Detecting Fraud
It's not often talked about in e-commerce but it's a huge problem: fraud. Unlike the face-to-face transactions in commercial storefronts (which also deal with credit card fraud), online transactions take place between two parties who don't know each other.
Some big e-tailers budget 2 to 3 percent for losses to fraud. But for small sellers working on razor-thin margins, that's not realistic.
Furthermore, drop-shipping adds a third party into the transaction. It's a little bit easier for people who are looking to be bad people to use the disadvantages of drop-shipping to defraud individuals.
Some companies go to the extent of covering up the transactions between the retailer and the other party, but this is an exception and not the rule.
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