Online Shoplifting

Online Shoplifting: What It Is, How It Works, and Types

What is online shoplifting?

Online shoplifting is the theft of goods or content from an internet-based merchant or distributor. It can take many forms, from abusing payment dispute processes to downloading copyrighted material without paying. Although the theft often happens without face-to-face contact, it is still a crime and can carry legal and financial consequences for both the offender and the victim business.

Key takeaways

• Online shoplifting includes fraudulent chargeback disputes and digital piracy.
• Abusive chargebacks can force merchants to refund paid orders and may trigger penalties from payment processors.
• Secondary effects include lost sales and the possible loss of a payment processor or card network.
• Illegally downloading copyrighted music, books, video, or software is another common form of online shoplifting.

How online shoplifting through chargebacks works

1. A consumer buys goods online with a credit card and receives them.
2. The consumer then files a claim with the card issuer saying the goods were never received.
3. The issuer initiates a chargeback and the merchant is required to refund the purchase.
4. If the merchant cannot successfully dispute the chargeback, it absorbs the loss.

Chargebacks are a legitimate consumer protection tool, but when abused they become a form of fraud. Aside from lost merchandise, processing chargebacks imposes operational costs — reporting has estimated processing expenses averaging up to around $40 per dispute — and high chargeback volumes can cause payment processors to stop servicing a merchant, reducing the merchant’s ability to accept certain payment methods and harming sales.

Other forms: piracy and copyright infringement

Digital piracy — illegally downloading or distributing copyrighted music, books, movies, software, or other media — is a form of online shoplifting that harms both creators and distributors. Factors that make piracy hard to eliminate include:
* Consumer demand for free or very low-cost content.
* The speed and coordination of piracy networks compared with large media companies’ responses.
* The rise of user-generated content platforms, which can enable inadvertent copyright violations.

There is no single, universal solution to piracy; organizations typically use a mix of tactics to protect assets and enforce rights.

Mitigation approaches

Effective responses typically combine multiple measures tailored to the specific risk:
* For merchants: robust fraud detection, clear delivery and return documentation, proof-of-delivery systems, careful monitoring of chargeback rates, and strong dispute evidence to contest illegitimate chargebacks.
* For content owners: digital rights management, monitoring and takedown procedures, legal enforcement where appropriate, and consumer education about legitimate distribution channels.
* Across industries: maintaining feedback loops between merchants, payment processors, and law enforcement to identify abuse patterns and respond quickly.

Conclusion

Online shoplifting covers a range of fraudulent behaviors from abusive chargebacks to digital piracy. While chargebacks and consumer protections serve important purposes, their abuse can inflict significant direct and indirect costs on businesses. Preventing and reducing online shoplifting requires a layered approach that combines technical, operational, and legal measures.