The Clearsale Blog

Fraud Risk Profile for the Food & Beverage Industry

Fraud Risk Profile for the Food & Beverage Industry

As e-commerce expands, the food and beverage industry has been quick to seize the opportunity to capture new business: Online grocery sales totaled more than $150 billion in 2017 and are expected to top $334 billion by 2025.

Food and beverage retailers are fueling this growth by introducing a range of mobile apps and e-commerce-enabled websites that empower customers to order everything from a quick carryout meal to a week’s worth of groceries delivered to their doorsteps.

But these merchants must also be careful to avoid getting blindsided by high fraud rates and chargebacks and protect against hits to their revenue.

Online Fraud Risks Food and Beverage Retailers Face

Because many of these retailers are new to the e-commerce space — and may be unaware of the security measures e-commerce requires — they’re finding themselves easy targets for savvy fraudsters.

It’s an expensive mistake; in fact, LexisNexis reports in that mobile fraud costs retailers $2.33 for every $1 in fraudulent transactions.

So, what should food and beverage merchants look for in the fight against mobile fraud?

Click-and-Collect Orders

Because of the short shelf-life of many food items, online retailers typically offer same- or next day delivery and pickup. Fraudsters can easily place high-value orders for filet mignon, lobster and champagne and have the entire ticket get delivered before the victim even realizes the card number has been compromised.

Card Testing

After fraudsters purchase stolen credit card information on the dark web, they must confirm the cards work. Fraudsters often test their stolen accounts on a food or beverage company’s website by trying to make low-value gift card purchases.


After fraudsters use stolen credit cards to make fraudulent purchases and the legitimate cardholder discovers they’ve been defrauded, the customer often files a costly chargeback on the transaction.

Merchants are also vulnerable to chargeback fraud, which happens when customers want to keep the item they ordered but also receive a refund of the transaction amount. For example, think of the customer who orders and receives their weekly meal kit from a delivery service and then fraudulently files a chargeback, saying they never received the order.

Unfortunately, food and beverage retailers are increasingly finding themselves among the least likely to win chargebacks, meaning retailers should do whatever they can to avoid them.

Mobile Wallets

Fraudsters can load mobile wallets with fraudulently purchased credit cards. If the fraud is discovered, the criminal easily deletes the account and starts fresh with a new one.

e-Gift Cards

The gift card industry is projected to top $160 billion in 2018, which is great news for food and beverage retailers. But that also makes gift cards a prime target for fraudsters: They’re easy to purchase, resell on secondary sites and spend — plus, they’ve virtually untraceable.

Account Takeover

In 2017, food and beverage account takeover attacks rose 49.8%. In this type of attack, cybercriminals hack into customers’ accounts to make purchases and then change communication and notification preferences so the customer no longer has control over the account.

This can be especially profitable for criminals if the victim has the auto-reload feature turned on (e.g., the Starbucks app), which means the fraudster can make repeated purchases and the account will refill once it’s drained.

How Retailers Can Minimize Their Online Fraud Risk

To help minimize their online fraud risk, food and beverage retailers should consider:

Following Up With Customers

Connect with customers after purchases are delivered or have been picked up. Not only does it give merchants the opportunity to ensure customer satisfaction, but it also offers the opportunity to resolve problems before they escalate to chargebacks.

Verifying Customers’ Identities

It’s easy for cybercriminals to use stolen identities and credit cards to make online purchases. Use the Address Verification System to match customer-provided billing addresses with those on file with the credit card-issuing bank. Merchants can also compare the cities, states and area codes against the ZIP codes customers provide to ensure they match.

For merchants that offer curbside pickup or home delivery, ask customers to show an ID or the credit card used for the purchase.

Encouraging Data Security

Encourage customers to regularly update passwords, not reuse passwords among sites, and avoid using popular passwords. Customers should also secure their phones and payment apps to prevent accounts falling into the wrong hands if a phone is lost.

Ensuring PCI Compliance

Payment Card Industry Data Security Standards have the sole goal of keeping credit card data secure as it makes its way from a merchant to the credit card processor. Although every merchant must comply with these regulations, the food and beverage industry had the highest percentage of data security investigations in both 2011 and 2012.

Protecting Food and Beverage Retailers Against the Rising Threat of CNP Fraud

Successful e-commerce retailers have to be able to accept credit cards. But they don’t have to accept losing revenue to fraud and chargebacks. Implementing a comprehensive fraud protection program can help merchants catch fraudulent transactions before they’re processed and avoid declining legitimate transactions. The best approach? One that provides superior fraud screening and analytics and a highly trained team of analysts that can discern between legitimate and fraudulent transactions — all while offering customers a seamless shopping experience.

At ClearSale, we’re committed to helping e-commerce retailers maximize their sales and protect their profits. Contact us today to learn why our Total Guaranteed Protection Solution is used by companies around the world to defend their businesses against the rising risk of online fraud.

ClearSale Fraud Protection Buyers Guide

You may also like

[Industry Focus] Fraud Risk Profile for Nutraceutical and Drug Retailers

[Industry Focus] Fraud Risk Profile for Nutraceutical and Drug Retailers

As people become more conscious of what they’re putting into their bodies, there’s been an increased demand for high-quality supplements and healthful food and beverages. The result has been a..

Jewelry E-Commerce Statistics and Insights

Jewelry E-Commerce Statistics and Insights

Whether worn for cultural reasons or pure ornamentation, jewelry is often anything but practical. And that’s precisely why it’s such a pleasurable purchase. Jewelry is the classic “splurge.” But..

[Industry Profile] Fitness Equipment and Sporting Goods

[Industry Profile] Fitness Equipment and Sporting Goods

Jokes abound in 2020 about working from home, eating all your quarantine snacks and putting on your best Zoom pajamas for online meetings. It might seem that health and fitness have fallen by the..

4 Enterprise Retailers to Watch in 2020

4 Enterprise Retailers to Watch in 2020

In today’s uncertain market, e-commerce retailers are looking for new ways to confidently grow their business. Exploring new sales channels, implementing new delivery methods, and even partnering..

Customer Behavior Profile: Male Luxury Goods

Customer Behavior Profile: Male Luxury Goods

Historically, luxury brands have catered to women as their primary customers, but times are changing. Recent studies show that men spent $39 billion on luxury items in 2018, while women spent just..

Online Ordering Trends: Grocery Industry

Online Ordering Trends: Grocery Industry

Over the years, grocery shopping hadn’t evolved much. Sure, self-checkout lanes emerged as a new convenience, but the actual shopping experience was virtually the same.

Industry Trends 2020: Consumer Electronics

Industry Trends 2020: Consumer Electronics

When it comes to rapid change, few industries match consumer electronics. Stalwarts like Sony, Apple, and LG have seen, ridden, and in some cases driven the multiple waves of change that have..

Luxury E-Commerce: 6 Business Growth Strategies for Merchants

Luxury E-Commerce: 6 Business Growth Strategies for Merchants

Author and politician Anthony Crosland once said, “What one generation sees as a luxury, the next sees as a necessity.” Given the explosive growth of the sales of luxury goods as new generations..

Retailers have got COVID-19 problems, but fraud shouldn’t be one

Retailers have got COVID-19 problems, but fraud shouldn’t be one

 The coronavirus pandemic has led to more Australians filling their shopping bags from behind a screen, but a proliferation of COVID-19-themed online scams are pushing customers away from shopping..

Want to write
for our blog?

Please review our writers' guidelines
and then email with your pitch!

Subscribe to our blog