Protect Your Handmade Business from Fraud on Shopify

Learn how to catch red flags and stay ahead of holiday-season scams.

If you’ve ever seen the dreaded “Fraud Warning” on a Shopify order, you know how unsettling it can be. Is it a legitimate purchase? Or is someone trying to scam your handmade business?

While some flagged orders might be valid, it’s always worth taking a closer look before shipping out your products. Fraud is rampant in e-commerce, and it spikes even higher during Q4 when order volumes surge.

But here’s the catch: If you’re like us and spend most of your time working in tools like ShipStation, you might miss Shopify’s fraud warnings altogether if your settings aren’t optimized.

In this post, we’ll explain how to identify suspicious orders, set up fraud-detection tags in ShipStation, and create automations that protect your business from costly mistakes.

How Common Is E-Commerce Fraud?

E-commerce fraud is a growing problem. Fraudulent online transactions increased by 14% in 2023, and handmade businesses aren’t immune.

The risk becomes even greater during the holiday rush. Fraudulent orders often spike in Q4 when businesses are overwhelmed with orders and may not have time to scrutinize every transaction.

Key Stats to Know:

• $41 billion in e-commerce fraud losses were reported in 2022, according to Juniper Research.

• Q4 fraud attempts are typically 30% higher than at any other time of year.

Takeaway: If you’re not vigilant, fraud can eat into your profits—and your inventory.

How to Check Suspicious Shopify Orders

When Shopify flags an order as “High Risk”, it’s not necessarily fraud—but it’s your cue to dig deeper.

Here’s how to investigate:

1. Check the IP Address

On the Shopify order page, you’ll see details about where the order was placed. Red flags include:

• An IP address that doesn’t match the billing address.

• Orders placed from countries you don’t typically sell to.

2. Verify Billing and Shipping Information

Compare the billing and shipping addresses. If they’re drastically different (e.g., billing is in New York but shipping is in Singapore), it’s worth reaching out to the customer for clarification.

3. Look for Multiple Expensive Orders

Scammers often place large orders or multiple orders in quick succession, hoping to resell your products before the fraud is caught.

Pro Tip: If you’re ever in doubt, contact Shopify Support or the customer directly to verify the order before fulfilling it.

What If You Only Use ShipStation?

Many handmade sellers rely on ShipStation for day-to-day order management and rarely log into Shopify. Unfortunately, if your ShipStation settings aren’t configured correctly, you might miss Shopify’s fraud alerts entirely.

Here’s how to make sure suspicious orders don’t slip through the cracks:

Step 1: Add a Fraud Tag in ShipStation

Tags in ShipStation are visual markers that help you quickly identify orders that require attention.

1. Log in to your ShipStation account.

2. Go to Settings > Tags and create a new tag labeled “Fraud Check” or “High Risk” (use a bold color like red to make it stand out).

Step 2: Set Up an Automation Rule

Automation rules can flag suspicious Shopify orders and apply your new tag automatically.

1. Go to Settings > Automation Rules and create a new rule.

2. Set the Trigger Condition to detect orders labeled as High Risk in Shopify.

3. Choose an Action to apply your custom “Fraud Check” tag.

Pro Tip: You can also set up an automation to send flagged orders to a separate queue for manual review before processing.

Tips to Protect Your Handmade Business from Fraud

Beyond Shopify and ShipStation settings, here are additional steps you can take to reduce fraud risks:

1. Enable 3D Secure Payments

Shopify offers 3D Secure, which requires customers to complete an additional verification step during checkout. This protects you from fraudulent chargebacks.

2. Monitor Chargebacks

Chargebacks can be a sign of fraud. Keep an eye on your payment processor for patterns like frequent disputes.

3. Limit International Orders

If you rarely sell outside your region, consider restricting international orders during high-risk periods like Q4.

4. Use Address Verification Services (AVS)

AVS checks the customer’s billing address against the cardholder’s bank records, helping you catch inconsistencies.

Why Q4 Fraud Prevention Matters

The holiday season is make-or-break for many handmade sellers. You’re juggling high order volumes, tight shipping deadlines, and customer expectations. It’s easy to miss the signs of fraud in the rush to fulfill orders.

However, failing to catch fraudulent transactions can result in:

• Lost inventory.

• Chargeback fees.

• Damage to your reputation.

  
  

Being proactive with fraud detection tools like Shopify’s alerts and ShipStation automations can save you headaches and protect your bottom line.

Summary: Keep Your Handmade Business Safe from Fraud

Fraud prevention might not be the most exciting part of running a handmade business, but it’s essential—especially during the holiday rush. Here’s how to stay protected:

1. Investigate Shopify Fraud Warnings: Check IP addresses, billing info, and order patterns for red flags.

2. Set Up Fraud Tags in ShipStation: Create tags and automation rules to flag high-risk orders in your workflow.

3. Take Extra Precautions in Q4: Enable 3D Secure payments, monitor chargebacks, and consider limiting international orders.

By taking these steps, you can reduce your risk, keep your profits intact, and focus on delighting your customers with unique handmade products.