Jeweller recently reported on an international scam that the mainstream media has described as ‘ghost stores’ – websites claiming to be Australian-based businesses that target consumers with false and misleading claims.
Unfortunately, the term ‘ghost stores’ does not adequately describe the swindle being perpetuated on Australian consumers – this is a scam. Indeed, unsuspecting customers are presented with glossy websites featuring aggressively discounted products, justified by emotional stories from the owners.
Many of these websites feature fabricated reasons for Closing Down Sales, ranging from retirement to poor health. Some websites detail ‘sob stories’ with images of the owners standing in front of the store.
The problem is that none of it is true. The stores and the owners don’t exist. In one notable example, a raging fire tragically destroyed the store, forcing the retailer to sell products online at slashed prices!
An astute shopper would likely ask an obvious question: If the store burned down, how is there any stock left to be sold?
These scammers target Australian jewellery consumers, and not only are they swindling them, but this illegal conduct also harms genuine retailers. Given the ‘make-up’ of the independent jewellery retail market, this means that these ghost stores are damaging authentic family-owned businesses.
These websites are like a zombie horde – as soon as one is taken offline, another website is up and running, aided by easy-to-use and replicate e-commerce website design platforms. Most of these businesses tend to be based overseas, despite often claiming to be located in Melbourne, Sydney, or one of Australia’s picturesque tourist hotspots.
An investigation by The Guardian claims to have found more than 140 scammer websites operating offshore while pretending to be a local business.
Jeweller’s research in recent weeks has gone further and identified many more.
These scam shops are intriguing. They exhibit striking similarities while diverging in compelling ways. Patterns suggest that many of these websites may be run by the same people or groups.
Each website’s approach to deception varies, ranging from subtle misrepresentations to bold, outright fabrications. Broadly speaking, the one thing these online retailers have in common is that the central business model is drop shipping.
For those unfamiliar, drop shipping for retailers involves selling jewellery, accessories, and clothing without holding inventory. When a customer orders online, the retailer forwards it to a third-party supplier who ships it directly to the consumer.
There’s nothing wrong with drop shipping, as long as you don’t lie to consumers about what your business does and where the products are sourced!
With that said, the deceptive and misleading actions these online retailers are willing to take can differ significantly. For some, it’s merely the suggestion that the jewellery has been handmade when it’s mass-produced.
For others, the lies include long-winded stories of hard-working family businesses falling on hard times, coupled with AI-generated images of the owners.
As I recently discussed, the most common advice for consumers is to exercise caution when shopping online. Unfortunately, this advice contradicts the very attraction of these shady businesses.
Shopping online is meant to be quick and convenient, and taking the time to investigate the claims of these businesses flies in the face of the experience consumers are looking for online. Other, more practical advice is available. If the prices appear too good to be true, they probably are!
As another example, taking the time to check when a website was registered can be revealing. Many of these websites claim to have decades of experience despite often being registered within the past 12 months.
Some sources suggest checking reviews on websites such as Trustpilot, as an overwhelming flood of negative reviews and a distinct lack of any positive feedback is unusual for most businesses.
Using unusual payment methods, a strange website layout, and odd URLs is circumstantial evidence that an online retailer may be untrustworthy.
Interestingly, a report from ABC highlighted the information on Facebook’s ‘transparency’ page, where the country of origin for an account’s administrators can be determined.
This report found that many of these online retailers are active on Facebook, and despite claiming to be Australian, overseas administrators exclusively operate the pages.
On the surface, this is merely circumstantial evidence, as many businesses outsource social media and website management overseas. With that said, Jeweller’s research has uncovered some interesting findings.
Major jewellery chains, accounting for hundreds of stores, almost exclusively have Australian and New Zealand-based administrators. Jewellery chains such as Michael Hill International, Shiels, Angus & Coote, Goldmark, and Zamels were compared, and these Facebook pages are almost always managed by administrators based in their local markets.
With thousands of stores internationally, the Pandora Facebook page is still managed by users from Australia (14), Denmark (7), the UK (7), Argentina (1), and Ukraine (1). The same can be said for Lovisa, which is managed by accounts in the US (9), Australia (4), and South Africa (3).
With that in mind, it would seem most unusual that when social media accounts of large jewellery chains can be managed by administrators based in local markets, a small ‘mum-and-dad’ store based in Sydney or Melbourne would outsource similar tasks to professionals in Pakistan, China, India, the Netherlands, Vietnam, or Indonesia!
Furthermore, Jeweller was recently contacted by a business owner who explained that hundreds of images and product descriptions were stolen from her website.
If you’re somewhat ‘digitally literate’, it’s easy to wave away consumers who have been burned searching for a bargain as foolish – they should’ve known better. All the signs were there!
Many of these scams are sophisticated, and while consumers should know better, not all do. When consumers are forced to learn a harsh 'life lesson', most deserve sympathy, not scorn.
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