Saturday, June 28, 2008

Fight Bad Buyers and use Immediate Pay on eBay

Imagine if every eBay buyer actually paid for their item (like they do over at Amazon). There would be no more dealing with NPBs (non-paying bidders) filing UPI reports, worry about non-paying bidders leaving your bad DSRs or negative feedback, customer service would be reduced and you would also have a better class of customer.

Scot Wingo posted some tips for improving DSRs at his blog and the most controversial tip was: Improve your DSRs Tip 14 - Consider NOT filing for UPI credits. Scot reasons; "So as a seller if your DSRs are really important to you, then why risk them by starting this dance at all? Sure it's eBay's fault the UPI process is so broken and all, but you do have the option to opt-out of it. Sure, this puts more FVF $$ in eBay's pocket, but maybe you can take more out by opting-out and do what's right for YOUR business."

I certainly would recommend doing the math to see if that tip would improve your business, but while you are doing the math why not consider using Immediate Pay instead of worrying about all this.
  • Immediate Pay keeps "whacked out" competitors away from your listings because they have to pay for the stuff, they can just create a user id bid on stuff and then never pay.
  • Immediate Pay helps reduce customer service and also gives you, I would argue, a higher class of customer.
  • No more NPB's or worries that a pissed off buyer will ding your DSRs because you filed for UPI credit.

Immediate pay has some drawbacks:

  • Cart abandonment (even though it's not really a cart) Using Immediate pay may reduce your sales but if your NPB rate is 10% and your cart abandonment rate is 10% its a wash and you don't have all of the customer service issues to deal with.
  • Combining orders can be a problem.

Why doesn't eBay promote "Immediate Pay" as the method of choice on eBay, I would think it would improve both the buyer and seller experience? My guess is, if Immediate Pay were used site-wide it would reveal how bad the NPB problem really is.

eBay might might even take a 10% haircut on their GMV which would make last year's $60 billion a more accurate $54 billion and of course the difference between actual UPI credits filed and actual fees paid on UPIs might be a nice chunk of change. I guarantee you if the metrics were in eBay's favor they would make immediate pay mandatory site-wide.

My tip for eBay sellers who are fighting with this issue, is to switch to Immediate Pay on your items; remove both the hassle and the cost of non-paying bidders.

Just my 12%


David said...

Randy when you were at Glacierbay DVD did this ever happen to you?

Say most of your items sell for $17.95; Buyer sends a $20 bill with no return address, no information on what they ordered, etc.

This is what sucks, you get buyers like that and then they wonder why they never got the item and then they file an INR dispute.

INR disputes are 10 times worse than Paypal disputes because they stay open for 90 days, whereas Paypal claims stay open for 20 days. eBay really needs to reevalute the INR dispute.

Immediate pay is the way to go.

David said...

oh yeah, ever notice how the buyers who take 3 weeks to pay expect to get their items in 2 days?

Randy Smythe said...

David, yeah that happened to us, if eBay truly wants a better marketplace for buyers they need to do their job first.

They created the problems in the marketplace and now they want sellers to clean them up.

Sellers really just need to re-evaluate being on eBay at all.

Sellers need to find a way to get off the crack (ebay volume)

Anonymous said...

Randy, using the immediate Pay means PayPal only right ?

Or it means that they have to complete the checkout right away and can use another payment method?

Being a media seller with around 150 sales/day, and having to deal with PayPal, on each day that the sun rise above us, I tend to appreciate sales paid by any other payment method than PayPal.

Also, we have to take into account that since the US dollar value has decreased, we tend to have more international customers, meaning higher fees to PayPal, more PayPal disputes and lower DSRs.

But this is another debate.

David said...

I always loved it when buyers would send a personal check and then expect to receive their shipment immediately.

It's as if I'm just waiting by the mail every day to get this $20 check, and then I'm going to spend an hour of my time driving to the bank.

This may have been a mistake in hindsight, but I'd only go to the bank once a week. It would take an hour of my time to drive, wait in line to deposit checks, and then drive back home. If you combine that with the 7-10 day hold I had on checks (I used to ship immediately, even though my auction stated checks had to clear until I started running into problems with buyers stopping payment after getting the merchandise) it would sometimes take 3 weeks to a month to get an item.

If anybody remembers what eBay was like in the 90's. Occasionally I'd buy from a media seller that had a merchant account however if you got your item in 3 weeks that was considered quick. Now people send personal checks and expect the immediately.

Here is another problem that I had. Once every other month I'd get a payment and I couldn't read the persons hand writing. I had to wait for them to contact me and ask why they didn't receive the item.

David said...

anonymous I stopped international shipping a year ago. Lots of headaches, lots of refunds for people who never received their merchandise.

At the very end I started to wonder if the buyers were being honest when they said they never got the merchandise, or if they were just trying to take advantage of the fact that I had no tracking everything was sent airmail

Randy Smythe said...

Anonymous, yes this does mean PayPal only, but in all honesty that is the direction eBay is headed anyway.

I used to take checks and money orders also it came to about $10K per month with only an occasional bounced check but it took 40 hours a month of an employees time to process and manage the checks so the cost to take checks was roughly 4% of the amount I received BTW, my PayPal fees were a smaller %.

David said...

I always felt that I was at risk for fraud by accepting checks and money orders.

ms.pat said...

Am I mistaken but doesn't it also mean fixed price only? I don't think you can use immediate payment for auction items. I could be wrong in that. I don't deal in many fixed price items.

Ebay needs to get off the stick and stop issuing new policy with nothing behind it. As I said before...everything for Ebay...everything for buyers, absolutely nothing for sellers - it won't work! Sellers are left wide open and vulnerable and generally with no recourse but to eat this expense and that expense. I think ebay is eventually going to find the honest sellers who really care are the ones leaving and the bad sellers who just want to make a buck with the least amount of effort are the ones that are staying.

Shipping...if they want to emulate Amazon, Amazon gives a time frame for an item to arrive and the buyer can't even give feedback until it is within that time frame. That's just one example of why Ebay will turn into a cheap, cheesy clone of Amazon - nothing like the real thing at all! There lackadaisical attitude at trying to arrive at the same point as amazon is what will doom them in the end!

Randy, you're right - the only real solution is to get off ebay crack! They don't deserve good sellers OR good buyers.

Anonymous said...


for a fixed price auction you can turn on immediate pay as well as the paypal account required buyer block.

for auction format you can only do the latter, but it still has some deadbeat filtering effects.

we receive about 10% of sales via check/mo. I always wonder if its worth it.

will now seriously consider using paypal only in both cases, way too much time and effort on NPB's and UPI's. Additionally, ebay failed to credit both of our accounts for the so called UPI protection which refunds the listing fees including the expensive featured item fees in the case of a NPB or refund situation. We were supposed to receive $3000 or so in May and $2700 in June and thus far ebay has only given me lip service, automated sytem etc.., meanwile I continue to pay them thousands in fees or they will shut me down.

Since ebay is playing this game with us, paypal only/ immediate payment could be the best way to go, especially if it is coming anyway.


BPS said...

First off, Scot's post the other day was a joke. There is no other marketplace where you get charged for an item and not get paid for it. As an eBay seller you have a RIGHT to get those fees back, don't give eBay any more than they deserve. And backing down or giving in is not the answer.

How about a better solution. Here is what we do.

Since eBay refuses to fix the UPI system, we take it into our own hands. We play hardball.

Three days after an item is won and not paid for, a reminder goes out. This is standard practice. At seven days we send a more serious notification, warning that their eBay account could be put in jeopardy if payment is not received by the 10th day. Most people by this point apologize with whatever BS delay excuse they can think of, and send payment off or pay through PayPal.

If there is still no payment after day 10, however we send them a VERY serious-sounding final warning. Their account is now in jeopardy, and they have 48 hours to make payment through PayPal, or their account may be "suspended indefinitely". We CC "" on the email. Their credit score may be affected. What the F do they know?

At this point we ALSO give them the option to pay a cancellation fee of, let's say, $4.00. This fee will "let them out of their responsibility in paying for the auction" and "remove their liability for the item," and "no further action against their account will be taken."

Does it work? Oh it works allright. Since most people don't really know how the whole eBay system works (partly because eBay does such a poor job at explaining, partly because the eBay experience is always changing), they assume they need to act quickly, apologize, and pay our cancellation fee, which we invoice them for through PayPal. We make it seem like big eBay will take serious corporate action if they don't pay it (which of course they should, but they don't). But buyers don't know this. At least not our deadbeat buyers.

Do we get the occasional wiseass who says something like "fu*k you, go ahead and try to get my account suspended, I'll just start another one!"? Sure we do. But the vast majority of people don't want to bother with the hassle, and after three automated warnings (which sound personal, by the way) assume they'd better not take any more risks with their account, credit, etc... Most people say, "yes please invoice me for the fee, my paypal email address is Thanks guys." When the invoice has been paid, we close the dispute via "Mutual Agreement - Other Reason", and everyone is happy

So you want numbers? If you assume 10% NPB, which some do, and if even just one fifth of those people pays your cancellation fee, chances are you are not only recouping your losses, you are actually making money on the situation (money you should have made anyways). You can set up your cancellation fee structure however you want based on your business model.

For us, we receive about $20 per day in cancellation fees alone. That's nearly $8,000 a year, before (ugh) PayPal fees and time spent invoicing. Not only that, the buyers leave us POSITIVE or no feedback! Comments like "Seller agreed to cancel auction, A++" are more common than anything. Nobody ever leaves a negative. Ever. And why should they? They didn't pay for their item, and we let them out of the auction, for a small but fair fee.

In 2006, we lost nearly ten thousand dollars! to NPD's (Non-Paying Deadbeats). Last year we made about half of that back through this system, and this year people seem even more resonsive. We will probably make around $10,000. The situation has completely reversed itself, with minimal effort. And 90% of it is automated.

Don't take my word for it, go out there and try it for yourself. It's your business, and if eBay isn't going to do anything about this serious problem, then you need to find the best solution. I'm not even necessarily saying this is it, but it definitely works for us, and it's a whole lot better than the alternatives.

Just try it out, put your deadbeat buyers in their place, and make some money while you're at it. It's money you would have received had they actually completed their purchase, like they are supposed to...

Randy Smythe said...


When I was selling at Glacier Bay we had a $15% of the transaction amount as a cancelation fee but our methods weren't as extensive as yours. We only used that occasionally when buyers complained about a strike, but, I never had to deal with DSR's.

My preference is still using "immediate pay" becasue it helped reduce the customer service load as well as meant our FVF fees to eBay were only paid for items we received revenue on.

Thanks for the idea. It may work for many sellers out there.

Cliff Aliperti said...

Hey Randy,

I think this advice would work best for a Media Seller using Free Shipping. If you're selling anything that gets combined on a regular basis, shipping would have to be free I think. Especially if it's for items offered by competitors -- the buyer potentially walks away because 1)Multiple purchases increase shipping and 2)Multiple purchases take time, increase number of PayPal transactions, etc. #2 might still get you even with the free shipping.

Also, I can see dropping international buyers if you sell, say DVDs, because I'd imagine you're not selling many outside of your regional coding area, right?

So I can see where this advice is coming from and I can see it working well under certain circumstances such as those I mention, but I don't think it can work universally, for all sellers that is.

The major problem here, and the one which puzzles me daily, is eBay's lack of a cart. With the cart shipping can be combined and the number of PayPal transactions is cut to one. Both problems solved, and to some degree the Unpaid Item Strike issue raised by Scot Wingo is solved as well because then the tools would be in place to implement what you suggest.

Without the cart, sorry, but I think your ideas could be adapted quite well by many sellers I think they would be a minority.

PS: Personally I like the checks and money orders as well. Well, I prefer PayPal, but I know some people just won't use it (or any other online payment service).

Thanks as always,

Janet Graham said...
This comment has been removed by the author.
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