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About a fifth of Shopify sellers analysed by Fakespot warrant a 'caution' or 'warning' label for selling fraudulent clothing, electronics, or home goods

Business Insider Australia logo Business Insider Australia 19/01/2021 Natasha Dailey
a keyboard and mouse on a table
  • Thousands of Shopify stores are selling fraudulent products or not delivering on sales.
  • About 21% of stores analysed by Fakespot should get a "caution" or "warning" label.
  • Scammers sell dupes of popular items and attract buyers with discounts or free shipping, the report said.
  • Visit Business Insider's homepage for more stories.

About a fifth of Shopify sellers evaluated by Fakespot deserve a "caution" or "warning" sign for activities like selling fraudulent products or not delivering items.

Fakespot, an internet extension that helps protect consumers from fraudulent sellers, analysed 124,044 of Shopify's online stores and found that 25,788 have fraudulent practices. The Fakespot data was originally reported by the Financial Times in December.

Shopify, based in Ottowa, Canada, is an online retailer that allows merchants to set up their own "stores" and sell products to consumers. It now hosts more than one million merchants, according to its website.

"While the ease of setting up an eCommerce business was great for reputable companies, it also opened the floodgates to scammers and con-artists," a Fakespot spokesman said in an emailed statement to Insider.

Read more:

A 21-year-old is 'dripping in dropshipping money,' selling $US1.7 million in products on Shopify. He shares his biggest tips for making e-commerce profit.

In the statement, Fakespot said Shopify scammers often sell counterfeit products or knock off popular products from Amazon, Shopify, or Kickstarter, and then promote those items to consumers using perks such as discounts or free shipping.

Sellers adopt different methods to scam customers, Fakespot said: shipping items that are clearly knock-offs, sending different items entirely, or not sending any products at all, but still keeping the payments from unassuming shoppers. If a consumer receives an unwanted item, it's his or her responsibility to pay for return shipping outside the US, which is often more expensive than the item itself.

Shopify scammers can easily set up a store on the site without a background check, Fakespot said. Then these scammers "spend heavily" on Google and Facebook ads because of negligible inventory costs and little investment needed to run a Shopify store.

A Shopify spokesperson told Insider in an emailed statement that it has closed thousands of stores, and it regularly implements new measures to address fraud or other violations. But there will still be those few that abuse the service. "We take this matter seriously," Shopify said.

"We do not condone the behaviour of bad actors, and we employ multiple teams who handle potential violations of Shopify's Acceptable Use Policy (AUP), notices of alleged copyright and trademark infringement, as well as fraud complaints," Shopify said in a statement. "Our AUP clearly outlines the activities that are not permitted on our platform, and we take action when stores are found in violation. We also encourage consumers to report potential unacceptable behaviour here and to contact their credit card companies to file a dispute."

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