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EBay exposed

Posted on 15 May 2009 at 15:13

The bizarre footnote to the policy of apparently favouring buyers is that it's the sellers who pay fees to eBay.

EBay stands by its decision to protect buyers. "Trust and transparency has always been at the heart of eBay's feedback system," a spokesperson told PC Pro. "However, in the past, buyers were discouraged from leaving honest feedback for fear of retaliatory feedback from the seller. Therefore, in March 2008, we evolved our system so that sellers are no longer able to leave negative feedback for buyers. This means that buyers can now leave honest and open feedback without fear of retaliation, helping to strengthen trust in and reward our best sellers."

The PayPal lock-in

EBay customers will be all too aware of PayPal. It's now impossible to do business on eBay without offering PayPal as an option - something eBay claims is helping thwart fraud. Sellers can offer other payment methods, but buyers increasingly seek the relative safety of the "buyer protection" offered by PayPal.

In America, PayPal is the only payment option - a situation that might have been global had it not been for the intervention of the Australian Competition and Consumer Commission, when the PayPal-only policy was mooted Down Under. Yet people who use PayPal might be surprised to learn that the system, which makes a big deal about both buyer and seller protection, is hardly comprehensive and requires excessive hoop jumping.

"Seller protection covers sellers for when items aren't received. But the seller has to have proof of delivery that can be tracked online," said Rob Skinner, head of public relations at PayPal UK. "If there's no proof, there's no protection. And if it's over £150 then you have to have proof of signature as well." Which means that you need to pay additional postal charges just to be eligible for basic cover.

The problems don't end there: any disputes surrounding what was actually inside a package become far more contentious. One of the most common post-sale complaints is that items are "significantly not as described", for example, when a smartphone is more scratched than a buyer expected, despite the damage being mentioned in the listing. "If there's a problem such as goods aren't as described, then we'd look into it and if we decide in favour of the buyer we'd remove the funds from the seller's account," said Skinner.

However, the company doesn't actually look at the item in question. Instead, said Skinner: "We'd look at what the buyer and the seller said and take a view." So, quite possibly, the party who shouts loudest and most convincingly is protected, while a potentially innocent party loses out.

PayPal has also recently upset some vendors by imposing reserves on their accounts to cover chargebacks. Although the company says this is "a very small percentage of higher risk people", the consequences can be devastating. "We'd hold a rolling reserve of 5-10% on sales for a period - typically 90 days," said Skinner. "Sellers can remove funds, but not those that are held in reserve and we could impose that reserve with five days' notice."

It may not seem like a huge deal, but having so much capital tied up could mean vendors are unable to pay creditors and buy new inventory. "If they put one on me I wouldn't like it, and I'd have to choose if it was worth continuing," said Dawson. "It will make many businesses that are marginal non-viable, but then as a low-risk seller I'd rather see that than see my PayPal fees go up.