails with attractive offers such as free airline tickets, free smartphones or tablets, etc. When the consumer clicks the link, surprise! there’s no prize at all. The site has just harvested their information. 

Another common promotion scam is the “Improve Your Website Ranking!” offer, usually targeting new websites. New site owners, eager to see their traffic numbers grow, are readily lured into paying these scammers to have their organization’s URL listed in 50, 100, or more sites. But they get nothing in return.

Bogus Account Credit Scams

It is surprisingly easy for criminals to steal an organization’s identity with not much more than a prepaid cell phone and a mailbox from a storefront postal center. These fraudulent companies that only exist online as synthetic identities are able to open credit accounts, buy goods and services, and shut down well before the first credit statement arrives. 

Each year, scammers and thieves become increasingly more sophisticated. With the busy holiday season upon us, it’s important to be wary of these various scams and take steps to help consumers avoid them.  

Stu Sjouwerman is founder and CEO of KnowBe4.

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