DEFINITION of Online Shoplifting
Online shoplifting is the theft of goods from an Internet-based merchant. Online shoplifting might seem harmless since the shoplifter never interacts with the victim and executes the fraud with a few keystrokes and mouse clicks. It is a crime nonetheless, and online shoplifters can face serious legal problems, such as charges of mail fraud.
BREAKING DOWN Online Shoplifting
One way to conduct online shoplifting is through the credit card chargeback process. A consumer purchases goods online using a credit card, receives the goods, then submits a statement to the credit card company claiming that he never received the goods. As a result, the credit card company initiates a chargeback and forces the merchant to refund the customer’s purchase.
Even though the customer has never set foot in the merchant’s place of business, he has effectively shoplifted by fraudulently using the chargeback process to obtain goods without paying for them. What is more, if a credit card payment processor receives too many chargeback requests for the same company, it may stop doing business with them. The online merchant then experiences secondary damage from online shoplifting because it can no longer accept a certain brand of credit card. This might in turn reduce sales, since the inability to accept that card will significantly inconvenience customers.
To be clear: Chargebacks themselves are not fraudulent, but when consumers abuse this tool meant for consumer protection, it raises alarms with both retailers and credit card issuers. On top of the lost merchandise, it typically costs about $40 to process a chargeback request.
Online Shoplifting by Piracy
Another way to conduct online shoplifting is through piracy. Illegally downloading copyrighted music, books or movies for free instead of purchasing them through legitimate channels is a form of online shoplifting that simultaneously robs both producers and distributors.
The issue has posed a challenge for a number of reasons. Consumers of pirated content want it for free, or at least a very low cost. Secondly, media companies often lack the resources to respond to growing demands for free content; the digital media "underworld" moves faster than big businesses, with conglomerates of intelligent hackers and pirates joining forces across the globe. Thirdly, the proliferation of user-generated content allows anyone and everyone to create and distribute content and they may not even realize that the are committing copyright infringement along the way.
When it comes to finding a solution, there is no smoking gun or universal set of best practices to keep pirates away. Companies will need to assemble their asset-protection strategies in bits and pieces to minimize losses and ensure that feedback loops are in place.