The impact of online frauds on the sale of luxury goods on the Internet
source: own elaboration
Last year showed consumers that they don’t need physical stores to shop. Most companies expanded their delivery system and sold their goods online. Free delivery, extended return time, numerous discount codes and promotions - there were many ways to increase the value of shopping carts, and the lower margin was rewarded by new customers and larger quantities of purchased products. But what about luxury goods that buyers want to see, and often even feel, before making a purchasing decision?
Online shopping is often more convenient, faster and cheaper than traditional, especially if we buy well-known products. But what if we want to buy an apartment, car or wedding dress, i.e., things that we would choose for months under normal circumstances? Companies selling this type of goods have been hit particularly hard by the pandemic. Car dealerships, stores offering designer clothes or jewelry, art galleries, real estate offices, etc. - if their brick-and-mortar stores weren’t fully closed, they certainly attracted far fewer potential customers than before. There were also no fairs, open days and other events where they can usually present their offers. In order to survive, they had to adapt to new conditions and try to sell on the Internet. This was particularly evident in the automotive industry - many manufacturers offered customers to deliver a new car configured online to their doorstep. The greater activity of these brands on the Internet has also made it necessary to buy paid online ads. However, it soon turned out that the market of luxury goods, i.e., more expensive, rarely bought and often very carefully selected by consumers, is particularly sensitive to online frauds.
Click frauds
As reported by CHEQ in Pay Per Click campaigns for the automotive industry, about 3% of all clicks are invalid clicks from users (or BOTs) who will never buy a car. Among luxury goods, this may be of particular importance due to expensive phrases or keywords, and thus the higher cost of each single click. In addition, scammers often drain budgets in paid online campaigns early in the morning, preventing their ads from showing to potential buyers for the rest of the day. But this is only one form of online fraud in the luxury goods market.
Scrapers
Manufacturers of luxury goods and companies trading in them place great emphasis on the quality of content published on the Internet. Content for them is often created unique, and the resources allocated to it are significant. Hence, BOTs copying content appearing on websites and pasting them on other websites they create can be a big problem. The result is the duplication of materials published on websites of well-known brands on portals with often dubious reputation, which significantly reduces the value of such content and may adversely affect the image of the entire brand.
Traffic from databases
One of the most common online marketing scams is the so-called „junk traffic” originating from databases. How do scammers deliver junk traffic work? It is often database owners who monetize their information about real people (such as email addresses, telephone numbers, etc.) by sending it en masse to various advertisers. In some campaigns they are paid for the amount of data provided, in others they expect someone from that list to make a purchase, for which they will receive a commission. Of course, such databases aren’t created with a specific campaign in mind - they are most often out of date, and the people to whom the information relates aren’t really interested in specific products. In addition, the owners of such data centers rarely care about having appropriate contact consents. This is especially dangerous for the luxury goods market. Why?
First of all, due to the high cost of handling each contact. The average advertiser checks the acquired traffic using a call center or mass messages, but manufacturers of luxury goods must take particular care of the feelings of potential customers. They want each contact with the brand to be the best and leave positive emotions behind. Therefore, they don’t use mass solutions, which increases the cost of service significantly.
In addition, the effects of contacting a person who didn’t consent to it may be much more serious - it happens that similar cases sometimes even go to court, and very often they cause disgust, which has a negative impact on the brand image.
We also can’t forget about the cost of the wasted opportunity, i.e. the lost revenue from a potential customer that hasn’t been served, because the time has been spent on handling junk traffic. It is particularly important in the case of luxury goods due to the very high CLV (customer lifetime value).
Invalid leads
Another popular way to trick advertisers in online campaigns is to send them false leads, i.e. contact details containing false or incomplete information. In this case, the effects are similar to the handling of the traffic from databases described above, with the difference that contact forms are automatically treated as potential customers, so they are handled much more often.
Fake reviews, opinions and ratings
An online scam that is very acute for the luxury goods industry is the false ratings and opinions issued by BOTs or the fraudsters themselves. For a fraudster, most often paid for by the competition, it is a very simple way to harm a given brand. For expensive goods and services, reviews are of great importance as the purchase decision isn’t made immediately. Potential customers often search for information about a given brand for a long time and learn about the opinions of users. If they come across false opinions resulting from such actions, they may ultimately choose the products or services of the competition.
Distorting statistics
Last but not least, marketing campaigns related to luxury goods such as cars or branded clothes usually have large advertising budgets and all activities are planned in detail. Each of the above-mentioned frauds can seriously distort the indicators on the basis of which marketing decisions are made, and thus reduce the effectiveness of the entire campaign and result in the waste of significant funds.
