Retail fraud awareness rises with social media, risks USD $107bn

Research from Netacea has indicated a significant cultural shift in attitudes towards retail fraud, with a sizeable portion of consumers expressing both awareness of and temptation towards engaging in such activities.

The study surveyed over 2,000 consumers in the United Kingdom and the United States, examining how social media platforms such as TikTok, Facebook, and YouTube are disseminating information about "refund hacks" and similar fraudulent tactics. The findings point to the emergence of what the report calls a "Cyberfraud Economy," where mainstream consumers are exposed to and, in some cases, drawn into organised criminal networks that facilitate retail fraud.

The report, titled "Cyberfraud in Retail – The Changing Face of Fraud: Malicious Intent Gets Organized," explores the growing scale of these activities and projects a financial impact on retailers valued at USD $107 billion by 2029.

The survey found high levels of familiarity with fraudulent techniques among consumers, with 93% recognising at least one method of retail fraud. A specific method, known as DNA (Did Not Arrive), which involves falsely claiming that an order was not delivered in order to obtain a refund or replacement, was recognised by 81% of respondents.

Despite acknowledging the illegality of such actions, 23% of respondents admitted to having been tempted to commit retail fraud in the past, while 15% would consider more serious offences if they believed they would not be caught or if they knew others had successfully done so. The research also revealed that one quarter of consumers believe some level of retail fraud is morally acceptable, with 34% of all respondents considering fraud involving amounts up to GBP £100 justifiable.

Furthermore, 16% of respondents perceived retail fraud as a victimless crime, and a majority of 58% assumed retailers could absorb the losses without significant consequences for their business operations or pricing strategies.

Social media platforms emerged as the primary channels for spreading awareness of retail fraud. Nearly two-thirds of participants (63%) stated that they had encountered information about fraudulent tactics online, while 45% had seen advertisements or guides promoting such activities. Some guides offered detailed, brand-specific instructions for conducting refund fraud.

The research highlighted the greater vulnerability of younger demographics to online fraud content. Among 18-30 year olds, 76% reported awareness of retail fraud via social media, and 58% indicated that they had been directly targeted by advertisements promoting these activities. Facebook was identified as the leading platform for exposure to fraud content, particularly among Generation X, followed by TikTok for Generation Z users. Other notable channels included YouTube, Instagram, X (formerly Twitter), and discussion forums like Reddit.

This expansion of fraud awareness has extended offline, with people discussing retail fraud with friends, relatives, colleagues, and classmates. In the United States, the trend is more pronounced; 36% of consumers said they had received recommendations for retail fraud from personal contacts or online acquaintances.

Another concern for retailers comes from internal threats. The survey found that 18% of respondents knew someone involved in insider fraud within the retail sector, with 12% identifying such individuals as retailer employees and 6% as workers in fulfilment services. This access enables corrupt insiders to manipulate processes or even lease their access to professional fraudsters, intensifying the complexity of defending against such crimes.

Matthew Gracey-McMinn, VP Threat Services at Netacea, said: "We monitor professional criminals every day on underground marketplaces, but it's clear that retail fraud techniques are no longer hidden in the shadows – they are being openly shared and discussed among friends, and widely promoted online. As a result, we are seeing a cultural shift where fraudulent behaviour is not only visible but, alarmingly, considered acceptable by a significant portion of the public. In order to turn fraud from a lagging indicator of a problem to a leading indicator, retailers and ecommerce merchants need to ensure they are making good use of cyber threat intelligence and real-time detection of sophisticated automated cyberfraud attacks to protect their customer experience and avoid the negative impacts brought about by fraudulent activity."

The report draws attention to the persisting risk that this cultural and technological shift poses to retailers, as methods of fraud become increasingly accessible and accepted among consumers.