TECHKNOW: Esther Dyson's update

TECHKNOW: Esther Dyson's update - Item sold online disappoints buyer. It's an all-too-familiar story and, frighteningly for auction sites like eBay, leaves its customers increasingly drained. Why? Because the buyer/seller disputes may be similar, but disg

by ESTHER DYSON chairs Icann, the committee assigning net namesworldwide. E-mail: edyson@edventure.com
Last Updated: 31 Aug 2010

Item sold online disappoints buyer. It's an all-too-familiar story and, frighteningly for auction sites like eBay, leaves its customers increasingly drained. Why? Because the buyer/seller disputes may be similar, but disgruntled consumers want specific justice.

Although eBay's ratio of disputes to total transactions is small, the problem was large enough for former McKinsey consultant Steve Abernethy to develop a process for resolving disputes online. His company, San Francisco-based www.squaretrade.com, works on the principle that if you get the two parties talking online, problems can be resolved without great cost or anguish. Square Trade quickly won the contract as eBay's official mediator, and now handles 50,000 disputes online for eBay and other sites such as eLance and DoveBid.

SquareTrade's edge is to do away with humans as far as possible. It has an automated resolution process - a form for customers to fill in online - and new disputes are continuously added to its store of rule-of-thumb expertise. People are thus forced to focus on their complaint: I sent my payment but did not receive my merchandise; the merchandise arrived late; the merchandise was damaged; the merchandise was different from the description - and so on. Tick the boxes off. The complaint is forwarded to the seller, who can either acknowledge the complaint or tell its side of the story: I sent the merchandise late; I sent the merchandise on time; I will ship the merchandise right away; I am willing to contact the shipping company.

Two things are happening here. First, people get a chance to make their case without any money being spent. Second, the software reduces the emotional level and gets people to focus on the relevant facts. It guides the responding party to see if their view is the same as the complainant's. If it isn't, it suggests a resolution: I'll give a partial refund and let the buyer keep the merchandise; I'll give a full refund if the buyer returns the merchandise, etc.

But what of the disputes that are not resolved that easily? These, about 10% of SquareTrade's cases, go to one of its 250 or so human mediators.

They lead the parties through a normal mediation process - but still online, to keep costs down. Neither eBay nor SquareTrade will discuss details, but eBay subsidises the cost of this service, presumably gaining a competitive advantage over other auction sites and generating revenues for SquareTrade.

Cases without human intervention are free to users; those with human mediators cost users dollars 15 or more. Overall, 95% of disputes are resolved; the rest may go to court, hang around unresolved, get referred back to eBay or even go to the government for fraud investigation.

The benefit, though, is predictability and clarity. Users feel they are getting a fair deal (a square trade, in fact). For most people, the cost of going down the legal path is prohibitive. SquareTrade is more like an FAQ (frequently asked questions) business. It shows how other people resolve similar disputes. It speaks in clear language, not legal terminology, and it uses examples rather than principles or specifications. So, when buyer meets seller and they disagree, each story is unique. But, online, software tools can help the story reach resolution faster when you don't want it to go on for ever.

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