Yuletide warning Cybercrime seen increasing during holiday season due to supply chain issues, pandemic

December 6-12, 2021

By Wesley Brown

As consumers have become increasingly dependent on online retailers during the pandemic and holiday shopping season, there has also been an alarming spike in the number of cyber criminals taking advantage of those seeking great deals and too-good-to-true bargains.

Based on several metrics, both instore and online shopping in 2021 is up substantially from a year ago levels as consumers make up for last year’s pandemic-impacted yuletide season that had most Americans hunkered down at home due to COVID-19 social distancing and shelter-in-place orders.

However, according to the National Retail Federation’s annual holiday shopping results, nearly 180 million Americans shopped during the five-day period from Thanksgiving Day through Cyber Monday. In total, 179.8 million unique shoppers made in-store and online purchases during the holiday weekend, exceeding NRF’s initial expectations by over 21 million. The figure compares with 186.4 million shoppers in 2020 and is in line with the average of the last four years.

“Retailers have adapted and enticed customers with a number of incentives throughout November. The Thanksgiving holiday weekend remains a significant time for friends and families to check specific holiday items off their lists,” said NRF President and CEO Matthew Shay. “Over the last few years consumers have shifted their holiday shopping plans to start earlier in the season.” (See 2nd feature story)

Besides the highly watched NRF report, Salesforce.com also released its annual Cyber Week report, which analyzes shopping data from over one billion shoppers on the company’s customer relationship management (CRM) platform and activity across commerce, marketing and service channels, including 24 of the top 30 U.S. online retailers. Overall, 2021 global online sales hit an all-time high of $275 billion, up 2% compared to 2020, and $62 billion in the U.S., up 4% compared to 2020.

According to the San Francisco-based analytics giant, the new data shows that digital patterns established during the pandemic are still a force this holiday season, with strong early November growth driven by consumers who were not deterred by higher prices, lower discounts, and decreased product inventory. Cyber Week itself, however, saw muted growth because of these early-season shoppers working ahead of the traditional shopping peak.

“While online sales leveled off over Cyber Week compared to the holiday surge we experienced during the pandemic, digital shoppers drove significant sales for the first few weeks of November and maintained the high Cyber Week baseline they established in 2020,” said Rob Garf, vice president and general manager of Salesforce’s retail operations. “Consumers entered into this holiday season aware of supply chain bottlenecks and inflation and shopped early and often to smooth out the demand we usually see concentrated over one week.”

It is those same supply chain bottlenecks and difficult of employers to find enough workers that is causing cybercriminals to prey on victims even more this year, according to Tampa, Fla.-based KnowBe4, a global security awareness training and simulated phishing platform. The shortage in goods is a prime target for bad actors to play into people’s heightened sense of emotions and stress levels even further by unleashing their social engineering attacks.

“Any email or post that causes an immediate, strong emotional response or threatens harm if you do not respond or take some sort of action should be scrutinized very carefully, especially during the holiday season” said KnowBe4 Stu Sjouwerman.

This Christmas season, North Little Rock-based First Orion also released findings from its 2021 Holiday Scam Report that explores U.S. consumers’ experience with scam calls during the holiday season. According to the report, Americans are expected to receive over 27 billion scam calls resulting in 21 million scam victims and over $10 billion in losses in November and December alone. The report indicates an increase in scammer activity, with 70% of respondents saying they have received a scam call in the past week, and 54% believe they receive more scam calls over the holidays.

The report also notes that the holiday season provides ample opportunities for scammers to take advantage of holiday shoppers. The report’s findings show that 54% of respondents typically don’t answer calls from unidentified/unknown callers, but during the holidays, 71% report that they are more likely to answer an unidentified/unknown call if they are expecting an order or delivery.

In addition, nearly one in 4 respondents report having received a scam call related to online orders or deliveries, while 68% reported missing a legitimate call regarding an order or delivery because they didn’t recognize the number calling

In addition to losing money while trying to find that perfect gift, scammers are also taking advantage of consumers’ goodwill and holiday cheer during the season of giving. Findings from First Orion’s report indicate Americans’ generosity during the holidays makes consumers more susceptible to charity-related scam calls with 49% of respondents stating they are more likely to speak with a caller regarding charitable donations during the holiday season.

For example, nearly 23% of respondents say that they have received a charity or donation scam call to their mobile phone. Another 31% report that they see an increase in charity or donation scam calls over the holiday season.

“The holidays provide a multitude of ways for scammers to fraud consumers and take advantage of their vulnerabilities, like those waiting for last-minute gift deliveries or making end-of-year donations to charitable organizations,” said Kent Welch, chief data officer at First Orion. “Consumers must be diligent in protecting themselves from potential scammers, and those brands trying to communicate with them need to make an effort to identify themselves through branded communication to protect their customers.”

The combination of scam frequency, customer willingness to answer unknown calls, and the surge of activity over the holiday season reveals that many people are falling for these scams in some fashion, with over 40% of all individuals surveyed reporting being a victim of a scam call. To conduct its report, the North Little Rock data analytics firm started by former Acxiom Founder and CEO Charles Morgan polled 2,000 U.S. mobile subscribers aged 18 and above across 48 states, and was nearly evenly split by gender, resulting in an even sampling of the U.S. mobile subscriber market at large.

According to the FBI’s Internet Crime Complaint Center (IC3), the two most prevalent of these holiday scams are non-delivery and non-payment crimes. In a non-delivery scam, a buyer pays for goods or services they find online, but those items are never received. Conversely, a non-payment scam involves goods or services being shipped, but the seller is never paid.

During the 2020 holiday shopping season, IC3 received over 17,000 complaints regarding the non-delivery of goods, resulting in losses over $53 million. It is anticipated this number could increase during the 2021 holiday season due to rumors of merchandise shortages and the ongoing pandemic.

That same report shows non-payment or non-delivery scams cost people more than $265 million. Credit card fraud accounted for another $129 million in losses. Similar scams to beware of this time of year are auction fraud, where a product is misrepresented on an auction site, and gift card fraud, when a seller asks you to pay with a prepaid card.

The supply disruptions have been so troubling that President Joe Biden hosted Walmart CEO Doug McMillon and CEOs at other top American companies to the White House on Nov. 19 to discuss their outlook for the strong holiday shopping season, and the steps companies large and small have taken to meet consumer demands. During the meeting, McMillon highlighted a 51% improvement in his company’s throughput at the ports due to the work of federal envoys.

Still, the Federal Trade Commission on the same day ordered Walmart, Amazon, Tyson Foods and other top retailers, wholesalers, and consumer good suppliers to provide detailed information that will help the FTC shed light on the causes behind ongoing supply chain disruptions and how these disruptions are causing serious and ongoing hardships for consumers and harming competition in the U.S. economy.

The FTC is issuing the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct wide-ranging studies that do not have a specific law enforcement purpose. The orders are being sent to Walmart Inc., Amazon.com Inc., Kroger Co., C&S Wholesale Grocers Inc., Associated Wholesale Grocers Inc., McLane Company Inc. Procter & Gamble Co., Tyson Foods Inc., and Kraft Heinz Co. The companies will have 45 days from the date they received the order to respond.

“Supply chain disruptions are upending the provision and delivery of a wide array of goods, ranging from computer chips and medicines to meat and lumber. I am hopeful the FTC’s new 6(b) study will shed light on market conditions and business practices that may have worsened these disruptions or led to asymmetric effects,” said FTC Chair Lina Khan. “The FTC has a long history of pursuing market studies to deepen our understanding of economic conditions and business conduct, and we should continue to make nimble and timely use of these information-gathering tools and authorities.”

In addition to better understanding the reasons behind the disruptions, the study will examine whether supply chain disruptions are leading to specific bottlenecks, shortages, anticompetitive practices, or contributing to rising consumer prices.

The orders require the companies to detail the primary factors disrupting their ability to obtain, transport and distribute their products; the impact these disruptions are having in terms of delayed and canceled orders, increased costs and prices; the products, suppliers and inputs most affected; and the steps the companies are taking to alleviate disruptions; and how they allocate products among their stores when they are in short supply.

The FTC also is requiring the companies to provide internal documents regarding the supply chain disruptions, including strategies related to supply chains, pricing, marketing and promotions, product costs, profit margins and sales volumes, selection of suppliers and brands, and market shares.

In addition, the agency is soliciting voluntary comments from retailers, consumer goods suppliers, wholesalers, and consumers regarding their views on how supply chain issues are affecting competition in consumer goods markets. These comments provide an opportunity for market participants to surface additional issues and examples of how supply chain disruptions are affecting competition.

As the only federal agency with both consumer protection and competition jurisdiction in broad sectors of the economy, the FTC’s antitrust laws also affect a variety of “vertical” relationships — those involving firms at different levels of the supply chain — such as manufacturer-dealer or supplier-manufacturer. Restraints in the supply chain are tested for their reasonableness, by analyzing the market in detail and balancing any harmful competitive effects against offsetting benefits. In general, the law views most vertical arrangements as beneficial overall because they reduce costs and promote efficient distribution of products.

In addition to alerting consumers to watchful for online scams during the holiday, the IRS is also warning taxpayers and tax professionals to beware of a dangerous combination of events that can increase their exposure to tax scams or identity theft.

The combination of the holiday shopping season, the upcoming tax season and the pandemic create additional opportunities for criminals to steal sensitive personal or finance information. People should take extra care while shopping online or viewing emails and texts, said the IRS

“Don’t let this be the most wonderful time of the year for identity thieves,” said IRS Commissioner Chuck Rettig. “The approach of the holidays and tax season increases risk for taxpayers and opportunities for criminals. We urge people to be extra careful with their personal and financial information during this period while shopping online or getting suspicious emails or text. Taking a few simple steps can keep people from becoming victims of identity theft and protect their sensitive personal information needed for tax returns and refunds.”

Since 2015, the IRS and Security Summit partners have taken important steps to protect taxpayers and the nation’s tax professionals from tax-related identity theft. But progress in this area led identity thieves to evolve their tactics, trying to obtain sensitive information from taxpayers and tax professionals to help prepare fraudulent tax returns. Taxpayers can help in this fight by protecting their financial and tax information.  

PHOTO CAPTIONS:

1. How the Grinch Stole Christmas Cybercriminals targeting online shoppers during holidays: According to North Little Rock tech firm First Orion, Americans are expected to receive over 27 billion scam calls resulting in 21 million scam victims and over $10 billion in losses in November and December alone. 

2. According to the FBI’s Internet Crime Complaint Center (IC3), thousands of people become victims of holiday scams every year. During the 2020 holiday shopping season, IC3 received more than 17,000 complaints regarding the non-delivery of goods, resulting in losses of more than $53 million.