# Three Online Fraud Trends Beauty and Cosmetics Merchants Should Watch Out For
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-09-16
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: The Rise of Fraud in Beauty & Cosmetics: Key Trends
Meta Description: Learn about the key trends contributing to fraudulent online transactions in the beauty and cosmetics industry, impacting customer experience and sales growth.
URL: https://financedigest.com/three-online-fraud-trends-beauty-and-cosmetics-merchants-should-watch-out-forhtml

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_By_ **_Oksana Balytsky,_** _Product Marketing Director at Forter_

Beauty and [cosmetics is one of the fastest-growing industries](https://www.financedigest.com/airless-pump-market-to-grow-by-1-8x-as-demand-in-personal-care-cosmetics-industry-picks-up-pace-future-market-insights.html "Airless Pump Market to Grow by 1.8x as Demand in Personal Care & Cosmetics Industry Picks Up Pace: Future Market Insights"). The sector went from being worth [$483 billion in 2020](https://commonthreadco.com/blogs/coachs-corner/beauty-industry-cosmetics-marketing-ecommerce#:~:text=Globally%2C%20the%20industry%20is%20strong,And%20%24784.6B%20by%202027.) to $511 billion in 2021, and is expected to exceed $716 billion by 2025.

One of the most significant contributing [factors to the growth](https://www.financedigest.com/the-stir-to-be-different-a-major-factor-of-growth-of-the-flax-seeds-market.html "The Stir To Be Different A Major Factor Of Growth Of The Flax Seeds Market") was the wave of new shoppers that were ushered online during the pandemic. During the first fiscal quarter in 2020, [almost 30% of the beauty market completely shut down](https://www.mckinsey.com/~/media/McKinsey/Industries/Consumer%20Packaged%20Goods/Our%20Insights/How%20COVID%2019%20is%20changing%20the%20world%20of%20beauty/How-COVID-19-is-changing-the-world-of-beauty-vF.pdf) and while traditional brick-and-mortar drug stores that supplied cosmetics experienced a decline in sales, it forced retailers to fully embrace digital transformation and enhance the online shopping experience.

Although the e-commerce explosion boosted beauty [brands’ sales](https://www.financedigest.com/geelys-ev-brand-zeekr-aims-to-double-sales-in-2023-expand-in-europe.html "Geely’s EV brand Zeekr aims to double sales in 2023, expand in Europe"), it also brought some added risks. Recentresearch showed that fraudulent online transactions in the beauty and cosmetics space were up 65%. There are three [key trends](https://www.financedigest.com/4-key-financial-trends-as-we-approach-2021.html "4 Key Financial Trends as we Approach 2021") that are contributing to the rise in fraud and decline in the customer experience for beauty and cosmetic retailers:

**Trend #1: Omnichannel Experiences**

The intersection of brick-and-mortar stores and [online shopping](https://www.financedigest.com/the-high-street-is-dead-long-live-online-shopping.html "The high street is dead – long live online shopping! ") has created the need for retailers to provide a consistent, coordinated shopping experience across all channels. Known as the “omnichannel” experience, it includes options for shoppers such as:

- Buy online, pick up in-store (BOPIS)
- Buy online and pick up curbside
- Buy online, return in store (BORIS)

Sixty percent of millennials and 58% of Gen Z shoppers have increased their use of BOPIS specifically for beauty products, according to a recent [PowerReviews survey](https://www.powerreviews.com/insights/2021-beauty-industry-consumer-report/#:~:text=Younger%20generations%20are%20taking%20advantage%20of%20curbside%20pickup%20even%20more.%2060%25%20of%20Millennials%20and%2058%25%20of%20Gen%20Z%20shoppers%20say%20they%E2%80%99ve%20ramped%20up%20their%20use%20of%20BOPIS%20services%20for%20beauty%20products.).

**How The Omnichannel** [Experience Increases Fraud](https://www.financedigest.com/fintechs-how-to-increase-loyalty-through-user-experience-and-fraud-prevention.html "FinTechs: How to increase loyalty through user experience and fraud prevention")

Shoppers are not the only ones finding the convenience of these omnichannel services. These options greatly expand the surface area scammers have to exploit. Forter research showed that there has been a [55% increase](https://www.forter.com/blog/ninth-fraud-attack-index/) in BOPIS fraud since 2020. Fraudsters know that retailers have to provide fast and seamless omnichannel options to attract customers, and are using legacy-based [fraud prevention](https://www.financedigest.com/payroll-fraud-and-how-to-prevent-it.html "Payroll fraud and how to prevent it") solutions to protect themselves. Unfortunately, these traditional systems don’t cover the entire shopping journey across omnichannel touchpoints.

**Trend #2: The Influx of New Online Shoppers**

There was a [43% or $244.2 billion increase](https://www.census.gov/library/stories/2022/04/ecommerce-sales-surged-during-pandemic.html#:~:text=According%20to%20the%20most%20recent,to%20%24815.4%20billion%20in%202020.) in e-commerce sales in 2020 compared to the previous year, and behind those dollars were millions of new online users. According to the same PowerReviews study referenced above, a little over [50% of consumers now purchase more of their beauty products online](https://www.financedigest.com/50-of-consumers-wont-spend-more-than-20-minutes-applying-for-financial-products-online.html "50% of consumers won’t spend more than 20 minutes applying for financial products online") than before the onset of the pandemic.

[Brands have to cater](https://www.financedigest.com/how-a-british-brand-catered-to-hnwis-can-maintain-its-position-within-the-global-luxury-sphere-and-even-grow-in-these-current-circumstances.html "How a British brand catered to HNWIs can maintain its position within the global luxury sphere, and even grow, in these current circumstances") to these online newcomers, but many beauty brands have no information about their preferences or shopping habits. This lack of understanding leads to new users experiencinghigher rates of payment declines compared to regular online shoppers. First impressions are everything and denial of service of any kind can sour the business-consumer relationship indefinitely.

**More [customers mean more account](https://www.financedigest.com/covid-19-has-made-your-customer-accounts-more-valuable.html "Covid-19 has made your customer accounts more valuable") takeovers.**

Many new users moved online out of necessity, and many are less experienced with [protecting their identity and online](https://www.financedigest.com/uk-opposition-calls-for-better-online-protections-for-children.html "UK opposition calls for better online protections for children") accounts. Weak passwords and the lack of understanding of two-factor authentication (2FA) make them more [vulnerable to account takeover attacks](https://www.financedigest.com/finding-it-hard-to-recruit-good-it-security-managers-dont-leave-yourself-vulnerable-to-attack.html "Finding it hard to recruit good IT security managers? Don’t leave yourself vulnerable to attack") (ATO). A study published in 2021 found that over [20 million households](https://www.security.org/digital-safety/account-takeover-annual-report/) have been victims of an account takeover.

Since the migration of shoppers to the [digital world](https://www.financedigest.com/fraud-in-a-mobile-digital-world.html "FRAUD IN A MOBILE DIGITAL WORLD"), ATOs have increased by 55%. These numbers are expected to climb in the [future as new users are continuously joining and fraudsters work](https://www.financedigest.com/meetings-in-the-metaverse-how-likely-is-this-the-future-of-work.html "Meetings in the metaverse – how likely is this the future of work?") to exploit and steal login information.

**Trend #3: Creative Policy Abuse**

As more shoppers take advantage of the integrated shopping experience, they will [grow to favor brands that offer](https://www.financedigest.com/discount-dining-clubs-tastecard-and-gourmet-society-grow-their-offering-as-chimichanga-and-spaghetti-house-both-sign-up.html "Discount dining clubs tastecard and Gourmet Society grow their offering as Chimichanga and Spaghetti House both sign up") convenient experiences _and_ affordable prices. Cosmetics and beauty [shoppers are savvy buyers and seek out retailers](https://www.financedigest.com/uk-retailers-see-40-jump-in-boxing-day-shoppers-springboard.html "UK retailers see 40% jump in Boxing Day shoppers -Springboard") that offer shopping incentives like loyalty programs, sales, promotions and faster shipping.

About 76% percent of shoppers [responded](https://www.claruscommerce.com/blog/new-data-reveals-what-most-consumers-want-from-loyalty-programs/) that they would pay extra for quality reward programs, and 40% of respondents said they anticipate immediate benefits once registering.

**More promotions mean more policy abuse**

Based on Forter’s [research](https://www.pymnts.com/news/retail/2021/retailers-getting-hit-with-90b-of-bogus-returns-promo-abuse/) in conjunction with PYMNTS, policy abuse cost U.S. [retailers more than $100 million](https://www.financedigest.com/incentive-qas-expands-retail-portfolio-with-million-pound-shopping-centre-contract.html "Incentive QAS Expands Retail Portfolio With Million Pound Shopping Centre Contract") and as much as $89 billion per year.

[Customer policy abuse is here to stay and will become more creative as omnichannel](https://www.financedigest.com/how-omnichannel-cx-can-help-insurers-meet-customer-expectations.html "How omnichannel CX can help insurers meet customer expectations") services/options are added. Types of policy abuse beauty brands can [expect to encounter include returns](https://www.financedigest.com/lufthansa-expects-further-significant-improvement-after-return-to-profit.html "Lufthansa expects further ‘significant improvement’ after return to profit") abuse, reward program abuse and promo abuse.

**How Beauty and Cosmetics Brands Can Protect Themselves**

There are many [factors for beauty and cosmetics brands to consider](https://www.financedigest.com/4-important-factors-to-consider-when-choosing-an-eb-5-visa-investment-project.html "4 Important Factors to Consider When Choosing an EB-5 Visa Investment Project") when it comes to addressing these fraud trends. A good starting point is to incorporate a [fraud prevention service with real-time fraud detection](https://www.financedigest.com/the-clues-to-detecting-fraud-are-hidden-in-relationships.html "THE CLUES TO DETECTING FRAUD ARE HIDDEN IN RELATIONSHIPS") capabilities to process orders as quickly as possible with minimal disruption to customers’ shopping experience. A [platform](https://www.financedigest.com/rationalfx-drives-customer-acquisition-with-regtech-platform-from-trunarrative.html "RationalFX drives customer acquisition with RegTech platform from  TruNarrative") with large customer profile repositories is essential to cross-reference new customers and welcome them with no issue. And ultimately, it [protects businesses against fraud](https://www.financedigest.com/protect-your-organisation-from-fraud.html "Protect your organisation from fraud") without compromising the quality of the customer journey.


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