September 24, 2002, 12:00 AM

Deadbeat bids affecting as many as one-quarter of all online auctions

ChannelAdvisor says 7% to 25% of auction winners don’t complete the sale. A new service for sellers finds them, blocks their bids, and recovers placement fees.


Online auction services provider ChannelAdvisor Corp. has released a product aimed at reducing online auction fraud for sellers, a problem the Research Triangle Park, NC-based company says now affects as many as 25% of all online auction transactions.

“Deadbeat bidder fraud is the largest and most rapidly growing problem facing online auction sellers today,” says Scott Wingo, CEO of ChannelAdvisor. “Deadbeat bidders” are those who win an online auction but do not complete the transaction. ChannelAdvisor based its study on the experience of a sample of its own client base that included more than 85% of enterprise-scaled manufacturers and retailers selling via online auction marketplaces.

The study found that fraud affects 7% to 25% of all online auction transactions. As many as 5% of the deadbeats are repeat offenders who consistently buy from the same seller and refuse to pay, and 5% to 10% of the deadbeats have a pattern of defrauding multiple sellers over a short period of time. While the items can again be put up for auction, the sellers’ time to sell the product is increased and sellers have had to pay auction placement fees for non-completed sales. Recovery of the fees is a time-consuming process for sellers and as a result, only a small portion of sellers defrauded by deadbeats actually file for fee recovery, according to ChannelAdvisor.

ChannelAdvisor’s BidAssure product will be offered at three service levels and can be used at eBay, Amazon and Yahoo auction marketplaces. BidAssure Checkout, the level of service currently available, streamlines the checkout process for auction winners while detecting, monitoring and tracking those who’ve been deadbeats. If the system detects a deadbeat bidder, based on data supplied by the client, it automatically replenishes the inventory for resale and files fee recoveries with the marketplace involved.

Bid Assure Block, to launch in October, will automatically detect deadbeat bidders and prevent that bidder from placing future bids on items offered by clients of its service, also leveraging fee recovery mechanisms. BidAssure Network, available next year, will offer Channel Advisor enterprise-scaled clients such as IBM, Motorola, The Sharper Image and Ritz Interactive the opportunity to opt into a network that allows participants to identify and block deadbeats detected by other network participants. ChannelAdvisor estimates that the Bid Assure service can reduce the incidence of deadbeat bids to less than 2% for network participants.


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