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  1. #1
    Affiliate Manager nish's Avatar
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    Commission Fraud by affiliates that buy & return products
    The merchant sends out checks to all affiliates on 15th of each month. A fly-by affiliate himself (or through a friend) buys an expensive product from the merchant's site on the 5th. He gets decent commission on 15th & then on 20th he returns the product (well within the 30 day return period) & diappears.

    Obviously one solution is to delay the payment to the affiliate. But that would be unfair to the honest affiliates.

    How prevelant is this problem? Is it a small problem that can be ignored or is it something that merchants have to really watch out for?

    cheers!
    -nishith

  2. #2
    Crazy like a fox suzigeek's Avatar
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    The merchant would just reverse the sale after the fact even though the affiliate is paid. It still will be deducted against new sales. I've had sales reversed 3 months after the fact.

    Also most merchants don't pay affiliates their commissions until after the 30 day return period happens so reversals where the affiliate has already been paid shouldn't happen that often. Its only happened to me once or twice.
    Suz~~GearGirl~~

  3. #3
    Moderator MichaelColey's Avatar
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    The problem is that the affiliate will probably generate no more sales. They only set the account up to generate the fraudulent order.

    The timeline in the Nish's email isn't quite accurate. Typically, the order will go through near the end of the month. Payment will be made around the 20th of the following month. Return will take place shortly thereafter.

    It could also be resolved or reduced a number of other ways:

    1) Hold an affiliate's first check, especially if it looks suspicious (large order near the end of the month for a new affiliate).

    2) Charge a restocking fee that will more than cover the commissions.

    3) Screen your affiliates more closely.
    Michael Coley
    Amazing-Bargains.com
     Affiliate Tips | Merchant Best Practices | Affiliate Friendly? | Couponing | CPA Networks? | ABW Tips | Activating Affiliates
    "Education is the most powerful weapon which you can use to change the world." Nelson Mandela

  4. #4
    Affiliate Manager nish's Avatar
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    Quote Originally Posted by MichaelColey
    The problem is that the affiliate will probably generate no more sales. They only set the account up to generate the fraudulent order.
    Correct, thats what I was talking about.

    The timeline in the Nish's email isn't quite accurate. Typically, the order will go through near the end of the month. Payment will be made around the 20th of the following month. Return will take place shortly thereafter.
    Yup, the example should rather be: affiliate buys on 25th, gets paid on 15th & returns on 20th.

    It could also be resolved or reduced a number of other ways:

    1) Hold an affiliate's first check, especially if it looks suspicious (large order near the end of the month for a new affiliate).

    2) Charge a restocking fee that will more than cover the commissions.

    3) Screen your affiliates more closely.
    I personally don't like the idea of restocking fee. It defeats the purpose of 30 day return. (1) is probably a good way of reducing the scam. (3) I am still trying to understand how to screen the affiliate closely. You can check his/her site, which very well might be a reasonably good site. What more can be done? This is also a problem with parasites entering into the program. How to know the affiliate is clean?

    So do you know of any merchant who got badly hit with such buy-return scams?

    Thanks!
    -nishith

  5. #5
    ABW Ambassador
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    But a restocking fee hurts your regular customers, it is something i will avoid.

    Holding the first check on odd orders is a much better way I think.

    Personally I understand this situation and have never had a problem with a merchant holding off first payment or even subsequent payments if there is a spike in activity.

    chet

  6. #6
    Moderator MichaelColey's Avatar
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    You can also do GeoIP tracking of orders as part of your fraud prevention.
    Michael Coley
    Amazing-Bargains.com
     Affiliate Tips | Merchant Best Practices | Affiliate Friendly? | Couponing | CPA Networks? | ABW Tips | Activating Affiliates
    "Education is the most powerful weapon which you can use to change the world." Nelson Mandela

  7. #7
    Affiliate Miester my2cents's Avatar
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    if you sell products that are likely canidates for fraud... just do like many merchants do..
    pay commissions 45 or 60 days after the sale...

    Affliates are ok with your TOS as long as you state them upfront... and pay promptly when you say you will...

    Joe
    ++++++++++++++++++++++++++++++++++++++++++
    that's my2cents, 'cuz I'm a legend in my own mind....

  8. #8
    Affiliate Manager nish's Avatar
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    Quote Originally Posted by my2cents
    Affliates are ok with your TOS as long as you state them upfront... and pay promptly when you say you will...
    Oh ok. Didn't really think that affiliates would like it if their payments are held that long.

  9. #9
    Affiliate Manager nish's Avatar
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    Quote Originally Posted by MichaelColey
    You can also do GeoIP tracking of orders as part of your fraud prevention.
    Yup, I really like their basic product. Have used it in the past. Very effective in raising red flags. Was just checking their site & this netspeed thing they have looks pretty neat aswell. You can figure out exactly what percentage of your visitors are broadband/dialup.

    cheers!
    -nishith

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