{"id":2069,"date":"2000-02-01T19:40:00","date_gmt":"2000-02-01T19:40:00","guid":{"rendered":"https:\/\/nclnet.org\/online_auctions_an_in_depth_look\/"},"modified":"2020-07-07T11:09:44","modified_gmt":"2020-07-07T11:09:44","slug":"online_auctions_an_in_depth_look","status":"publish","type":"post","link":"https:\/\/nclnet.org\/online_auctions_an_in_depth_look\/","title":{"rendered":"Online auctions: An in-depth look – National Consumers League"},"content":{"rendered":"

Online auctions are wildly popular; nearly one third of adults in the United States who go online have participated in them\u2014an estimated 35.6 million people. Most auction-goers are happy with their experiences and confident that they won\u2019t run into trouble. However, at NCL\u2019s Fraud Center, online auctions have consistently ranked as the top complaint since that category was added to the database in 1997.The average loss per victim in 2000 was $326. Auction victims often say that they never thought about the risks or how to protect themselves\u2014until it was too late. As part of an effort to educate auction-goers about how to take advantage of this exciting new marketplace and reduce the potential for problems, NCL commissioned this Harris Interactive survey with support from Tradenable, a major provider of escrow services. The survey was designed to find out how and why people participate in online auctions, how confident they are as buyers and sellers, how they usually conduct the auction transactions, what problems they encounter, and how they deal with those problems.<\/p>\n

Why online auctions are so popular<\/h3>\n

The Internet opens a global marketplace to consumers, one in which they can find anything they\u2019re looking for and compare prices easily, no matter where they live. For sellers, it provides access to a greatly expanded pool of potential customers, and the low cost of access makes it easy for individuals as well as businesses to offer goods and services.<\/p>\n

Most of the survey respondents who participated in online auctions did so only as bidders. A smaller group has participated only as sellers. Though most of the people who participate in online auctions have done so between one and ten times (65 percent), 22 percent said they had participated more than 26 times.<\/p>\n

Online auctions appeal to bidders mainly because they\u2019re looking for bargains (43 percent), hard to find items (23 percent), or things they collect (21 percent). When survey respondents who don\u2019t participate in online auctions were asked why, most said they simply weren\u2019t interested (52 percent) or didn\u2019t see anything they wanted (12 percent); few expressed concern that they would not get what they paid for as buyers (six percent) or thought that it would be too much of a hassle as sellers (three percent).<\/p>\n

Online auction buyers\u2019 experiences<\/h3>\n

Of those who have participated as bidders in online auctions, 83 percent have actually bought something. The average value of most purchases was $100 or less (75 percent), but 21 percent of buyers said the average value of their auction purchases was between $101 and $500.<\/p>\n

The vast majority of those who participate in online auctions are very or somewhat confident that if they are the winning bidder they will get what they pay for from the seller (94 percent). People who are mostly sellers but have also bought on auctions are also confident they\u2019ll get what they pay for (99 percent).<\/p>\n

Feedback about sellers\u2019 previous transactions is obviously valuable information for potential purchasers. But only half of those who mainly bid on auctions say that if feedback information is provided on the auction site, they always check it before bidding; 37 percent usually check. Those who mainly sell on online auctions are also cautious when they\u2019re bidders; 68 percent say theyalways check the information about the seller\u2019s track record before bidding; 20 percent usuallycheck.<\/p>\n

They are also reluctant to bid on items if there is no information available on the auction site about a seller\u2019s track record. More than three-quarters (77 percent) of those who mostly sell on online auctions say they won\u2019t bid on items in that case. Fifty-three percent of those who are mostly bidders are also reluctant to bid in these cases. People who are mostly bidders are willing to look for information from other sources like government agencies, consumers groups, or the Better Business Bureau before deciding whether to make a bid (17 percent). Overall, 29 percent of auction participants would bid on items even if there were no information on the auction site about the seller.<\/p>\n

The most common way that people who buy items in online auctions pay is by sending a check, cashier\u2019s check, or money order directly to the seller (69 percent). Unfortunately, by the time the buyer discovers that there is a problem with the transaction, the check or money order has usually already been cashed. And if the seller encounters a problem with the buyer\u2019s payment, such as a check bouncing, the merchandise may have already been shipped.<\/p>\n

Credit cards offer more protection because buyers have the right under federal law to dispute the charges if the goods were misrepresented or never delivered. Payment by credit card can also be safer for the seller than accepting personal checks. However, the frequency with which the auction buyers paid by giving their credit card numbers directly to the sellers is relatively low, only 17 percent. Services offered by or through some auction sites that facilitate payment by credit card are clearly helpful. Nearly half of all those who bought items have made payments through those services (44 percent).<\/p>\n

Escrow services are another way that auction buyers and sellers can protect themselves. For a small fee, an escrow service holds the buyer\u2019s payment and forwards it to the seller upon the buyer\u2019s receipt and approval of the item within an agreed upon inspection period. But overall, only six percent of those who have bought items have paid through an online escrow service\u2014the same percentage as a much more dangerous method of payment: sending the seller cash. Use of escrow services among those who are mostly sellers when they buy items is 15 percent.<\/p>\n

Despite the high confidence rate that people generally have in online auctions, four in ten (41 percent) buyers have had problems, including: receiving items much later than expected (20 percent), receiving items that were different than promised (11 percent), receiving damaged items (ten percent), and never receiving the items (ten percent).<\/p>\n

Most people who experienced problems were able to resolve these problems with the sellers by themselves (62 percent). Other actions buyers took included: complaining to the auction site (29 percent), disputing the credit card charges (eight percent successfully, two percent unsuccessfully), making an insurance claim (four percent successfully, one percent unsuccessfully), using an online mediation service (one percent successfully, two percent unsuccessfully), and complaining to a government agency, consumer group, or the Better Business Bureau (two percent). Many said they never took any action to solve their problems (21 percent).<\/p>\n

Online auction sellers\u2019 experiences<\/h3>\n

Nearly a third (32 percent) of those who offered items for sale on online auctions have sold 11 or more items. Smaller numbers have sold fewer items (24 percent sold 1-2 items, 19 percent sold 3-5, 9 percent sold 6-10). Most offered items for sale valued at $100 or less on average (69 percent), but 20 percent of sellers said they offered items with average values of $101-$500.<\/p>\n

More than half of the sellers (52 percent) said they had experienced problems with buyers, including: late payments (34 percent), never receiving payments (27 percent), buyers changing their minds (20 percent), checks bouncing (five percent), and buyers using stolen credit cards (one percent).<\/p>\n

The majority of sellers who experienced problems resolved their problems with buyers themselves (66 percent). Other actions that sellers took included: complaining about the buyer to the auction site (49 percent), participating in private online mediation (seven percent), contacting the escrow service they used to accept payment (five percent), and using a collection agency (two percent). Only seven percent said they took no action.<\/p>\n

Familiarity with escrow services<\/h3>\n

Unfortunately, 42 percent of the survey respondents who don\u2019t typically use an escrow service aren\u2019t familiar with the services. Another 30 percent don\u2019t think it\u2019s necessary to use them, and 19 percent don\u2019t want to pay the fee. Online escrow services are convenient for both auction buyers and sellers. The fee, usually a small percentage of the final purchase price, can be paid by either party as they mutually agree. For sellers, escrow may be a less expensive option than participating in the credit card payment system, especially if the buyer pays the fee. For buyers, it can help ensure that they will get what they pay for\u2014or they won\u2019t have to pay.<\/p>\n

Conclusion: what does this mean for online auction participants?<\/h3>\n

Online auctions can offer great benefits to both buyers and sellers. But as the survey shows, when a consumer pays before receiving the merchandise, or a seller ships the goods before the buyer’s payment clears, there is some risk involved. Even though most people have good intentions, things occasionally go wrong. And some people are irresponsible, or even downright dishonest, in their dealings with others.<\/p>\n

Auction participants need to be aware of the risks and know how to protect themselves. While there aren’t any guarantees in life, it is possible to reduce the potential for trouble in online auction transactions by following some basic safety tips, including<\/p>\n