A recent analysis from e-commerce authentication service Fakespot found that nearly 26,000 of the 124,000 Shopify ecommerce stores were "related to fraudulent practices." This makes customers highly vulnerable to scammers, according to BBC.
Shopify fraud risk has been highly apparent during the Covid-19 pandemic as the company and other e-commerce platforms have become valuable to house small businesses at cheaper cost that bigger websites. It is also easier to set up stores in Shopify.
Fakespot links 21% Shopify e-stores to fraud
While Shopify claims to routinely monitors its platform for fraud and violations, Fakespot finds about 21% of the 124,000 analyzed e-stores in the platform are connected or have committed scams and other threats. Although less than 17% of these stores had negative consumers reviews, about 39% of these flagged businesses were tagged as "problematic sellers," which have poor reputation, counterfeit issues, and possible brand infringements.
Also, about 28% stores seem to be shams with highly suspicious listings with too low prices and privacy leak concerns while 10% still had no transaction history.
The e-commerce company is one of the highly popular e-store platforms where businesses set up an e-store, promote, and sell their products online using the technology provided by the website.
According to a BBC report, Shopify said in a statement that it recognizes the existence of businesses and merchants that may abuse their service, "and we take this matter seriously" adding that the number of these crook businesses is relatively few compared to the more than a million merchants using the platform.
The Canada-based company also said that it has already terminated thousands of stores while it routinely implements new measures to further address the issues of fraud, scams, and other activities violating its policies.
Shopify: a big winner of the pandemic
As the coronavirus has shut down numerous physical stores while companies shift to online platforms, Shopify is deemed to be one of the big winners of the pandemic.
Shopify said its customer base spawn across 175 countries and its technology is being used by more than a million businesses. Many small companies and businesses choose Shopify because it is relatively cheaper than building their own websites.
Not only does Shopify provide a platform where businesses could create their own online stores to promote and sell their products, the website also has features such as inventory tracking as well as software for understanding sales trends.
In the third quarter of 2020, Shopify's total revenue skyrocketed to $767 million, which is a 96% increase compared the same period in 2019.
However, the recent Fakespot report shows that scammers have set up numerous shops as fronts for collecting buyer's personal data and they do not even have any intention of delivering a product. The e-commerce authentication firm also raised other issues like extremely poor customer service and brand infringement with these e-shops.
"With the trajectory of Shopify's growth, there comes a point in time when they will need to tackle this problem very seriously," FakeSpot's chief executive Saoud Khalifah told Financial Post. He added that numerous merchants appeared to be based in China merely posing as U.S. small businesses.
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Written by CJ Robles