BuySafe.com Founder Steve Woda

For every person who shops on the Internet, there are hundreds of others who don’t – who won’t. They don’t want to. They feel, with some justification, that doing so would lead to the nightmares others have lived through with identity theft, undelivered merchandise, credit-card fraud – you name it.

If you’re in the ecommerce game, you know about abandoned carts. One of the main reasons why folks leave shopping carts at the checkout page is fear – unadulterated terror about their financial security.

Steve Woda’s own mother has that fear, too, and he is doing everything he can to help her and millions of others who would like to shop on the Internet to be comfortable buying that hard-to-find product or sending that gift to a loved one without the hassle of crawling the real mall. Woda himself got burned in an eBay transaction, to the tune of about $400. And that is how BuySafe.com came into being.

Practical Ecommerce: How did you conceive of the idea of creating a buyer assurance program for Internet shoppers?

Steve Woda: To be quite honest, I was burned in an online auction. I bought something online. I did all the things you are supposed to do: I checked the buyers’ feedback ratings of the seller, I did my homework, and I thought I was dealing with a good seller.

But I didn’t get my product. I bought a $400 personal digital assistant that didn’t show up. I couldn’t afford to lose four hundred bucks. I thought about it for a couple of weeks and said to myself, “This is not a good thing.” It’s bad for buyers and for sellers.

I realized that if you are a small or medium-sized seller and you are not a trusted brand, people really think twice before buying from you. I thought that anything we could do to eliminate or mitigate the risk for buyers and vouch for those small but professional sellers would be a good thing for ecommerce.

PEC: Backing up a few thousand ecommerce merchants is a pretty daunting task. Just the task of checking and qualifying them is a big order. How did you tackle that first hurdle?

Woda: Well, I went about it a little differently. First, there are things called Seller Ratings, but they are not foolproof; they can be manipulated. There are buyer-protection plans, which are nice and afford a little protection — after the fact — but people really don’t want to have the problem in the first place.

So, for me, this is a matter of not looking for all the bad guys but rather prequalifying the good guys, the good professional merchants. If you do a good enough job with that, then you’re comfortable with guaranteeing their transactions up to $25,000.

So, we look at a merchant’s reputation and experience with selling online. We look at their financial condition. This is a very important issue. Small businesses go under every day. We have found that much of the time when people have trouble buying online, it is because they are buying from someone with financial problems.

Here’s an example. Recently, the merchant that had been the number-one eBay seller in the world, with more than 265,000 positive feedback ratings, went belly-up. It wasn’t because they weren’t a good seller and didn’t have great feedback ratings, but because they had gotten into financial problems. This is why we look closely at the financial condition of the company. Finally, we verify their identity, we make sure they are who they say they are and are where they say they are. So far, it has worked pretty well.

PEC: Somebody passes the test. What happens then?

Woda: They become a “bonded seller.” They’re called that because we use what is called a “surety bond.” Now, this isn’t a new concept; it has been around for thousands of years. In earlier agrarian societies, bonds were used when buyers sought products from distant farmers. The bondsman would act as the third party to guarantee that each party got what they wanted from the transaction. The same concept applies on the Internet where the buyer and seller are often thousands of miles apart.

PeC: Who is your client, the merchant or the buyer?

Woda: Kind of both. The merchant is the one who comes to BuySafe.com and says, “I’m JoesElectronics.com. No one knows who I am or trusts me yet, and I would love it if you would prequalify me and bond my transactions.”

These are the folks who pay us. On the other hand, however, we have an obligation to the buyer to make them comfortable buying from “Joe” and to ensure that if anything goes wrong, it is corrected.

PEC: When did you start the company?

Woda: In September 2000, after I got burned in that auction. We raised our first round of financing in 2003 and launched our business on eBay. We did that because there are tens of thousands of great small merchants doing business there every day. That is where our business grew up.

Today, there are about two-and-a-half million items on eBay each and every day that are bonded by BuySafe.com with a couple of thousand sellers involved. We started to expand beyond eBay last year, and we now bond items on TIAS.com and Overstock.com. This June, we will launch our greatest product enhancement when we begin bonding transactions on regular ecommerce websites that are not connected to auctions, such as eBay and TIAS.

PEC: How does the merchant pay for your service?

Woda: A merchant on eBay today pays 1% of the final transaction amount. Merchants would not do that if there weren’t something in it for them. Very simply, with the backing of our bonding, they can attract more buyers or bidders on eBay. More bidders means higher prices.

PEC: When you launch the service to general ecommerce merchants, will there be limitations on shopping carts?

Woda: We’ll launch the service with several checkout providers, such as Zoovy, but the best thing for anyone to do is to let us know what we have to do. Go to our special website called Bondmywebsite.com, and tell us who your infrastructure providers are so we can go to them and make arrangements to provide bonding on the merchant’s site.

PEC: The short history of business on the Internet has seen the industry solve one problem after another. First we figured out how to get products into an online store, then we developed ways of getting people to the store. There is plenty of discussion about conversion — selling the customers once they have arrived. Is bonding part of that solution?

Woda: Well, the big thing in my mind is how to get the customers to convert at a rate that makes this an efficient distribution channel. I believe that is where trust comes into play. If merchants aren’t thinking about that and doing something about it, they’re losing money.

PEC: Have you had to pay off on anything yet?

Woda: Absolutely. That’s the whole point of BuySafe. We want to help buyers be comfortable that they are buying from the best merchants on the Internet. But, if we’re wrong and we goof, and we don’t make a good call, we will put our money where our mouth is. A good example would be GlacierBayDVD, a number-one merchant on eBay that suddenly went under. We covered the customer losses.

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PEC: When someone has a problem, what is the procedure for resolution?

Woda: When the buyer orders something, we bond that item and send the buyer an email that says they have just bought something from one of the best merchants on the web and that we are bonding the transaction. We tell them that if anything goes wrong, they should let us know. If anything does go wrong, they can come to our web site and file a complaint.

We have an online dispute resolution process, which is the first step. They tell us what went wrong and what they want the merchant to do to fix it. Then we get the merchant involved either to fix the problem or suggest an alternative. If that doesn’t solve the problem, we have a team that steps in to mediate the process, and we also get our financial partners involved.

PEC: How often does a buyer complain?

Woda: It’s a lot like brick-and-mortar stores. Buyers and sellers have disputes. Normal businesses have returns and performance issues; so do online sellers. In about four to five percent of the transactions we see, buyers have a problem — the shipment is late, or it wasn’t the right color.

Rather than jump in and solve the problem for the buyer, we play the role of mediator and let the merchants solve the problems with their customers. Merchants would rather solve the problems and try to keep the customers. If they can’t or won’t, however, our role is to step in.