Amazon Refund Scams To Watch Out For

Selling on Amazon has its challenges. When you first launch a product, you may need to do deep discounts and giveaways. When holidays are around the corner, you need twice as much inventory as you’d usually have. When sales go down, you try to lower the price to compensate for it.

Yet, no matter how you adapt, it always seems you get the worst timing.

  • You run out of stock right before the holiday season. 
  • As soon as you lower your price, a customer buys eighteen units.
  • You set flash offers expecting to boost your sales volume, but they do the opposite.

These results aren’t coincidences. If you’re selling a high-demand, high-competition product, there’s a lot of attention for that niche. What if someone was trying to manipulate your listing to make money from you?

What Are Refund Scams?

After launching a brand-new product, getting sales feels exciting. Because we think our product is the best, we seek confirmation of the patterns around us:

Imagine you want to test your product and set the price twice more than the average. Ten minutes later, twelve different clients buy from you: but before that moment, you were getting no sales for weeks.

Do those sales come from real customers? Or is it a con man testing stolen credit cards? If the orders never show as “Complete,” the answer becomes evident.

Scammers who use refund tricks are trying to get free products and sell them later. Every experienced seller has dealt with them at least once, which isn’t a big deal. If you get many refund scams, however, Amazon may close your account without warning.

Refund Rates: How High Is Reasonable?

Before you get alarmed, mind that Amazon sellers have higher refund rates than the average e-com platform. Most buyers return because they have a change of heart, they bought the wrong variation, or the product arrived in bad condition.

Although refund scams happen in low proportion, they increase over time. Once a scammer knows he can trick you, he will try again to take advantage (until you stop them).

Up to 5% return rates make sense for most categories, especially apparel, personal care, textiles, and electronics. If you stay away from fragile products, intricate parts, and variations, your rates could fall below 2%.

What if you’re selling thousands of units a month? What if you get a dozen refund requests within 24 hours? That could still potentially be below 2%, but very suspicious.

Who Is Behind Refund Scams?

If someone scams you for a few units, they won’t make much, and you’ll lose almost nothing. Who would want to do such tricks?

  • Opportunistic buyers: Everybody gets an oddball from time to time. A client wants a refund, although they can’t prove they deserve it. You refund them to get rid of problems.
  • Listing hijackers: Hijackers plan to acquire your inventory for as cheap as possible, if not free. Then, they resell them for lower than your listing, win the Buy Box, and get your sales.
  • Immoral competitors: Sellers buy their products to see what competitors are doing differently. Others do it to leave negative reviews, and others try to sabotage the listing. They believe you’re the reason they aren’t selling.

How Much Refunds Really Cost You

By refund scams, we refer mostly to refunds without returns. After the scammer receives the package, they complain that they never received it, or it was an unauthorized purchase. They get a full refund, you lose the product, and the fulfillment cost. But it can get worse:

  • If you get too many requests in a short time, Amazon can suspend your account.
  • If customers complain (fraudulently) that your listing is misleading, Amazon could modify it, whether the claims are accurate or not.
  • If a refund scammer gets enough items from you, he can resell them on Amazon and hijack your listing.

You don’t just lose money. It may cost you the whole business.

When Should You Worry?

If you:

  • Get a load of refund requests overnight,
  • Get a ton of sales, but they stay in “Pending” status for weeks,
  • Get client messages asking unusual questions about shipping and refund policies,

Then your suspicions are right. Unfortunately, you can’t block certain people from buying from you on Amazon. But you can still take some steps to stay safe. Amazon will help you protect the business if you can prove they’re committing fraud.

Red Flags

Just as critical as it is to spot a potential Amazon scam, it’s fundamental to not confuse fake refunds with legit refunds. Stopping fraud isn’t a problem. The challenge is, how do you stop scammers without affecting legit returns?

Incoherent Orders

If a buyer wants to buy larger quantities, they do it in one order. Can you imagine a customer completing the order for the same product, one by one? Unless you set your minimum order quantity to one, it doesn’t make sense.

We can tell it’s the same client because they all come from one account to the same address. What you don’t see is that your client has been using a different card for each payment.

In other words, they’re testing stolen cards, not trying to buy your products. Even if those orders complete, it wouldn’t matter. The victim would make a chargeback soon.

Overcommitted Buyers

Few things feel better than making a big sale. But before you celebrate, use logic and look for clues. Why would a person want to buy twenty TVs from you at market price? Why, on top of that, they pay for urgent air shipping, which costs over $100? It may not be their money what they’re spending.

The plan works like this: steal a credit card and buy as much as possible, quickly. The victim finds out the steal and will try to report and refund their money (which isn’t possible without a return). Once they do, you may lose your product and process the refund after fulfillment expenses.

Unexpected Refund Spike

What are the reasons someone may want to refund? Unauthorized purchases, bad product condition, or a change of heart. Sellers expect some people to dislike their products, or that suppliers will make one defective item out of a hundred.

What if you find thirty different refunds issued within the same hour? If you’ve inspected your inventory, quality can’t be the problem. How are they so coordinated? Amazon looks at your overall rate despite the spikes, but sellers should always revise it.

Imagine you made over 10,000 sales in total, 100 of which happen today, including 30 refunds. Compared to the 10K, 30 returns may not seem like even 1%. Compared to a hundred, it screams: “scam!”

Scammers like to target big sellers, hoping they won’t notice. The more you sell, the harder it gets to spot them.

Orders Get Stuck On Delayed/Pending/Cancelled Status

Once an order appears as pending, Amazon can take up to 21 days to resolve it. One may assume the order is complete, or that the customer will solve the problem by that time.

The problem? Amazon can’t verify the customer’s payment method. If it fails, the order cancels. The sale never happened: it worked more like a reservation.

  • They order the product, but Amazon doesn’t ship it.
  • You get the balance, seller fees deducted, but they didn’t pay.

If you ship the product on pending status, you may lose both the sale and the product.

When Should You Worry?

What’s the worst-case scenario? A load of scammers attempts to refund while keeping the product with them. If you refunded them, you would still lose money one shipping and service fees. Also, if you have low account health/ high ODR rate, fraudulent returns could make Amazon close your store. 

Scam Variations

Although we don’t have many options to prevent it, we have enough evidence to prove the scam to Amazon and win the complaint. First, let’s learn about the tactics they use:

#1 Collect On PickUp Location

These days, you can’t get your package unless you verify it with an ID document/signature. But some scammers still manage to collect it without this step. They trick the system into thinking the order canceled after they picked up the item.

As the most unsafe method, the Amazon worker will leave the product at the door(if there’s nobody at home) and send a photo of the package to prove they delivered.

If you don’t respond to the delivery, they usually return it to a pick-up point and leave you a message. Mailmen may have delivered the package, but you may still complain that “the item never arrived.”

What if you cancel the order from your phone right after you collect the item? With that window of a few seconds, you can get the product for free. Since “it never arrived,” you don’t need to return to get your money back.

#2 Ebay Dropshipping Refund Scam

There’s a thin line between legit arbitrage and seller rip-offs:

In the first model, you try to buy a product on Amazon for cheaper to sell on eBay for more. It can be hard since Amazon charges more fees, but it’s possible if you find deep discounts, flash sales, giveaways, and coupons. The seller sells, you buy for low and sell high, and the eBay client receives the item in good condition in an Amazon package. Everybody wins.

How about the fraudulent model? The broker follows the same steps but tries to follow the Amazon seller to buy for low, if not for free. They create a fake listing on eBay for a product they don’t have. Once they get a client, they buy from Amazon sellers and use refund tricks to get it for free. 100% ROI.

#3 Switcheroo / Replace and Refund

Here’s perhaps the most dangerous scam for sellers.

  • You lose the item
  • You refund the thief
  • A future client receives a fake product.
  • That client returns the product and leaves a bad rating.
  • They blame you for the scam.

Worst of all? The new client will think the seller has tried to scam him. “I’ll never buy from them again!” Here’s how it works:

The con man purchases from a specific category, like electronics. Here, many commodities have high price variations, although they look almost the same. If someone switched both items, people would rarely notice the difference (until they test them).

He has previously bought the cheapest version that resembles what he wants to buy (it could be a replica/a broken item). The scammer will order the most expensive product, and switch it with his worthless version. 

To avoid refund policies, they may use a shrink wrap machine to keep the package looking as if they never opened it. They return, get refunded, and enjoy their free, expensive item!

But damages don’t stop here. Since they “never unpacked the item,” Amazon considers it Sellable and returns it to your inventory. One unlucky client will get this replica, get frustrated, return, refund, and leave a one-star rating: “You seller, scammer!”

Problems can last months after the scammer got the free item. What do you think will happen to the fake package? These items don’t just go away. As long as buyers keep returning them, they’ll continue to ship to your future clients forever, falling on a spiral of bad reviews!

#4 Address Forwarding Rip-Off

This scam reminds us of the “Fail To Deliver” scam. The buyer will ask you to change the shipping address right after it ships, not recommended by Amazon.

Ideally, they’d cancel the order and start a new one adding the new address. But experienced scammers know how to get around it: “I’ll leave negative feedback if you don’t change it right now.” 

You change the address while the product is in transit. What’s the worst that can happen? Among the address confusion, the buyer qualifies for an A-to-Z guarantee even after receiving the item. 

They’ll likely buy hundreds worth of products from you, send it to A, ask you to change the address to B, and claim against you. “The items never arrived.”

#5 Freezing inventory

Wouldn’t it be a coincidence that right before the holiday season, a customer buys all your inventory? It happens more often than you might think. But why would they purchase so many items? Different answers:

  • To sell them later.
  • To pull refund scams.
  • To leave you out of business for this moment of the year.

In this scam, the con man attempts to steal your business, profit, and then return whatever is left. Here’s how:

  1. They order all your inventory, especially when you make a discount or price drop. A seller could also mistakenly input a wrong and much lower price. Private underground software exists for such price changes that immediately alerts con artists of such abnormalities.
  2. They hijack your listing and may sell the items under your name. Because buyers go crazy on holidays, the scammer can resell it for much higher than what they paid.
  3. If they happen to have units unsold by the end of the season, they might file an A-to-Z guarantee and get their money back.
  4. If they manage to keep both the money and the product, they can keep selling them.

These con men strike hard when you least expect it. Limit your maximum order quantity, and buy more inventory than usual. Remember to trademark your product later. Scammers can sell knock-off versions ordering from your same manufacturer.

Don’t be surprised if it happens to you. Amazon Basics itself also gets hijacked from time to time.

How To Stop These Scams?

No measure is infallible. Nothing will stop a motivated con man from attempting a refund scam. If they work hard, they’ll achieve it. The trick is, if you make it hard enough, they’ll look for another victim instead.

#1 Create a Brand Outside the retail Platform

You can only win so many disputes as a seller. No matter how right you are, Amazon always favors the buyer. The best way to support fair trading is to be the one who sets the rules.

Once you’re big enough, you don’t need to stick to Amazon’s policies. In fact, selling on Amazon may be a limitation for big brands who don’t want to spend money on fees and unreasonable refunds. 

Long term wise, start building your audience on Amazon and move it to an official site later. 

That doesn’t mean you can’t win a case against dishonest buyers. It means that, due to Amazon’s conditions, it’s easier to forgive a refund than the hassle of reclaiming an order worth a few bucks.

#2 Avoid Ambiguity

Because everybody thinks differently, assumptions lead to confusion. Make your refund conditions as clear as water so that nobody can exploit them.

Most sellers already know these policies. But that’s not enough if your customers can’t see them immediately. For example, having the right conditions may help you win the refund case. But because the customers didn’t know them, they’ll be frustrated and leave unnecessary bad reviews.

  • Add your refund policy on the product description.
  • Include a guarantee insert card in your product.
  • Remind your refund policy on an email after the buyer completes an order.

You might also want to check out these common shopping scams.

#3 Track Everything

You can’t have quality problems if you know your products better than the customer. 

  • Buy samples before sourcing.
  • Inspect the inventory before shipping it to the warehouse.
  • Record your products on transit to their customers.
  • In an event of a large stock buy, consider asking the customer for ID verification.

Also, mention these procedures on your listing. You’ll discourage scammers from trying to con you.

#4 Set Comprehensive Limits

Your maximum order quantity should be low enough to avoid hijackers and high enough to avoid restricting sales. Set it between one and five, depending on your product size, price, and dimensions.

#5 Respond to Hijackers

If you find someone selling your products, contact them with a Cease-and-Desist Letter. If it doesn’t work, send a Report Infringement Report to Amazon.

If your product is easy to copy, consider getting a trademark to stop hijackers completely.

The Bottom Line

Nobody likes unfair refund claims. But if you offer the best products and care about quality controls, you can win fraudulent complaints despite Amazon’s customer preference.

Luckily, these setbacks can’t cause long-term losses in your business if you are committed. Amazon refund scams can’t stop a reputable brand that stands for their customers’ interests.

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