Framework for managing first party fraud in e-tailing: A case study of the UK retail sector

Abstract

Although there is a growing volume of research on different types of fraud, relatively little has been written about fraudulent consumer behaviour. Even fewer studies have been written about fraudulent consumer behaviour in the retail sector, nor of the strategies for managing such fraud. This study filled this identified gap. The focus of this study is not on large-scale corporate fraud but on consumers who misrepresent the facts of their interaction with a retailer for personal gain.
The ethnographic case study method employing semi-structured interviews and observation (in one of the companies) was used for the study. Given the size of the companies and the financial implication of this fraud, it was expected that there would be clear action plans for managing such an issue. In order to ensure the success of this study, the fraud management lifecycle theory was used to organise, discuss and assess the approaches used within the companies.
First party fraud was found to be reinforced by numerous factors such as the availability of opportunities, retail employees that abuse their trusted positions, law enforcement officials who often do not view this behaviour as criminal and inappropriate sanctions by retailers sometimes on the verge of toleration; hence first party fraud is thus made easier. This study shows that first party fraud is mostly an opportunistic crime.
It also emerged that some of the retailers did not realise they had a fraud problem and even when they did, found it cost-effective to ignore some of it. However, one retailer had good action plan, which helped them reduce first party fraud losses to a greater extent.
This study found that managing first party fraud effectively is possible if retailers acknowledge that there is a serious problem to address. First party fraud requires effective: deterrence, prevention, detection and mitigation, analysis, investigation and sanction.