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Auction service targets deadbeat bidders

Bidders who don't pay for the items they win may soon find themselves blacklisted. ChannelAdvisor has a two-prong plan to protect sellers.

Auction bidders who don't pay for the items they win may soon find themselves blacklisted.

Auction management company ChannelAdvisor plans to launch a service later this month that will let sellers automatically block certain auction users from bidding on any of their auctions. By early next year, ChannelAdvisor intends to take the blacklist concept a step further by combining sellers' individual lists of bad bidders to create one comprehensive list.

"Amongst our customers, we've found (deadbeat bidding) is the largest problem facing sellers today," said Scot Wingo, the company's chief executive officer.

The company plans to offer both services for free to its enterprise-class clients, which include IBM, Motorola and Samsonite. ChannelAdvisor will not immediately offer the services to its small-business customers. Like other auction management companies, ChannelAdvisor helps businesses sell items on auction Web sites through customer relationship management services and software that ties into their inventory system.

Bidder fraud, as the problem of deadbeat bidders is sometimes referred, has generally been overshadowed by reports of seller fraud in online auctions. eBay has taken steps this year to counteract seller fraud, where sellers list items they have no intention of selling, then take off with payments from unsuspecting bidders. In June, the online auction giant added some new fraud detection software, and in May, the company announced that it's developing a new authentication service with VeriSign.

Although potentially thousands of sellers are scammed each day on its site, eBay estimates that the percentage of auctions that end in a confirmed case of seller fraud are between one-hundredth of 1 percent to one-tenth of 1 percent of all auctions. The portion of auctions that ends in bidder fraud could be much higher.

About six months ago, ChannelAdvisor introduced a service that automatically files deadbeat bidder reports to eBay and other sites. Since then, the company has been monitoring non-paying bidder rates, Wingo said. The company found that the average rate of bidder fraud among some of its clients for their auctions on eBay, Yahoo and Amazon is 10 percent, Wingo said. For items that have a higher closing price, the rate increases, he said.

"I think a lot of that is educating the buyers. When you bid on something, you need to buy it," Wingo said.

Bidder fraud can prove costly to sellers, since it forces them to re-list an item or try to sell it to one of their losing bidders, often at a lower price. Although eBay and other sites credit transaction fees to sellers who report non-paying bidders, sellers often do not get a credit for their initial listing fees.

Meanwhile, many sellers don't file the deadbeat bidder reports. Preparing those reports can be a time-consuming process since sellers typically have to file an individual report manually for each item a bidder doesn't pay for. Additionally, some sellers don't report deadbeat bidders out of fear that the they will retaliate by posting negative feedback comments.

Wingo estimates that only about 5 percent of the time do eBay sellers actually report when they've been the victims of bidder fraud.

eBay representatives did not return calls seeking comment about deadbeat bidders.

In the past year, auction management companies Andale, AuctionWatch and ChannelAdvisor have rolled out services that automate the process of filing reports. The services monitor whether bidders have paid for their auctions, send payment reminders and file reports if they haven't paid within a certain time period.

eBay and other sites allow sellers to block particular bidders from bidding on their auctions, but sellers often have to re-enter the blocked bidders' names for each auction they list. ChannelAdvisor's forthcoming service, however, will automatically list those users for sellers. It will also let sellers specify the number of auctions that particular bidders can avoid paying for before they are relegated to the block list.

The new blacklists may not come soon enough for long-time eBay seller Will Stanton. Deadbeat bidding problems have driven Stanton to the point of giving up online auctions entirely.

Stanton, who primarily sells cell phone accessories, figures that about 10 percent of his auctions are won by bidders who either don't pay at all or take up to two months to pay. In all, the Kissimmee, Fla., resident estimates that the amount of winning bids that have gone unpaid and the listing fees he's paid on those auctions totaled $50,000 a year for each of the last two years.

"It's aggravating. It's extremely aggravating," Stanton said.