Even if you haven't used eBay (www.ebay.com), you've no doubt heard about it—this 900-pound gorilla of internet auction sites where you can buy and sell just about anything.
Since its founding during the heady year 1995, when the web first exploded into popular consciousness, eBay has grown exponentially. Today, you can browse or search through more than 50,000 categories of merchandise. eBay hosts about a half million online stores and has more than 275 million registered users.
This online auction behemoth grew a whopping 28.5% last year, according to business research firm Hoover's, and its profit margin is a whopping 27.4%, according to investment research firm Morningstar. And according to market research firm Jupiter Research, eBay controls 95% of all online auction listings.
eBay can be a great resource, a source of bargains with familiar products as well as a source of unusual products you'd be hard-pressed to find anywhere else. But it can also be a great way to get scammed.
With its continually increasing profits, eBay has generated criticism over the years for not doing enough to combat the fraud perpetuated through it. eBay has contended that the rate of fraud is low: only one "confirmed" fraud per 40,000 eBay listings. A few years ago, through its Operation Cyber Loss project, the FBI found that the rate of online auction fraud is about one in a hundred, or 400 times higher than the eBay figure.
In the area of antiquities, which I follow, dozens of crooks seem to have taken up residence on eBay, selling counterfeit items as authentic—the same ones over and over. Most are from Eastern Europe. When caught, many of these crooks simply change their eBay IDs and continue their fraud, using their same auction format. Others have kept the same eBay ID for years, offering money-back guarantees and counting on the fact that relatively few people they sell to will know enough to detect they've gotten stuck with a fake.
A similar situation exists, according to reports, with other collectables and anything in fact that can be faked, including but not limited to computer software, music CDs, movie DVDs, books, paintings, designer clothes, sneakers, jewelry, watches, handbags, toys, sporting goods, and film. Recently, I bought a DVD set of the TV show Cosmos on eBay only to discover upon delivery that it was a Chinese forgery, with Chinese lettering on the case and individual discs.
eBay recently enacted changes that appear likely to further increase its profits but also increase fraud in a serious way. First, it prevented people from contacting bidders when the highest bid on an individual auction reached $200. Then, it prevented people from contacting bidders when the highest bid on an individual auction reached $1. Most recently, it prevented people from contacting winning bidders.
eBay said it enacted these changes to prevent other sellers from contacting bidders and offering them similar items, contending it wanted to protect such buyers. But it appears that what it really wants is to avoid losing the revenue from such transactions. According to the experiences of many users on eBay, such side offers have never been a significant part of eBay and relatively little revenue is involved.
Mostly, the elimination of communication among bidders will eliminate a key way that members of the eBay community warn one another about counterfeit and other scams in the works. In general, such communication is integral to the online world. One of the reasons Yahoo! Auctions failed is that, from the start, it prevented such communication.
What this means for eBay buyers is that to avoid eBay scams, it's now more important than ever to buy only from eBay sellers you know or sellers recommended by those you trust, particularly with anything that can be counterfeited in an area you have little knowledge about.
On the other hand, keep things in perspective. Million of items are bought and sold every day on eBay without problems.
Unlike most in-person auctions, eBay auctions typically stretch out over days and end at a specific time. When the clock strikes, the highest bidder wins. There are tricks to placing winning bids, and other tricks in maximizing the bids placed on items you're selling. The strategizing, ticking clock, and winning and losing impart a game quality to online auctions. In short, it's fun.
As with much else, with online auctions, knowledge is power. Arm yourself with information like this, and you'll greatly increase your chances of having positive experiences.
Reid Goldsborough is a syndicated columnist and author of the book Straight Talk About the Information Superhighway. He can be reached at email@example.com or reidgold.com.