eBay and Seller Certification

Skip McGrath is the CEO of Auction Seller’s Resource – a terrific newsletter for professional eBay merchants and for those folks aspiring to make a living on eBay.

Skip recently posted a series of interesting articles on the subject of seller certification on eBay.

Part 1
Can Seller Certification Bring Buyers Back to eBay

Part 2
eBay Selling Tools To Build Your Business by Preventing Fraud

Skip has done a nice job of laying out a number of things to consider, and I encourage you to give his posts a read. 

I believe Seller Certification is part of the answer for eBay (and eCommerce in general), but my big fear is that a bunch of eBay marketing folks will get together and roll out a new "seller certification" program, and that the program will fail to actually do anything meaningful for buyers or the economic health of the eBay marketplace.  Tough, effective "seller certification" programs actually require that you have to tell some sellers that they CAN’T be "certified".  In my experience, marketing folks don’t like to tell current or prospective customers that they can’t do business together.  Tough, effective certification programs are designed to limit the players on the field, and this is usually counter to everything the marketing folks think about each and every day.

Therefore, as you think about "seller certification" and how to make this effective for online marketplaces, please keep in mind the following observations.

First, the Seller Certification has to be real and meaningful.  The certification needs to take into account the merchant’s financial condition because unfortunately, one of the biggest risks to buyers is a merchant that takes payment, but goes out of business before delivering the merchandise.  This past year on eBay, there were a number of high profile, large, "successful" merchants that went entirely out of business (including GlacierBayDVD), so this is a fact, not a theory.

Second, whoever is certifying the merchant needs to put their money where their mouth is.  In other words, the Seller Certification needs to be backed by material financial guarantees provided by the certifcation authority.  This is required so that buyers can feel confident about the strength of the certification signal.

Third, the certification authority needs to provide some assurances and protection against fake and counterfeit merchandise.  Obviously, counterfeit merchandise is a massive problem online these days, and so any solution has to tackle this issue head on.  The key here is that the certification authority has to take responsibility for the transactions of the certified merchants. This is absolutely critical.  How can buyers trust the certification authority if the certification authority won’t take responsibility for their certifications?

That is why I believe bonding merchants is the ideal solution for eBay and eCommerce in general.  Bonded Merchants have to pass a rigorous due diligence process that looks at their experience and reputation selling online.  In addition, the merchant’s identity and financial strength are analyzed and certified.  Then, their online sales are continuously scrutinized for any signs of a distressed business or irregular sales.  Finally, the merchant’s transactions are fully guaranteed financially via a surety bond. Unlike some eCommerce players, surety companies actually take full responsibility for the merchant’s transactions via the surety bond.

I hope this is helpful and interesting to you as you think about eBay’s information asymmetry challenges and solutions.  Bonding merchants is an ideal method for making buyers safer, merchants more profitable, and marketplaces more economically efficient and profitable.  This is true on eBay as well as the rest of eCommerce.

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