When it comes to online fraud, the e-commerce industry seems to hate looking itself in the mirror. Specifically, e-commerce executives cringe at the mere mention of the existence of online fraud. Their first reaction is almost always to blame the messenger for sharing tough information about the industry rather than actually tackling the core issues driving the online fraud that victimizes consumers for millions of dollars every day.
I ran across the following quote from Scot Wingo of ChannelAdvisor in this blog post regarding eBay’s VP of Trust & Safety appearance on the Oprah Winfrey Show:
"Unfortunately it’s never a positive when there’s someone with Oprah’s reach out there associating eBay+fraud so I think it was a net negative."
I have learned from experience that Scot Wingo is a very smart guy, and he has proven to be a vocal educator regarding the e-commerce industry. When necessary, he has also had the courage to stand up and point out what isn’t working in the e-commerce industry. My interpretation of Wingo’s comment is that Chestnut’s appearance wasn’t a good thing for eBay’s short-term prospects or stock price. I would agree with that. However, I do not believe Wingo was suggesting that coverage and discussion of online fraud problems are a bad thing for eBay or e-commerce in the long-run. If that was his suggestion, I would disagree with that.
Scot’s comment did make me think about an alternative point of view that I have heard many times from e-commerce executives over the years. I often the hear the following question from execs almost verbatim:
"Don’t you think that by talking about online fraud you are blowing the issue up way beyond proportion and scaring consumers away from e-commerce?"
When I hear that question, I cringe because it displays a fundamental lack of wisdom. Wake up everybody!
Today, more than 50% of all online surfers don’t buy ANY merchandise online! That is a ridiculously high number, and when surveyed, these non-buyer internet surfers overwhelmingly cite distrust of and nervousness about e-commerce transactions. Is that because the industry talks about the online fraud problem too much? No! It is because online fraud is, in fact, a huge problem as reported by many sources including the Federal Trade Commission. Almost everybody knows somebody that has been burned on the internet. Don’t you? The 50% of internet surfers that avoid eCommerce do so because, to date, the industry hasn’t solved the problem for consumers.
The industry consistently takes half-steps so that it can tell the press and consumers that "we are doing something". My honest opinion is that it is a bit of joke (You will want to tune in tomorrow for a very specific example that will probably shock you.), and any smart e-commerce executive knows that is true.
Buyer protection plans and merchant rating systems are simply not enough. If, for example, eBay’s Feedback Rating system and PayPal’s Buyer Protection were enough to make it completely safe for consumers, why does Chestnut have to go on Oprah and explain the issue? Well, of course, he wouldn’t.
If a crime happens in your neighborhood, most people want to know about it immediately so that they can take specific steps to protect themselves in the future. It is no different in your online neighborhood. Ignoring the problem of online fraud and shooting any messenger that points out that a problem exists is not going to help solve the problem.
In the long-run, Oprah’s coverage of online fraud is a very good thing for eBay, e-commerce, online merchants and consumers! Let me say that again… Disclosure, coverage, and discussion of the online fraud problem will help and inspire the industry to identify solutions that will be critical to the success of this industry in the long run.
The minute an effective, comprehensive solution to online frauds is adopted, consumers will buy merchandise on the internet like never before. The minute we stop blowing smoke and we start solving the problem will be the minute e-commerce starts to tap into the ~100 million internet surfers who we can’t currently count as customers.
Consumers want us to make it completely safe for them to buy online. We owe it to folks to do just that. Don’t shoot the messenger! Understand the problem. Discuss and debate it. Then solve it!
Proposed solution to e-commerce-related fraud:
A trusted, objective, regulated third party needs to investigate the backgrounds, history and financial stability of online merchants and then, if the third party is willing to endorse the merchant, the trust & safety company needs to put its money where its mouth is by fully protecting consumers for any deviation from the promised terms of sale. Obviously, that is what buySAFE does.
Related blog posts:
"buySAFE Invited By French Government to Help Stop Online Sales of Counterfeit Luxury Goods" by Travis Brown
"Stop Worrying! How to Solve the eCommerce Trust Problem. (A must read if you sell or buy online!)" by Jeff Grass
"What’s Wrong With eBay? It’s Simple Economics" by Steve Woda
"What is a ‘Market for Lemons’?" by Steve Woda
"What’s Wrong With eBay? It’s Simple Economics" by PowerSeller King
Last week, I had the opportunity to speak to a few hundred business school students at the Robert H. Smith School of Business, University of Maryland. Michael Beveridge, buySAFE’s VP of Business Intelligence, joined me in speaking at the invitation of Professors Guodong (Gordon) Gao, Peter Weiss, and Mingfeng Lin. The students had previously read “buySAFE – Creating and Profiting From the Bonded Seller Advantage“, a case study on buySAFE authored by Wharton professor, Dr. Eric Clemons. Here is the presentation that Michael and I shared with the students… “eMarket for Lemons – The Economics of an Evolving eCommerce Marketplace“.
