Financial Times FT.com

Ebay moves to protect buyers against fraud

By Richard Waters in San Francisco

Published: January 29 2008 21:01 | Last updated: January 29 2008 21:01

Ebay has announced some of the most stringent measures in its 12-year history to target unreliable and fraudulent sellers, marking what executives of the world’s biggest e-commerce company concede will be a controversial bid to revive slowing growth.

The changes are part of a broader overhaul by John Donahoe, who takes over as chief executive officer at the end of March last year, to move beyond the “flea market” culture on which the company was founded, but which has started to hold it back as internet commerce has become mainstream.

Ebay executives are braced for a wave of dissatisfaction among some users as the changes take effect. Some sellers will in effect become invisible as their goods are buried at the bottom of search results when users hunt for things to buy.

Mr Donahoe has warned this will cause some dissatisfaction in a market that has long been seen as one of the most effective community-based sites on the internet. But he said the changes were necessary to bring more buyers back to the market.

Ebay last year adjusted its five-star ranking system, one of the internet’s first and most successful attempts to harness user feedback, to try to weed out unreliable sellers, and now rates them on more detailed criteria, such as whether they ship on time.

In future, sellers whose overall ratings fall below 4.2 on the five-point scale will find their goods will fall to the bottom when buyers do product searches, the group said. Weaker sellers will also be forced to use a guaranteed payment system, such as Ebay’s PayPal.

Ebay has also made an attempt to attract back its most active users, known as “power sellers”, who have long been the lifeblood of its market but who have been defecting in increasing numbers to websites such as Amazon.com.

In future, “power sellers” will receive fee discounts of up to 15 per cent when their user satisfaction degree reaches a certain level, and their goods will feature at the top of search results.

Ebay also said it would cut the fees it charged users to list goods, in an attempt to bring more goods back to its market, while increasing the “final value” fees sellers pay when a sale actually takes place.

To prevent the market being flooded with low-value goods – something that happened when Ebay changed its fee structure two years ago – the company said it would use its search engine to ensure that only the most relevant products are presented to buyers.

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