In recent years, the global electronics market has grown exponentially based on technological advancements, shifting consumer preferences, and a growing desire for cost-effective, easy-to-use and high-performing products. This expansion has led to a rise in the distribution of fraudulent electronic goods, posing significant risks to ecommerce merchants. 

According to an analysis of Riskified data, 2023 was characterized by a sheer increase in risk levels for merchants. Why? It is likely attributed to a combination of factors including a worldwide economic recession, the rise of fraud-as-service on channels like the Dark Web, alongside the emergence of new and evolving AI tools and capabilities. 

With AI, fraudsters’ social engineering tactics have become much more effective and sophisticated. In a competitive market with relatively low margins, electronics fraud poses challenges to both the customer experience and merchant operations. 

Why fraudsters target electronics 

When it comes to attracting fraudsters, the market for resellable electronics products is booming. Products in high demand like mobile phones and computers are especially attractive because not only are they high-value items but they are also conveniently compact, making them easy to transport and resell for a quick profit. The lucrative combination of high resale value and the constant demand for the latest tech makes electronics prime targets for fraudulent activities. 

Five ways fraudsters target the electronics market

  1. Phishing and other scams: Pose as legitimate companies or organizations through social engineering, phishing emails, and SMS scams to trick consumers into providing personal or financial information that can be used to purchase electronics online.
  2. Gift card fraud: Use stolen data to buy gift cards, and  then use those to buy high-risk products like electronics without suspicion. Gift cards as a payment method are anonymous,making them an attractive option for electronics fraudsters.
  3. Business fraud: Unique to electronics, some fraudsters disguise themselves as a business, hoping not to raise any red flags while using stolen credit card numbers to buy office electronics in bulk. Fraudsters aim to exploit what is considered a legitimate behavior for businesses, challenging the merchant to make a decision on a high volume order. A wrong decision can either lead to losing a good business customer or incur a very high cost from fraud.
  4. Reseller abuse: Fraudsters use fake accounts and bots to quickly purchase and clean out inventory, ultimately preventing loyal customers from obtaining these products. They then sell these stolen electronics through reselling platforms, likely at marked-up prices.
  5. Policy abuse (e.g. INR claims and empty box): Fraudsters (or casual abusers) return used or damaged electronics goods, falsely claiming they are defective or unsatisfactory to obtain refunds. They also conduct fake returns, where counterfeit or non-working items are packaged to appear as original products. Additionally, they abuse promotions by stacking discounts, reusing coupons and manipulating referral programs to maximize their gains. 

Behind the numbers: Understanding the risk of electronics fraud 

To gain deeper insights into the risk levels of the electronics market and its effect on merchants, Lev Gal, a Senior Data Analyst at Riskified, analyzed a full year of transactions data in 20231. 

  • With fraudster tactics becoming increasingly sophisticated, the electronics industry exhibited a higher level of risk in 2023 compared to the previous year. Lev commented, “The surge in fraud attempt volume across both big retailers and independent electronics brands in 2023 poses a unique challenge for merchants. With more than half of fraudulent activity targeting high-value items like mobile phones and computers, merchants must continuously adapt to stay ahead of evolving threats. The challenge lies in balancing fraud prevention with getting popular electronics into the hands of good customers seamlessly.” 
  • When compared to other physical-goods industries throughout 2023, Electronics proved riskier than the Home and Retailer sectors, and less risky when compared to Luxury Fashion and Sneakers.
  • Although the Average Order Value is relatively low, the Gaming category is the most popular in terms of volume among both legitimate and fraudulent populations. “This insight reveals just how widespread and significant the gaming industry’s reach is across different types of activity,” said Lev. 

A closer look at Black Friday risk trends 

Lev further identified seasonal patterns in electronics fraud risk during Black Friday Cyber Monday (BFCM) weekend 2023. Consumer spending peaked significantly in November 2023, with monthly volume higher by +87% compared to the year’s average. During BFCM, the fraudulent population doubled compared to the November daily average, while the total population volume experienced an even greater increase. As a result, BFCM was 32% less risky on average compared to the rest of the month. 

What can merchants do?

Merchants should keep in mind two types of product categories: 

  1. High-value items: Products with high resale value and market demand, such as mobile phones and computers. 
  1. High-volume items: Products purchased in high quantities, making their accumulative value larger while also placing a strain on operations, such as gaming-related products. This can pose challenges to fraud, customer success, and operational teams as they are highly targeted by fraudsters. In these categories, the incidence of fraud can be up to twice as high as their popularity.

Challenges and solutions for tackling electronics fraud

The customer experience challenge: While popular devices can bring in the highest share of revenue, they are also prime targets for fraudsters for their high values and resellability. Managing these products can be challenging for merchants when it comes to balancing risk and customer satisfaction. Misunderstanding customer behavior can easily lead to high chargeback rates, false declines, and ultimately, a frustrating customer experience.

Solution: The key to overcoming this challenge lies in data and precision. Merchants need robust data and advanced decision-making tools to accurately differentiate between fraudulent and legitimate customers. This approach can help reduce false declines and minimize the costs associated with fraud, ensuring a smoother experience for genuine customers.

The operational challenge: Within Electronics, the Gaming subsector presents a unique set of challenges. While the Total Processed Volume (TPV) or total amount spent is low compared to other categories, the sheer volume of transactions is high. Online gaming continues to gain in popularity, with global revenues projected to grow 16% to a high of $32.56 billion by 2027. The scale of the sector can place a heavy burden on merchant websites, customer success teams, and fraud departments, especially if the process involves manual review. Teams handling high-volume order decisions, chargebacks, and disputes can find this particularly unwieldy.

Solution: By implementing automated fraud review, dispute management, and chargeback guarantee solutions, merchants can streamline their processes and manage high volumes more efficiently. This not only reduces the burden on fraud teams but also enhances operational efficiencies.

The power of automated fraud solutions for electronics merchants

In the rapidly evolving landscape of electronics fraud, effective fraud prevention is crucial for operational efficiency, business growth, and customer satisfaction. 

Through the integration of Riskified’s advanced machine learning and fully automated solution, see how Ring’s fraud team saves millions by combating returns abuse. Additional merchants not only improved their fraud detection accuracy but also significantly increased their conversion rates, allowing for safe and successful global expansion.

Amazon’s Ring

Ring, a home security technology owned by Amazon, faced challenges with its return policy, balancing customer satisfaction and the risk of abuse. After partnering with Riskified, they uncovered an organized pattern of abuse where scammers bought hardware in bulk, returned empty or junk-filled boxes, and resold popular items online. Riskified’s assessment revealed that Ring was not only losing millions of dollars annually due to returns abuse, it was also prominently featured on dark web fraud sites as a vulnerable retailer. 

Riskified’s automated tools and data intelligence helped Ring identify and combat fraud by revealing that 600 individuals were responsible for over $4 million in abuse each year. With Riskified’s Policy Protect automation and Identity Explore technology, Ring gained real-time insights to decline orders at checkout that would have led to fraudulent returns. In seven months, Ring successfully prevented over $4 million in abusive returns that would otherwise have represented pure loss. 

UK electronics retailer case study

A UK-based Electronics merchant partnered with Riskified after an unguaranteed fraud model fell short. The merchant experienced false declines, high chargeback rates, and a cumbersome decision flow that created customer friction and prevented them from scaling into new markets. 

With Riskified, the merchant moved to a fully automated process and saw an 18% increase in approval rates with a performance that keeps improving year over year. This has allowed the merchant to safely scale and expand globally, opening sites in 15 new geographies across Europe and the Pacific. 

Unleash ecommerce growth with Riskified

Riskified partners with major Electronics retailers and brands with direct ecommerce websites, offering extensive fraud prevention solutions across various electronics categories. Talk to a fraud expert to stop all types of ecommerce fraud today.

1Insights based on Riskified internal data