Real-world reseller abuse: From the POV of two retailers

Every retailer has a different relationship with resellers. For some, resellers represent a mutually beneficial and even essential part of their ecommerce business model. For others, it’s a more delicate dance. However, across this spectrum, there is the potential for resellers or fraudsters posing as resellers to exploit merchant policies and inflict real harm — from lost profits to wasted products to reputational damage.

What is reseller policy abuse?

Like other types of policy abuse, reseller abuse takes many forms; however, the bottom line is that a third party is attempting to resell your goods at a markup and in a manner that is not to your advantage.

For example, abusive resellers may circumvent item limits – typically by creating fake accounts to exceed the per-customer policy amount of a product. Item-limit promotions are typically intended to create excitement and boost brand affinity. Abusive resellers can hinder this strategy.

When abusers scoop up and hoard promotional products, retailers end up with frustrated customers who are unable to purchase the products they want and may direct their anger at the brand for failing to police its sales. This undermines loyalty-building efforts in a competitive environment where customers can easily shop elsewhere. 

Hoarding can lead to inventory scarcity problems and unnecessary and expensive competition with your own products. 

Two different global retailers shared with Riskified how resellers fit into their business ecosystem, what kinds of reseller policy abuse they face, and how they combat abuse without compromising desired relationships.

One type of policy abuse, two retail stories

Retailer one iterated that policing abuse is a balancing act. Among their customer group are businesses that may purchase stock or supplies, and so the merchant must leave room for legitimate bulk purchases by those small businesses.

At the same time, the merchant wants to ensure that its shoppers receive perks and advantages that provide an incentive to shop and reward loyalty. One way they do that is by offering deep discounts on desirable merchandise or exclusive offers such as a limited-edition product available only to their customers. 

With those kinds of attractive promotions, restricting purchases to a single or a small number of items is necessary to ensure there is enough stock to go around. However, some resellers have found ways to exploit those deals, sometimes by opening multiple accounts using slightly altered addresses to evade detection. 

Using such techniques, some resellers were able to purchase large numbers of promotional items and resell them at a profit, depleting stock for other customers. Moreover, those bulk orders generated additional costs throughout the business. The warehouse distribution team might pack up dozens of orders before identifying them as suspicious. Then the fraud team would have to spend time unraveling the orders, deciphering who is actually behind all the purchases and multiple accounts, and then determining if it is an entity they want to block or work with and keep.

For retailer two, managing resellers and potential abuse required a different approach. Exclusivity and a premium customer experience are fundamental to the brand, and resellers may use multiple or slightly differentiated customer accounts to hoard and attempt to resell exclusive merchandise at inflated prices, creating stock control issues and frustration for customers who can’t find the item they want or see inconsistent prices across different sellers.

Much like at the first retailer, resellers created other costs for this brand. Resellers would often attempt to return items they couldn’t resell within the 30-day returns window. The brand thoroughly inspects returns, so reviewing those extra returns was time-consuming and costly. 

To address the issue, both retailers deployed Riskified’s Policy Protect solution to more easily identify when a single entity is behind multiple accounts, differentiate between legitimate B2B customers and bad actors, and add in policy layers and selective friction to prevent resellers from returning unsold items or otherwise abusing policies. In some cases, resellers with a problematic history were blocked from making purchases.

Detect up to 95% of unauthorized resellers

Unauthorized resellers using fake accounts and bots can literally clean out inventory for merchants, keeping it away from loyal customers and creating lasting harm to the business. Using Policy Protect, leading retailers have been able to detect nearly 95% of unauthorized resellers in real-time, securing their stock, customer experience, and revenue.

Using identity-based clustering capabilities to accurately pinpoint abusers in real time and distinguish them from loyal customers, Policy Protect offers merchants an efficient way to block abusive resellers from hoarding limited items and adding to the burdens of distribution, returns, customer service, and fraud teams. 

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