By Doriel Abrahams, Head of Risk, U.S., Forter
Valentine’s Day is big business for retailers. According to the National Retail Federation, U.S. consumers will spend $25.9 billion on gifts and cards for loved ones this year, up from $23.9 billion in 2022. More than half (52%) of consumers say they plan to celebrate the holiday and spend an average of $192.80, with $130.75 allocated for gifts and cards for their partners and other loved ones, and $52.65 planned for gifts for friends, children’s classmates and teachers, coworkers, and even pets.
The top categories for spending include candy (57%), greeting cards (40%), flowers (37%), an evening out (32%), jewelry (21%), gift cards (20%) and clothing (19%). Consumers will do their purchasing online (35%), in department stores (34%), discount stores (31%) and specialty stores (18%) in the one to two weeks before the holiday.
Retailers Must Be Able to Detect and Combat Valentine’s Day Fraud
Unfortunately, Valentine’s Day is also notable for fraud attempts. With ample consumer spending occurring in a compressed time period, Valentine’s Day offers many opportunities for fraudsters looking to drive a fast return. They can offer great deals on items they’re reselling, because they didn’t pay anything for them in the first place. In addition, fraudsters know it’s easier to hide in large crowds of online traffic.
For their part, consumers may be less discerning of the merchants (or fraudsters) they buy from, because they need to make one or more purchases quickly to celebrate the important people in their lives.
There’s a lot at stake. Every $1 of fraud now costs U.S. retailers and ecommerce merchants $3.75, and merchants will lose $48 billion to fraud globally in 2023. So, understanding fraud trends and developing mitigation strategies can help retailers protect sales from this important holiday.
Valentine’s Day Fraud Trends for 2023
Forter research found the top items for fraud include:
- Targeting specialty foods: Chocolate-dipped strawberries are attacked 3X more around Valentine’s Day than the rest of the year, due to their consumer appeal. Regular strawberries are also targeted, but only 1.5X more than the rest of the year.
- Going after groceries: Attackers target grocery and ready-to-eat food items from delivery sites and apps 2X to 3X more than other merchants in the same category. It’s possible that fraudsters target specialty food items or larger orders as romantic partners, friends, and family gather to share a meal.
- Feeling fresh about flowers: Floral arrangements, a popular gift, are attacked 5X more than the rest of the year. However, potted plants are barely affected by retail fraud this holiday. It seems that red roses signify love more effectively than ferns or ficus plants.
- Seeing gold in jewelry: Bracelets are targeted more than necklaces, with love bracelets the most of all. Love bracelets often have the word love spelled out, hearts, charms, and other signifiers of affection, and sales are sure to be brisk over Valentine’s Day.
Fraud Strategies Retailers and Consumers Should Know About
Here are some different threats retailers and consumers should be aware of:
- Standing up fake websites: With more consumers doing their shopping online, fraudsters are standing up fake websites to capture their business. These websites may look convincing, by stealing branding and legitimate product imagery from other retailers. Consumers can avoid these threats by checking website URLs, social media, user reviews, customer service phone numbers, and other signs of an established business. In addition, unusually high discounts or atypical payment demands, such as requests to use cash transfer apps or cryptocurrency, may be red flags, the Better Business Bureau warns.
Better still, consumers can just shop at their favorite retailers, typing in URLs or navigating to their websites from established social media accounts.
- Using social engineering to steal credentials: Fraudsters send emails or texts to consumers, warning them that their credentials are expiring, large purchases have been made in their name, or making other seemingly urgent demands.. Unwitting consumers then log into fraudulent websites, providing their actual credentials.
Consumers should never respond to requests for credentials and always visit legitimate websites to change them.
- Launching impersonation attacks: U.S. consumers who live in large cities should especially be on alert for fraud attacks this Valentine’s Day. Forter found that they are more likely than rural residents to fall victim to impersonation attacks, which create plausible email addresses for victims, spoof IP addresses to appear to hail from the appropriate city, and use stolen payment methods to commit fraud. Fraudsters use credentials they’ve gained via data breaches, phishing, or other social engineering attacks and fill in the details. They then turn around and resell these stolen goods for a quick return.
- Rerouting product shipping: Fraudsters have to use consumers’ correct billing addresses for stolen payment credentials to ensure purchases go through, but will seek to reroute packages after orders have been confirmed.
- Large-scale bot buys: Individuals and groups may use bots to bulk-buy popular limited-edition goods that they can then resell to consumers for a healthy profit margin. These purchases may use stolen or authentic payment credentials. Either way, they deprive other consumers of buying goods they want. These would-be buyers then have to do without or pay inflated markups on reseller websites. Additionally, bot attacks slow down retailer website performance, contributing to additional lost sales across other items and product categories.
How to Combat Evolving Fraud Attempts
Fraudsters and resellers are creative, evolving strategies and tactics to match consumer demand and gaps in retailers’ ecommerce operations. In addition, fraudsters’ ability to use stolen credentials in attacks is growing, due to the increase of data breaches, which are becoming more severe in scale and scope. As just one example, the recent T-Mobile breach exposed the personal information of 37 million consumers.
Retailers can improve their own fraud detection and prevention measures by deploying AI-powered decisioning tools to make accurate, real-time assessments of customer trustworthiness. That way, good customers get the experience they deserve and fraudsters are stopped in their tracks.
This Valentine’s Day, retailers can share the love by protecting their customers and business from fraud.
