Police are investigating at least 27 cases of an online scam in which victims were duped of around $33,000 after receiving fake e-mail notifications.
The tricksters posed as online payment giant PayPal and sent the e-mails to sellers on various e-commerce sites such as Gumtree, eBay and STClassifieds pretending that payments had been made for fake transactions.
The sellers then shipped goods such as dresses, cellphone accessories and bags - for which they were never paid - to the overseas address given.
Police have warned online sellers always to verify payments using their PayPal accounts before sending merchandise.
They stressed this should be done through opening a new browser page instead of clicking on links in e-mails.
The authorities also reminded sellers never to give out personal information such as bank account and credit card numbers through e-mail.
"You would be asked to log into your PayPal account to provide such information," the alert read.
As well as falsely claiming that payments had been made, scammers continued sending e-mails to the sellers requesting administrative payments such as activation fees for their PayPal accounts to be made through bank account transfers or remittance to overseas accounts.
Police said: "There were variations in some cases where the victims received fictitious e-mails from 'Citibank' instead of 'PayPal'."
The police warning is a timely one, considering how more consumers here are shopping online.
Market research firm Euromonitor International estimated that Singapore consumers will spend more than $1 billion online this year on purchases such as clothes, consumer electronics and media products. Last year, they spent $960 million.
Currently, there are 500,000 active registered PayPal accounts in Singapore.
According to research commissioned by PayPal, the value of the online e-commerce market is expected to reach $4.4 billion by next year.
A spokesman for PayPal said the Internet payment giant covers sellers for claims, chargebacks and reversals for unauthorised transactions and items not received.
She said: "If a buyer files a claim, chargeback or payment reversal, PayPal will place a temporary hold on the funds in question."
PayPal will then send an e-mail to the seller to ask for proof of shipment or delivery and signature confirmation.
"Once we have received the documentation, PayPal will investigate to determine whether the transaction is eligible for Seller Protection, and if it is, the hold will be removed and access to the funds will be restored as soon as possible," she added.
A spokesman for Citibank advised merchants to verify with the bank if payment has been made before releasing their goods.
He said: "Online sellers could also adopt a 3-D secure authentication for payment processes as it serves to protect them."
This provides an extra layer of protection as the customer receives a one-time password via SMS that must be entered before the transaction can be processed.
The police alert was also posted on Member of Parliament Liang Eng Hwa's Facebook page last Wednesday by a grassroots leader.
In the alert, police also encouraged citizens to volunteer for Citizens-on-Patrol or their Neighbourhood Watch Group initiative.
Anyone who has information on online scams is urged to call the police hotline on 1800-255-0000.