6 Tips for Foiling Fake Suppliers in Online Marketplaces

Kirsch CPA Group

Jun 23, 2022

Supply chain issues continue to hurt many U.S. businesses — possibly in more ways than you think. Not only do supply shortages and delays make it difficult for companies to ramp up business and recover from the pandemic slowdown, but they also make some fraud schemes easier to perpetrate. For example, criminals might advertise hard-to-get goods, then ship defective products — or no products at all — to unsuspecting buyers.

Here are six tips to help your company avoid losses from such scams:

1. Evaluate marketplace safety. Many online marketplaces invest heavily in preventing fraud and are willing to reimburse funds stolen from customers. But not all of them are proactive. Before using an online platform to buy goods, review its fraud policy. And if you’re defrauded, notify the platform quickly to increase the likelihood of recovering your money.

2. Scrutinize ratings and reviews. Online buyers often use ratings and reviews to vet potential suppliers. Unfortunately, some criminals use bots to create fake reviews and boost their ratings. Or they may hire real people to engage in sham transactions and post positive reviews. When reading reviews, pay close attention to overly positive comments and note repeated phrases, similar grammar errors and typos that appear in reviews that purport to come from different customers.

3. Read product descriptions closely. Fraudsters often copy product information from the original equipment manufacturer or from legitimate sellers of the product. Read listings closely for signs of manipulation — for example, the description may talk about an entirely different product. If in doubt, contact the seller. If you receive no answer, look elsewhere.

4. Slow down. To prevent supply chain interruptions, you may feel pressure to complete online purchases quickly. Fraudulent sellers could add to this sense of urgency with rock-bottom prices or by advertising their rapidly dwindling inventory. Avoid the temptation to rush your due diligence process.

5. Assess how the seller resolves disputes. Watch out if customers post complaints about defects, shoddy construction or fraud, and the seller doesn’t respond. If potential customers submit questions to the supplier, read the answers. If a seller can’t answer complex questions about the manufacturing of a product or doesn’t seem to understand how your industry uses it, move on.

6. Pick your payment method carefully. Learn how your credit card company protects your business from fraud. Some companies credit accounts and assume responsibility for investigating fraud as soon as customers notify them. Others have been known to “slow walk” investigations and eventually deny customer claims. Call your credit card issuer and ask how the company handles fraudulent charges from online marketplace sellers. Also, ask your company’s finance or accounting staffers for recommendations.

Although online marketplaces can help your company avoid supply chain disruptions, these platforms aren’t without risk — particularly at a time when too many buyers are chasing too few goods. Take the time to vet potential suppliers and contact Kirsch CPA Group if you have questions about preventing fraud.


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About The Author

Kirsch CPA Group is a full service CPA and business advisory firm helping businesses and organizations with accounting,…

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