eBay 'tweaks' spark concern

2008-01-31 12:07

San Francisco - Online auction site eBay says it's changing its user-feedback system to keep buyers from leaving, but the plan has sellers worried they'll no longer be able to weed out untrustworthy shoppers.

Buyers and sellers have been able to rate each other at the online auctioneer since its birth in 1995, when eBay founder Pierre Omidyar envisioned a virtual marketplace built on trust among buyers and sellers.

Come February 20, a full spectrum of feedback is welcome from buyers about sellers, while sellers can no longer give buyers negative star ratings.

The shift was announced on Tuesday among a complex series of pricing changes and initiatives that eBay hopes will improve buyers' experiences as it struggles with stagnant user numbers.

It's a fundamental change to create trust and tackle fraud in a marketplace where buyers and sellers never lay eyes on one another. Steve Grossberg, a Florida-based top seller of video games and president of the Internet Merchants Association, said the ban on rating buyers is a good thing.

"When the seller leaves a negative feedback for a buyer, it drives them away from the site," Grossberg said.

But eBay needs to work harder to stop bidders who don't pay up, he said. The site does not require immediate payment and sellers complain they are just as exposed to fraud as buyers on eBay.

Company spokesperson Usher Lieberman said about six percent of auctions end in non-payment by the winning bidder.

Sellers can require payment upon checkout for fixed-price sales, which account for 40% of eBay's business worldwide. But immediate payment is not required on auctions because the buyers are not at their computers when they win an auction, Lieberman said.

'It's a very abrupt change...'

Sellers have long used feedback to alert one another about fraudulent practices like non-payment. Sellers earn good ratings by delivering quality products and using timely and reasonably priced shipping methods. Buyers earn poor ratings by not paying for an item or threatening the seller with a bad rating if they don't lower the final auction price.

Buyers and sellers use the information to assess their trading partners' trustworthiness. Buyers can decide not to purchase from poorly rated sellers, and sellers can eject poorly rated buyers from an auction, for instance.

But sometimes sellers retaliate for poor ratings by giving a buyer a bad rating. Retaliatory ratings by sellers have risen fourfold in the past several years, Lieberman said.

And that's turned off buyers, he said. Those who stop using the site complain more often about retaliatory ratings than other factors, such as not receiving items they've paid for.

Grossberg, the trade association leader, said eBay has no incentive to stop non-paying bidders, because it charges its fees and commissions regardless of whether a transaction goes sour.

Sellers wrote this week in online forums that they worry what the change means for how they do business.

"Most of the sellers are having a gut wrench about the feedback changes. It's a very abrupt change to something that has always been sacrosanct in the eBay world," Bill Hamilton, a top seller in Georgia who specialises in collectible gemstones, said.

The company does not keep comprehensive fraud statistics since most fraud occurs outside of the site. For example, a customer may use a non-secure payment method.

In the first quarter of 2006, eBay's reported loss due to payments it made to settle fraud claims was .06% of revenue.

- Dow Jones