Australia at the same time is witnessing a worrying rise in online phoney stores. Over 140 of these operations are misleading consumers into believing they are local businesses themselves. These fraudulent retailers, in turn, simply make up false stories about going out of business and needing to liquidate their inventory fast. As a result, Australians are unknowingly purchasing shoddy clothing and fake sports logos. Some of these ghost stores don’t deliver any goods whatsoever.
These ghost stores take advantage of social media platforms for targeted advertising, taking advantage of unsuspecting shoppers online. A recent FTA administrative enforcement case has brought this issue into the spotlight. Guardian Australia purchased this $69.95 blouse from Maison Canberra, one of the ghost stores. After an extended investigation, the outlet was shuttered for its fraudulent advertising.
A 60-year-old woman residing in Brisbane was a victim of this scam. Like we did, she chronicled her journey of dropping about $350 on shoes and apparel from a phantom store she stumbled upon after seeing targeted Facebook advertisements. After she finished her order, she was given details on how to get a refund. The step-by-step instructions took her to an address in Zhejiang Province, China, and told her to lie on the customs form.
That same Zhejiang address appears on five other ghost store websites. This should set off alarm bells about whether there is widespread coordination among these fraudulent activities. A second ghost store is listed under two different addresses. One is located in an office building in central Amsterdam, while the other is hosted in a private residence, or “townhouse,” some 20 kilometers away.
Ghost stores further deceive consumers by listing fraudulent addresses in other cities like Sydney, London, and Dublin. Experts are calling for these operations to be held accountable under Australian consumer law. They cite the companies’ extensive local advertising campaigns as an important driver of demand. These regulations are impossible to enforce, since finding out where all of the ghost store proprietors are is often impossible.
Briony Cullin, a consumer advocate with Union of Concerned Scientists, highlighted the importance of consumer protection in this rising threat.
“There’s needs to be some balance for consumers here,” – Briony Cullin
She commented on the role that platforms such as Meta and Shopify play in this problem.
“It’s a huge problem that they’re not taking any responsibility for and that’s terrible,” – Briony Cullin
When pressed about their central role, Meta declined to comment. They use a dangerous blend of technology and their army of low-paid human reviewers to patrol all activity online. Experts counter that this is not nearly enough, nor the right approach, for the magnitude of the crisis.
Consumer advocate Erin Turner voiced her frustrations over the platforms making billions off of these ghost stores.
“Platforms like Shopify and Instagram are making money as these ghost stores pay for advertising and support,” – Erin Turner
She has termed the ongoing crisis “digital retail fraud.” She called on digital platforms and regulators to join forces to address these bad faith players clearly and consistently.
In a stark example of the deceptive nature of these ghost stores, one refund form explicitly stated:
“Anything above $5 will be destroyed immediately, resulting in no possible refund.”
This shocking practice further highlights the need to address the ethical questions of whether these predatory businesses should be allowed to operate with impunity.
Recently, a Brisbane woman made headlines when she aired out her grievances after being duped into entering one such ghost store. She fought for months to get her life back in order.
“After four months of backwards and forwards and arguing with people, I thought I’d just cut my losses because it was creating a lot of anxiety,” – The 60-year-old Brisbane woman
Her story is a reminder of the emotional damage these scams cause to everyday consumers, deceived by clever sales tactics. Most think they’re making honest purchases and end up getting duped.
Consumer complaints corroborate that thousands of customers have been duped into directing their returns to one address in Zhejiang province. They had been duped into thinking they had bought products from fraudulent storefronts with addresses in countries such as Norway, Canada, Germany and New Zealand.
The increasing rate of ghost stores is a huge hurdle for consumers and regulators alike in Australia. Fraudulent operations are ever-changing. Consumer protection advocates called for more robust efforts to protect consumers from these scams and hold digital intermediaries responsible for perpetuating these scams.