Most e-commerce platforms witness a huge spike in the number of “consumers” filling up their carts during a sale or peak commercial periods like Black Friday or Cyber Monday. While this phenomenon may suggest a surge in sales and, therefore, profits for the platform, there is a catch:
A large portion of the carts never reach the checkout stage, and many of the “sales” never convert.
Shopping bots create an illusion of brisk e-commerce activity, filling up carts rather quickly and hoarding inventories to create a scarcity of in-demand items and deny genuine consumers a chance to score deals. But in reality, there is a high cart abandonment rate and the purchases are never completed. This negatively affects the customer experience and can erode merchant profits. Fortunately, businesses can repel inventory hoarding attacks through the use of strategic approaches and intelligent bot management solutions.
What Are Shopping Bots?
Shopping bots, a form of automated software, are malicious tools attackers use to disrupt the online shopping landscape and harm e-commerce platforms. These bots come in various types, such as price scraping bots, which clandestinely gather product data and overload servers, impacting website or app performance. Price manipulation bots distort product prices for deceptive purposes. Fake review bots manipulate customer perceptions by posting fraudulent reviews. Checkout bots rapidly complete the purchase process, bypassing waiting queues or restrictions on limited releases.
But one of the most dangerous types of shopping bots are inventory hoarding bots. These bots are designed to quickly add large quantities of high-demand products to carts and often lead to cart abandonment, where the bot operator may leave the site without completing the purchases. The motivations behind these attacks are multifold. In one scenario, e-commerce businesses deploy these bots to cause shortages and drive up prices on their competitor's website, thereby driving a competitor’s customers to their own retail site. In another, individuals or groups intend to resell the hoarded items at inflated prices, taking advantage of scarcity to create artificial demand.
The Role Of Shopping Bots In Inventory Hoarding
Because shopping bots are programmed to act quickly, shopping bots can complete the purchasing process in a matter of seconds, much faster than a human user can do. This affects the perceived value of products and creates buying frenzies.
Shopping bots can buy items in bulk in a single transaction, resulting in depletion of stocks rather quickly and creating an unfair advantage for the bots over regular consumers to acquire these items at fair prices. Once shopping bots have acquired products, attackers can take advantage of the scarcity they have created to resell the items at significantly higher prices on secondary markets.
Bot-driven inventory hoarding creates illegitimate market distortions that are powered by bot traffic rather than genuine supply and demand dynamics.
Implications Of Inventory Hoarding Across Industries
Inventory hoarding has far-reaching consequences across industries, affecting both businesses and consumers.
E-commerce
Denial of inventory practices in e-commerce platforms can disrupt stable pricing structures and consumer access to products, leading to unpredictability in the market. It can lead to product shortages and stockouts, making it difficult for retailers to meet customer demand. Bot-induced artificial scarcity not only impacts consumers' ability to access products, it also inflates the prices, which reduces the affordability of the products and denies consumers an opportunity to avail of the discounts and deals.
Customers may experience frustration and disappointment when they cannot find and purchase the products they want at reasonable prices. Discontented consumers may lose trust in the e-commerce platform and take their business elsewhere.
Travel And Hospitality
Travel site owners depend on precise inventory management, and any disruption in reservations and bookings can lead to both short-term and long-term negative consequences. Therefore, denial of inventory attacks can cause them a lot of damage. These include loss of revenue due to canceled bookings and lower customer satisfaction, operational challenges like rebooking and resource allocation, potential damage to their reputation, financial impact through refunds and regulatory compliance issues, and a competitive disadvantage when reliability falters.
Inventory hoarding can lead to unavailable hotel rooms, flights, or other accommodations during peak travel periods. It can create an artificial scarcity to drive up prices for travel bookings, which can make travel more expensive for consumers. Repeated instances of unavailability and inflated prices can damage the reputation of travel and hospitality booking platforms.
Online Gaming
Denial of inventory in online gaming poses significant challenges, particularly in virtual economies where players buy, sell, and trade virtual items. These online hoarding practices create scarcity, inflating the value of specific in-game assets and disrupting the economy, making it difficult for newer or casual players to obtain sought-after items. Maintaining game balance is essential for fairness and competitiveness, but hoarding can upset this equilibrium, giving advantages to players with extensive collections or access to hoarded items on secondary markets like the darknet, impacting the gaming experience for others.
Inventory hoarding in the online gaming industry can result in limited access to highly sought-after gaming consoles, video games, or in-game items. Consumers may have to pay significantly more than the retail price to acquire gaming products due to artificial price inflation. Gamers who cannot access the products they desire may express discontent and frustration, impacting the gaming community and reputation of the platform.
Ticketing
Ticket hoarding, often called scalping, drives up the prices of event tickets on the secondary market, making it more expensive for consumers to attend events. Ticket hoarding can lead to situations where a significant portion of tickets for an event are held by resellers, leaving limited options for genuine fans who want to purchase tickets at face value. The secondary market for event tickets can also be a source of counterfeit or fraudulent tickets. Consumers who pay their hard-earned dollars to purchase tickets from scalpers may unknowingly buy fake or invalid tickets, which can lead to disappointment and financial losses. Besides creating negative experiences and discouraging repeat attendance, genuine fans risk being priced out of attending their favorite concerts, sports games, or entertainment events.
Ticket hoarding can create an unfair marketplace where the distribution of tickets is skewed in favor of resellers rather than genuine fans. It is a profitable business for resellers, as they capitalize on the scarcity they create. However, this lack of fairness can frustrate consumers and result in inefficient resource allocation, where tickets may not end up in the hands of those who genuinely value them.
Further, event organizers may need to invest in additional resources and technologies to combat ticket hoarding, such as implementing bot detection systems and fraud prevention measures. They also risk facing damage to their reputation when consumers blame them for ticket scalping issues. Negative publicity can impact the image of events and organizers, making it harder to build trust with fans.
The Significance Of Inventory Management
Inventory management is a vital component of supply chain and business operations, ensuring product availability and minimizing the risk of stockouts. This process encompasses overseeing the procurement, storage, and distribution of goods for optimal operational efficiency. Striking a balance between meeting customer demand and minimizing carrying costs, such as storage and insurance, is crucial. Efficient inventory management not only frees up working capital for other needs or investments but also mitigates risks related to market demand fluctuations, supply chain disruptions, and economic uncertainties.
How Inventory Systems Work
Inventory management involves businesses using historical sales data and market trends to forecast demand and determine appropriate inventory levels. They monitor inventory with several methods, such as manual counting, barcoding, RFID, and advanced software solutions, to track the quantity, location, and status of items in stock.
Some inventory management systems automatically generate purchase orders or replenishment orders when inventory levels reach predetermined thresholds. They also help calculate the value of inventory on hand, which is important for financial reporting and cost accounting.
How Inventory Management Prevents Hoarding
Effective inventory management measures can help businesses prevent hoarding. They can set purchase limits to prevent customers from buying excessive quantities of a product. By providing real-time product availability information on their e-commerce platforms, businesses can discourage hoarding and speculative buying. Implementing dynamic pricing strategies can discourage hoarding, as prices may increase with increased demand or reduced availability.
Furthermore, in today’s era of automated bot attacks, businesses must consider using smart bot protection solutions to block automated hoarding attempts early in their tracks.
How Shopping Bots Negatively Affect Inventory Management
Shopping bots can cause operational disruptions and financial losses by impacting inventory management for e-commerce platforms. Because advanced shopping bots can quickly purchase high-demand products, they can deplete available inventory in no time. This can cause product shortages and stockouts, frustrating the customers who cannot purchase the items they want. Further, if potential customers believe that product reviews have been manipulated, they may become skeptical of the accuracy of product information, making them less likely to make a purchase. This can tarnish the brand image of the business and affect customer loyalty.
The rapid and high-volume purchases made by automation may not immediately reflect in the inventory system. This can show incorrect stock levels in inventory management systems and make it difficult for businesses to make informed decisions about restocking and managing their inventory effectively. When shopping bots manipulate prices to first artificially lower them and then correct them, retailers may unintentionally order more inventory than necessary and be stuck with an overstock of items that may be difficult to sell at the increased price. This also disrupts the normal sales cycles for products, making it challenging for businesses to predict sales and revenue accurately.
A Disrupted Consumer Experience
Shopping bots can negatively impact consumer experience by engaging in activities that disrupt the shopping process. These may include bulk purchase of discounted items, which can deplete inventory, artificially inflate demand, drive-up prices, and make the items unaffordable. Consumers also lose out on the speed with which bots can complete transactions. This unfair competition can make it challenging for real shoppers to secure limited-quantity items, such as limited-edition items or event tickets.
When shopping bots manipulate product reviews and ratings, consumers cannot be sure of the quality of the products, leading to loss of trust in the e-commerce platform. Often, shopping bots manipulate notification systems to falsely signal items as unavailable. This can cause consumers to miss out on restocks or limited-time offers.
Continuous bot activity can slow down the affected e-commerce platform's performance, leading to longer loading times and a frustrating shopping experience. Bad actors also use bots to power account takeover attacks and gain unauthorized access to user accounts. These compromised accounts can then be used for identity theft, unauthorized purchases, and security breaches.
All of these bot activities can erode consumers' trust in the platform's security measures and create a stressful shopping environment. This can reduce consumer trust in the online shopping platforms.
Strategies To Combat Shopping Bots
Combating malicious shopping bots is essential for e-commerce and other online platforms to maintain fair and secure digital shopping environments for genuine customers. It is an ongoing process, as bots continually evolve and adapt. Therefore, businesses must adopt a combination of multiple strategies and a proactive approach to bot management.
Some strategies that can prove effective in combating shopping bots include, but not limited to:
- Bot Detection Software: Use AI-driven anti-bot software to help identify and block malicious shopping bots.
- Rate Limiting: Restrict the number of requests a user can make within a certain timeframe with rate limiting, to mitigate the impact of bots attempting to flood the system with requests.
- CAPTCHAs: Implement CAPTCHA challenges at critical points in the user journey, such as during login, checkout, or when making multiple requests to verify that users are human.
- Device Fingerprinting: Use device fingerprinting techniques to identify and block suspicious or repeat access from the same device.
- Behavioral Analysis: Use behavioral analysis for anomaly detection, such as unusually fast or repetitive actions, indicative of bot activity.
- Geo-Blocking: Restrict access from known bot-heavy regions or IP addresses with a history of malicious bot activity.
- API Security: Use authentication and access controls to ensure API security by preventing bots from exploiting them for malicious purposes.
- Purchase Limits: Set limits on the quantity of specific items users can purchase within a certain timeframe to prevent bulk purchases by bots.
- User Authentication: Verify identity of buyers at account creation and authentication. Implement two-factor authentication (2FA) or multi-factor authentication (MFA) for added security.
- Active Monitoring: Continuously monitor the e-commerce platform for suspicious activities and take immediate action to block or mitigate bot-related threats.
- Collaboration: Collaborate with industry peers, law enforcement, and bot detection services to share information and best practices for combating malicious bots.
- Legal and Regulatory Measures: Comply with jurisdiction-specific regulations to avoid penalties or legal action.
Arkose Labs Is at the Forefront of the Fight Against Shopping Bots
Arkose Labs is a global leader in bot management, serving several leading e-commerce platforms successfully ward off shopping bots. Arkose Labs unique approach and cutting-edge technology ensures bots stand no chance to disrupt business operations or user experience.
Arkose Bot Manager is uniquely positioned to help fight e-commerce fraud by detecting shopping bots and blocking them early in their tracks. Instead of blocking any user outrightly, Arkose Labs allows users to prove their authenticity with proprietary Arkose MatchKey challenges. These challenges are served to users according to their real-time risk assessment. This means most genuine users may not even encounter them! However, this is not the case with bots and malicious human attackers.
Arkose MatchKey challenges have in-built resilience to automated solvers and bots of all advancement levels. As a result, bots instantly fail when faced with an Arkose MatchKey challenge. Persistent malicious humans trying to circumvent the challenges at scale, soon find out that it’s not possible to create a solver for a single challenge without putting in days together. Given that there are several variations of each Arkose MatchKey challenge, it is virtually impossible to create a solver that can clear all challenges. The failure to automate solving the challenges at scale, the delay in executing the attack, and mounting investments make the attack unattractive and forces attackers to give up for good.
The best-in-class Arkose Labs technology can accurately detect bot activity and uses targeted friction to engage with risky users, while maintaining a superior user experience for genuine users. It also guarantees long-term cost savings and a far better ROI.
Arkose Labs offers 24x7 SOC support, data-driven insights, attributes, and global threat intelligence from its client network, which enables its partners to identify suspicious activity and take countermeasures instantaneously, thereby ensuring protection from evolving threats. Arkose Labs provides reporting and insights on bot behavior, which is valuable for businesses to understand the scope and impact of bot threats.
Arkose Labs solution is a comprehensive and adaptable solution for stopping malicious shopping bots, allowing e-commerce businesses to maintain a secure and fair online environment, safeguarding their reputation and the trust of their customers.