Fight Against Ecommerce Fraud

ECOMMERCE FRAUD is climbing fast, and consumer packaged goods (CPG) brands are feeling the pressure. Global losses were set to reach $44 billion in 2024, reported Juniper Research, and could rise to $107 billion by 2029.

The impact goes far beyond the cost of the product. In fact, the impact is double, with every $100 in fraudulent orders leading to $207 in losses in losses to the businesses through lost customers, recompensing products, and brand reputation. Beauty and wellness brands in the CPG sector are particularly exposed. They often operate in high-volume, high-margin categories with loyal followings and frequent purchases, all of which make them attractive targets.

In response, brands are investing more than ever in fraud prevention. Most are already using an average of five fraud detection tools, and three-quarters plan to increase their budget further. But even with these tools in place, fraud continues to evolve. The problem is, many of these tools focus on detecting fraud after it happens, or blocking it at the last second. What’s missing is a preventive layer that encourages better behavior and helps spot suspicious activity before it becomes a loss.

That’s where loyalty programs come in.

While most brands think of loyalty as a tool for retention, it can also offer a strong, often overlooked defence against ecommerce fraud. From spotting unusual activity to reducing the appeal of dishonest behavior, loyalty programs can help protect brands while strengthening customer relationships.

Accounts Build Visibility

A loyalty program that requires customers to create accounts immediately raises the bar for fraudsters. With each login, purchase, review or referral, the brand gains behavioral data that can be valuable in the prevention against fraud. Then, over time, this builds a pattern of what a “normal” customer journey looks like. When something unusual happens, such as multiple orders to different addresses, sudden refund requests, or inconsistent device usage, those red flags are easier to spot.

This is especially helpful for beauty and personal care brands, where customer routines are often predictable. If a shopper typically reorders a product every six weeks, it’s easier to spot when they suddenly buy six of the same item in a single day. With loyalty data in place, fraud detection becomes less about guesswork and more about context.

Loyalty Makes People Think Twice

Not all ecommerce fraud comes from strangers. Sometimes, it comes from the most loyal customers. Some shoppers request refunds even when they plan to keep the product. This “friendly fraud” is common in sectors like beauty, where shades, scents, or textures might not be quite right. Some customers justify their actions by thinking, “I’ve spent a lot with this brand already, one refund won’t hurt.”

A well-designed loyalty program can challenge that thinking. When customers know they could lose points, drop down a tier or miss out on future rewards, they are more likely to pause. The idea of losing long-term benefits can feel more painful than the gain of one free product. That small moment of reflection can be enough to prevent a dishonest decision.

Fraud Prevention without Frustrating Customers

Fraud detection software is effective, but it is also blunt and can be frustrating for shoppers. Legitimate customers often get caught up in extra checks, denied transactions or delayed deliveries. Over time, these measures can damage trust and create friction, especially if customers feel they are being treated like suspects rather than valued shoppers.

Loyalty programs offer a softer alternative. Instead of penalizing behavior, they can encourage better habits. For example, brands can reward customers who consistently keep their orders, leave honest reviews or engage positively after a purchase. These seemingly small gestures can reinforce trust while helping brands identify and reward low-risk customers.

In high-touch categories like skincare or cosmetics, that kind of positive reinforcement matters. It keeps customers engaged, even as brands take necessary steps to protect themselves.

Rebuilding Trust after Fraud

Even when fraud is external, such as phishing scams or fake websites, the damage often lands with the brand. Forty percent of customers who fall victim to scams on lookalike ecommerce sites say they would not shop with that brand again. Even if the brand had no role in the fraud, the trust is broken. That’s more than just a sales loss. It’s a long-term customer loss.

Loyalty can help soften the impact. Offering extra points, personalized support or a temporary boost in status can show affected customers that they are still valued. It gives the brand a way to respond with empathy rather than just policy. In a moment of stress or disappointment, that can go a long way.

Encouraging Honest Behaviors

Loyalty programs also offer a space to reward the behaviors that help prevent fraud in the first place. For example, customers who do not frequently return items could be given exclusive perks. Those who refer genuine friends or family members might be recognized in a meaningful way. Customers who update their account security details could receive small thank-you gestures. These incentives not only encourage honest behavior, but also make fraud more difficult to carry out.

Looking Ahead

Ecommerce fraud is a growing concern, but the answer isn’t always more barriers or stricter rules. For CPG brands, especially in beauty and wellness, where the customer relationship is built on trust, transparency and routine, the better strategy is often more human.

Loyalty programs offer that. They build data and context around customer behavior. They reduce the appeal of dishonest actions. They give brands a way to protect themselves while improving the customer experience. And when things go wrong, they provide a framework to recover and reconnect.

As fraud becomes more complex, the smartest brands will be the ones that pair strong detection tools with thoughtful, preventive strategies. Loyalty may not shout the loudest, but it could be one of the most effective fraud fighters you already have.

Charlie Casey is CEO and Co-Founder of LoyaltyLion, a loyalty platform.