Shopify logo on company website

According to a report published by the Financial Times, ecommerce authentication service FakeSpot claims that over 20 percent of Shopify powered online stores pose a risk to shoppers.

FakeSpot analyzed 120,000 Shopify powered stores and the authentication service found that as many as 21 percent of the Shopify powered stores only existed to collect personal data, sold fake products, and offered poor customer service.

Shopify says it powers over one million online stores, so the number of online stores FakeSpot analyzed represents just under 10 percent of all Shopify stores. FakeSpot did not identify how it selected the stores it analyzed.

Shopify’s rise in the online commerce platform space certainly made it a target for criminals to abuse the easy signup and launch of bad stores, especially during the pandemic when more shoppers were looking for online options to purchase goods.

This year, Shopify reported record sales during the Black Friday / Cyber Monday weekend, in addition to higher sales leading to the “official” start of the holiday shopping season. This increase underscores how consumer behavior has changed this year.

The rapid rise of Shopify as a go-to online commerce platform for small business merchants has even raised the possibility of Amazon getting back into the online commerce platform space, offering a competing service to Shopify.

Shopify wants to be part of the solution to squash scams

Just as marketplaces like eBay and Amazon have to detect and remove problem listings, especially during the 2020 COVID pandemic, the simplicity and ease of opening an online shop on Shopify has put the company under pressure to maintain trust among shoppers.

FakeSpot’s CEO Saoud Khalifah explained to the FT that many of the bad stores it found are operated out of China, pretending to be US small businesses. Shopify said it is facing an “industry-wide” problem and that it has security measures in place to verify business locations.

A Shopify spokesperson said to the FT, “To date, we have terminated thousands of stores and routinely implement new measures to address fraud and other activities that violate our policies. Although these issues challenge the ecommerce industry at large, Shopify is committed to being part of the solution.”

Shopify not a marketplace

Unlike marketplaces, that use customer feedback to rate sellers and products, online commerce platforms appear to shoppers as individually run operations, making it easier in the short term to pretend to be a professionally run online store.

It’s even possible to generate fake feedback as Shopify is not a marketplace and does not validate individual shoppers and their feedback. Feedback systems on marketplaces are already subject to manipulation, but that problem is even worse if the online commerce platform does not police potentially bad or incorrect feedback.

While Shopify won’t discuss its security measures, it is likely that with this rise of problems, the company will implement more seller identity verification measures to protect shoppers on its platform. In the long term raising the bar to become a merchant on the Shopify platform also protects honest sellers from criminals selling fake products, potentially damaging small niche brands.

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