Fake It Till You Make It: An Empirical Investigation of Sales Fraud in E-commerce

The competition on e-commerce platforms has become more and more fierce. Among all the different promotion strategies, sales fraud, which is a practice inflating sale volume by using fictitious transactions, is an open secret among e-commerce sellers. Sales fraud will fundamentally undermine the credibility of sales volume, which is one of the major information source for decision making in online purchasing. To shed light on this phenomenon, we empirically investigate circumstance under which sales fraud will take place, using a comprehensive dataset from a mainstream e-commerce website in China. We find that sales cheating is more likely to take place for those products with lower price, from lower-level shops, in their early stages, but with good sales potential. Our empirical findings provide important contributions to the literature on e-commerce, and offer critical managerial implications to online retailers, e-commerce platforms, and consumers.