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How Online Fraud is stunting the Health and Beauty Sectors

Previous online fraud trends have misled industries to believe that high-ticket sectors like electronics are the most vulnerable to scam. Believe it or not, scammers have spotted another lucrative spot in the beauty, and online health market which studies revealed had experienced double-digit growth last year.

Fueling this growth, according to the Natural Products Insider, is the surfacing of natural products which recorded a 30% boost in Amazon sales in 2016. Elsewhere, BigCommerce said sales for web-based cosmetic market have been rising 17% year after year. And the increasing popularity of the online cosmetic and beauty brand sales is being inspired by social media sites like Instagram.

These, together with changing buyer preferences— for example, shopping from the comfort of their seats— have left the industry vulnerable to fraud.

Health & Beauty Industry challenges

While the Health and Beauty marketplace experiences the difficulties other sectors face (namely friendly fraud, account takeover, Card not present and fraudulent account scam), the following are industry-specific setbacks only merchants in this niche encounter.

1-Social Purchasing

Though praised by Forbes as the “globe’s most powerful selling tool, Instagram has reported an alarming increase in account takeover cases making social buying a dangerous trend.

2-Subscription Billing

Almost 40% of health sector consumers and cosmetic product buyers and in the U.S use subscription billing, according to Business Insider which records high charge levels because of the high rates of friendly fraud.


Add-to-cart and collect sales are popular with buyers, yet they are very vulnerable to fraud than traditional e-commerce sales.

4-Commission Fraud

As beauty and health firms seek more ways to generate revenue, both direct sellers and affiliate marketers have continued to face new fraud challenges and risks.

Sadly, merchants in the health and cosmetics industry have not made fraud prevention their priority even as the rates escalate. A single chargeback could be very costly to the company after all the costs are factored in including; shipping costs, labor, chargeback charges and lost revenue.

Common trends in fraud

The most common forms of scam include;

1.    Payment Fraud- these are payment-linked forms of fraud that can occur in three different ways.

  • Friendly fraud
  • Criminal fraud
  • Egift fraud

2.    Account takeover-involves a scammer taking over an account and using it for fraudulent purposes.

3.    Fraudulent account creation- fake accounts are created and used to exploit buyers or sellers.

In conclusion

A ready mindset can help you avoid some form of fraud. You’ll find that you won’t need to contact your Chargeback insurance providers all the time.

*Chargeback Shield is not an insurance service. EMB does not sell insurance and Chargeback Shield is not insurance, it is an alert system.