Published: January 18, 2023
Reading time: 7 minute read
Written by: Forter Team

By Doriel Abrahams, Head of U.S. Analytics

As a fraud fighter, I spend a lot of time diving into data. Most of my research is naturally driven by fraudster activity and development — like the ongoing evolution of account takeovers, emerging trends in digital goods, and the subtle (but significant) shift in gift card attacks.

Increasingly, I’m equally fascinated by trends that aren’t entirely driven by professional fraudsters. As consumers become better informed about the options online, they also become more creative about leveraging them to their advantage. Sometimes, they get ingenious — almost like fraudsters. I’ve seen that with promotion abuse and returns abuse, and now we’re also seeing it with resellers. 

The reality of today’s resellers has become so complex that retailers often feel overwhelmed by it. This is especially true in apparel, footwear, or ticketing, where resellers can be a huge proportion of a site’s traffic. 

An accurate analysis of reseller activity can be more impactful than you think. If you’re not on top of the situation, it might cost you money in ways you don’t even realize. It may be time to re-evaluate the reseller reality on your site. 

Resellers Are Bargain-Hungry

A reseller is an individual or company that aims to buy goods as cheaply as possible to resell them for a profit. The better the deal they can get, the more profit they make. This leads to two main consequences, both tricky for a retailer: 

  1. Resellers always look for bargains – promotions, discounts, gift card boosts, credit card points, and ways to stack coupons. Anything that can help them drive the price they pay down directly impacts their bottom line. 
  2. Resellers have to work at scale. With small margins, this business model only works if a reseller can achieve reasonable scale. That means they’ll be hitting lots of sites selling similar items and often hitting the same site many times. Sometimes, a single reseller might be targeting millions of dollars worth of goods. 

The problem is only growing, which makes sense in growing economic uncertainty. Reseller activity has grown 24% over the last year within apparel alone.

This is particularly challenging because each of the two consequences I mentioned leads to another factor that could almost be designed to cause trouble for retailers. 

Resellers Are Vulnerable to Fraudsters

Resellers are always looking for discounts. Many ways they find to shave a little off the price are legitimate. Some are a little dubious, like promotion abuse. Others get the reseller unwittingly tangled up with fraud. 

The most common area of vulnerability is around gift cards. It’s common for legitimate customers to resell gift cards for a slight discount. Let’s say you got a $50 gift card for a particular store from work or from a family member who doesn’t know you very well. You never shop at that store and have no intention of doing so. You sell that gift card to someone who, by contrast, loves that store. They give you $45 for it. Everyone is happy. 

When a reseller gets a legit gift card this way, it’s great — that $5 tends to add up when you’re working at scale. The trouble, however, is that this is a common monetization tactic for fraudsters who have either stolen gift cards outright or used stolen funds to purchase gift cards. 

In those cases, the reseller purchases and uses these tainted gift cards. Since resellers work at scale, the bad gift card scenario can be painful for retailers from whom the reseller is trying to make purchases. That’s a lot of fraud. 

Even more confusingly, fraudsters sometimes sell “gift cards,” simply stolen credit card numbers. The reseller typically has no idea what’s going on — but that doesn’t stop the very real confusion they then cause at checkout. 

Resellers Might Look Like Fraudsters

If the bargain-focused mentality leaves resellers vulnerable to fraud, making them unintentionally look like fraudsters, their need to scale sometimes makes them look like they have a lot in common with the fraudulent fraternity. 

This pops up in mild form when resellers try to conceal their identity in gentle ways, to conceal the fact that they’re returning so often to make purchases from the same sites. This is because they know that some sites don’t like a single entity to make too many purchases for various reasons. These minor forms of obfuscation are typically easy for a fraud system to see through since resellers are decidedly amateur at this sort of digital trickery. 

More seriously, though, is that resellers sometimes work with bots. This helps them make purchases at the required scale without demanding manual effort for every purchase. Some resellers also aim to get their hands on particularly desirable goods, such as limited edition items, and here the challenge for them is to scoop up as many as possible to maximize their inventory and minimize other people’s chances of buying directly from other sites. 

This isn’t fraudulent – the resellers pay for the goods – but it’s generally extremely unpopular with retailers. 

Should Retailers Say “No” to Resellers?

Retailer policy on resellers varies hugely from merchant to merchant. Some retailers, particularly those with strong brands, feel that resellers devalue their brands and should be banned. In other cases, there are legal limitations – retailers may have distribution agreements with other brands or out-of-state retailers that prevent them from distributing goods to other countries, in which case resellers can represent problematic leakage. 

Others are happy for any business which brings profit. As long as the discounts the resellers find aren’t gouging the retailer’s profit margins, they’re happy for resellers to continue shopping – with legitimate payment, of course. 

Still, others have a nuanced policy, with specific goods or brands made either accessible or inaccessible to resellers or a certain percentage of items marked internally as being acceptable to sell to resellers. These policies may change depending on the time of year or how the business is doing. 

What is consistent, though, is that every retailer needs to know the real picture of resellers buying from their business. Only with a full and accurate understanding can a retailer make fact-grounded policy decisions and follow through with the appropriate decisions at checkout.

Resellers Leave Many-Layered Digital Footprints

Understanding the reality of reselling in today’s intricate online ecosystem requires the ability to see the big picture of a reseller’s interactions with diverse sites over time.

What intrigued me about resellers in the first place was an issue we came across looking through Forter’s platform. We were researching a previously good customer who had suddenly tried to use a stolen credit card and was blocked by the system. In digging, we could see the reseller’s history across multiple sites over time, buying goods (always the same sorts of high-end apparel, in this case) at a discount where possible. We could sometimes see the resale, as well, on one online marketplace or another. We could also see the same reseller purchasing gift cards legitimately at various times. It wasn’t hard to work out what had happened and to ensure the system understood it, too. 

For me, the nuance of making sure that our system consistently knows the difference between fraud, policy abuse, and reselling activity, and ensuring that each of our retailer’s different policies about resellers is reflected in the decisions our system makes on their site, is an exciting and engaging challenge. 

I strongly encourage fraud fighters to take time to look into the details of how resellers interact with their businesses. Make sure you’re asking the right questions, like:

  • What is our company policy about resellers, and how well does our system reflect this?
  • How confidently can we determine when a customer is a reseller? Are there things that could be done to improve this?
  • What percentage of transactions are attempted by resellers? What percentage of successful transactions? What dollar amounts are involved? How has this changed over the last year?
  • How often are reseller transactions associated with fraud? With bots?
  • How does reseller activity correspond to the use of promotions? How about promotion abuse? Should the promotion abuse policy be altered to reflect this?
  • Are there insights into the reseller picture that other departments or management might find interesting or unexpected? 

I’ve had fantastic conversations with some of Forter’s customers around these areas and how the insights from this research can be used to update policies appropriately. I can recommend re-evaluating the reality of resellers on your site. It’s unexpectedly fascinating, and the results can tremendously impact the bottom line and company clarity around reputation and policy issues.



About Forter

Forter is the Trust Platform for digital commerce. We make accurate, instant assessments of trustworthiness across every step of the buying journey. Our ability to isolate fraud and protect consumers is why Nordstrom, Sephora, Instacart, Adobe, Priceline, and other leaders across industries have trusted us to process more than $500 billion in transactions. Click here to learn more.

7 minute read