Earlier this year, the increasing prevalence of ‘ghost store’ scammers received mainstream media coverage. These online retailers use misleading and deceptive tactics to fool local consumers into purchasing products, including false claims that the business is based in Australia or New Zealand.
A report published by CHOICE has documented the many frustrations that local consumers have encountered when shopping with these online retailers, including various failures to adhere to the Australian Consumer Law (ACL).
“In reality, these stores don't exist beyond carefully curated websites and stylish pages on social media. Rather, many are likely run by people based overseas and operate as drop shipping schemes,” writes Liam Kennedy.
“Drop shipping refers to when a retailer hasn't bought, stored or shipped any of the products it's selling. Rather, this side of the business is run by a third party in a different location. Drop shipping can be used by legitimate businesses, but ghost stores abuse this process by misleading consumers into thinking they're entirely based in Australia.
“On top of this, they then tend to sell poor-quality products at overblown prices and withhold refunds. A persistent consumer seeking their money back will eventually discover the goods have to be sent back overseas at their own expense before a full remedy can be provided.”
One consumer quoted in the report levelled criticism at social media companies, including Facebook, Instagram, and Shopify, for a perceived failure to prevent these scams from occurring on their respective platforms.
The report noted that Shopify did not respond to a request for comment. Meanwhile, a Meta spokesperson stated that the company had taken action against specific online retailers identified by the Australian Competition and Consumer Commission (ACCC) as practising misleading and deceptive practices.
Jewellers behaving badly
Meanwhile, a report published by The Canberra Times has documented the impact of the ‘ghost store’ scam in the local market, highlighting an example of an online jewellery retailer engaging in misleading and deceptive conduct.
The example provided was Olivia & Jack Jewellery, which claims to be based in Canberra. The retailer’s website features an ‘Our Story’ section, which provides a ‘heartwarming’ background for the business and its supposed owners. As the report notes, another website for a retailer supposedly based in Canada has the same information.
Queensland University of Technology retail professor Gary Mortimer told the publication that Australian consumers are battling with a new generation of scammers.
"It's incredibly difficult to shut [these businesses] down. The problem is that once you click on one link, suddenly your Instagram feed, your Facebook feed is filled with these types of businesses,” he explained.
The report notes that some of these stores will deliver a low-quality version of the advertised product, while others won't deliver anything at all. Images of jewellery published on Olivia & Jack Jewellery resemble those of products on Temu, a Chinese e-commerce retailer known for its inexpensive products.
The article features an example of a ‘vintage hand-painted ring’ on the Olivia & Jack Jewellery website, which is advertised at $199.94 but discounted to $64.95. The same product is reportedly available on Temu for $2.90.
"The ones that come from overseas, the majority are coming out of China," Mortimer explained.
"It is literally Chinese businesses that would normally produce poor-quality products for the likes of Temu; they've gone, we can actually create some imagery and make it look very professional... and by doing so, we can sell this poor-quality product for a relatively high price.”
Jeweller recently published the findings of an investigation into ghost stores operating in Australia, outlining the various misleading and deceptive tactics these online retailers employ to fool consumers and undermine local jewellery businesses.
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