Resellers Vs Fraudsters: Best Practices for Business

There are two types of individuals who share similar characteristics but have a vastly different impact on your business: resellers and fraudsters. Understanding what sets them apart can benefit you in a variety of ways — from reducing actual fraud to leveraging partnerships to grow your brand.

What Is a Reseller and How Can It Be Good For Business?

There are a lot of misconceptions out there about resellers — who they are, what their goals are, and whether or not they’re good for businesses. Not all online resellers are bad. In fact, many can help bring in new customers and increase brand awareness, sales, and customer retention.

A reseller is an individual or a company that buys goods as cheaply as possible to resell them for a profit. Types of resellers include affiliate marketers, drop shipping businesses, and consignment or thrift stores. Some resellers operate without authorization from brands. Meaning, they don’t secure the legal rights to resell products or services. But many are authorized and can become a great asset to your business.

The main benefit of working with resellers is that they can help grow sales and reach new audiences — all without you spending a dime on marketing efforts. Resellers typically know their customers well, so they have an easier time making sales and marketing to the right audiences.

Plus, resellers can create strong, personal relationships with customers — increasing brand loyalty and customer retention for you. They can also collect feedback and pass it on to you so that you can improve products and services.

Best Practices for Separating Resellers From Fraudsters

While resellers can be beneficial, unfortunately fraudsters often hide amongst them. They conduct the same kind of business — buying products for cheap and reselling them online — but with ill intentions. Sometimes it can be difficult to tell the difference between a legitimate reseller and a fraudster. Learn what sets them apart so you don’t mistakenly turn away a potentially good business partner.

Understand the type of product bought by each group

Resellers and fraudsters typically go after different kinds of products. For example, fraudsters are more likely to resell convenience products and shopping products — things like household items, personal care products, electronics, and phones. They want items that are easy to sell and widely available.

On the other hand, resellers more often buy up specialty products or unsought products. That includes items like designer clothing, perfumes, luxury watches, diamond rings, and new types of goods. Resellers often make their online business out of selling unique, carefully curated products.

Know which payment methods are preferred by each group

With all the payment methods available today, it may seem impossible to differentiate a reseller from a fraudster on payment type. Of course, you can’t rely on this attribute alone, but looking at the payment methods used to purchase certain products can help uncover who is reselling your products or services.

Fraudsters more often pay with credit and debit cards than any other payment method. And often, those are stolen cards that could put you at risk of chargebacks. These are easy to get and use en masse, which is why they’re preferred by fraudsters.

Resellers, however, lean towards using prepaid cards more often than other payment methods. They’re typically more secure than traditional card payments and they help control business expenses. Additionally, they may use business credit cards instead of personal credit cards. Checking the BIN will tell you if the card is a personal credit, debit, prepaid, or business credit.

Evaluate the usage of promo offerings and discount codes

A key differentiator between resellers and fraudsters is how each group uses promotions and discount codes. While both groups aim to buy up products as cheap as possible — whether that be through sales, promotional offerings, or special discounts — their methods are not the same.

Fraudsters typically try to find loopholes so they can take advantage of promos and discounts by using them in a way that goes against your policies. For example, they may create dozens of fake accounts to take advantage of a sign-up bonus. They may even find ways to abuse or duplicate one-time discount codes so that they can reuse them.

Resellers typically use discount codes and promotional offerings in accordance with your policies. Their goal is to reduce costs to increase their profit margins, not take advantage of you. So they may look for discounts and promotions more often, but they work within your guidelines.

Collaborate with other industry professionals

Sorting out the good from the bad is a challenging effort, and one you shouldn’t face alone. Collaborate with other brands and retailers by sharing data on fraudulent activity, trends in reselling, and more. What may be normal at one business might not seem normal at yours. But by communicating with other industry professionals, you can better distinguish what’s good and what’s bad.

Leverage technology

You may not always have the time or energy to manually review orders or investigate fraud. While it’s important to know what to look for when distinguishing between fraudsters and resellers, it’s equally important to have the right tools to help you.

Fraud technology can be a great asset to your overall risk management strategy. But it can also identify the subtle differences between resellers and fraudsters by evaluating payment data, historical shopping behavior, and consumer profiles. It can work alongside your existing processes, making them more efficient and effective.

Make sure you find a tool that is customizable because a one-size-fits all approach simply isn’t adequate. You need a technology that allows you to set certain policies that block fraudsters and a different set of policies that allow good resellers.

Want to Learn More About the Benefits of Fraud Technology?

Navigating the world of fraud can be challenging. When good customers can sometimes look like fraudsters and fraudsters can sometimes disguise themselves as good customers, how do you trust your instincts? And how do you make sure you’re making the right decisions for your business?

That’s where fraud technology can help. Learn more about fraud detection software to see if it’s the right next step for you.