The Simility Blog

Recommerce at Risk: How To Beat The Fraudsters On Resale Marketplaces
Jayan Tharayil
May 08, 2019

Online fraud is just about everywhere today. In fact, retailers are estimated to  lose billions in card-not-present scams over the next several years. Yet some online markets are more vulnerable than others. Online marketplaces that enable the sale of used, second-hand and/or refurbished goods are particularly at risk, as trust is absolutely central to successful commerce on such sites.

That makes it more important than ever to find advanced fraud prevention solutions leveraging machine learning for faster, more accurate decision making.

The Resale Craze

This fast-growing appetite for “recommerce” has sprung up across the globe. It’s the product of a mix of intersecting trends. Consumers increasingly want to get their hands on the latest products advertised by online influencers and TV stars, yet their budgets may not stretch to buying the originals. There’s also a growing movement to buy recycled goods as it’s a more eco-friendly way of shopping. Perhaps unsurprisingly, the charge is being led by younger consumers.

Apparel is said to be the most popular category within this sector. One provider reckons it will experience double-digit growth over the next few years, with more than one in three “Generation Z” shoppers predicted to buy second-hand in 2019. Marketplaces have emerged to meet this latent demand, by providing a platform via which sellers can offload products to interested buyers.

Yet it’s not just about clothing. A marketplace for trading second-hand cars, recently raised $14m in Series B funding, while an India-based marketplace recently launched the sale of refurbished electronics.

Trust is a vital component of any online marketplace. Yet it’s even more important when it comes to the trade in used goods. Traditionally, buyers could see in person what second-hand items looked like, and whether they were worth the price. But that process of assurance disappears when the industry moves online.

Put simply: buyers have to trust sellers to accurately describe the condition of used items and to deliver these items, while sellers have to trust buyers to provide payment. This provides ample opportunity for fraudsters on both sides to prosper.

Getting Tough On Fraud

The answer for online marketplaces serving the rapidly growing demand for second-hand goods is to improve their fraud detection tools. Unfortunately, legacy technologies are ill-equipped to tackle sophisticated, modern fraud techniques. Scammers are adept at leveraging stolen identity data and using automated bot technologies to open fake accounts, post fraudulent listings, hijack legitimate user accounts, and use stolen card details to make unauthorized purchases.

An effective response requires investment in machine learning-powered solutions which are able to provide a 360-degree view of each user, using large volumes of data. The value of machine learning is not only in supporting highly accurate, automated decisioning — even spotting previously unknown fraud patterns — but in adapting over time as fraud evolves.

Recommerce is growing fast, but widespread fraud could have a chilling effect on user trust, and could ultimately force customers away. That’s why marketplaces must act now to tackle the challenge head-on.

To find out how Simility can help you facilitate trust in your online marketplace, schedule a demo now.