Stop Worrying! How to Solve the eCommerce Trust Problem. (A must read if you sell or buy online!)

What’s the #1 problem slowing the growth and profitability of eCommerce today? That’s easy: it’s trust – more accurately, the widespread LACK of trust among online shoppers. A shopper becomes a buyer only when her confidence is sufficient to push the “Add to Cart” and “Checkout” buttons. Without those acts of trust, nothing else matters. As you already know, most people don’t feel completely safe when buying online, especially when buying from small and medium-sized merchants that lack a national brand, like Walmart or Amazon.com. In this blog, I’ll lay out theory and practice as to why the key to continued eCommerce growth is all about creating SUFFICIENT TRUST to transform the tentative shoppers into trusting buyers.

When a shopper perceives risk at a website, she either avoids buying (thus reducing the merchant’s sales and the size of eCommerce generally) or she discounts the price she’s willing to pay based on that perception of risk (thus forcing the merchant to reduce price to get the sale and thereby lowering margins and profits). Unfortunately, this lack of sufficient trust creates a major problem for online retailers as they see lower sales and profitability than they otherwise could or should receive. 

Put differently, online merchants currently pay a kind of “tax” – in lost sales and margin – that is larger and more damaging than any legal tax they pay. Who passed this tax? No one and everyone: it is the economic manifestation of all the fears, doubts, hesitations, etc. that ever killed on online sale, or re-directed it to another merchant. While every online merchant pays this tax, it is not applied evenly. It disproportionately hurts the smaller, lesser known merchant than the big national retailer. The small merchant likely pays more to acquire their inventory, they pay the same as a well known brand for the keyword that drives traffic to their site (or listing fee) and then because of the lack of sufficient trust they are forced to sell the product for less than the well known (and more trusted) merchant if they hope to maintain a similar conversion rate to the more trusted merchant. Alternatively they could seek the same price and but see a dramatically lower conversion rates.

This “tax” hits merchants in direct proportion to their LACK of brand and lower levels of trust. This insufficient trust problem is the primary reason why small and medium-sized businesses on the web or on marketplaces are suffering – and it threatens the continued success of eCommerce and artificially limits its full potential. buySAFE provides, in a sense, a form of “tax relief” for online merchants by reducing the trust gap and increasing website conversion rates.

Over 50% of online users in the U.S. still don’t buy online (astounding!) and a lack of trust is the #1 reason for this. Study after study shows that well over 85% of online shoppers are worried about their information security (will my information be stolen by a hacker?) and over 80% are also worried about merchant non-performance (will my item arrive?, will it be authentic and as described?, will the merchant live up to all promises made, including refund and return policies?, will the merchant treat me fairly?, etc.), especially when buying from a merchant that lacks a national brand.

While SSL certificates (e.g. VeriSign, Comodo, etc) and site scanning services (e.g. HackerSafe, ControlScan, etc.) are generally effective at solving the information security half of the equation, buySAFE is uniquely positioned to solve the much more problematic half of the trust equation.

There are five essential elements required to a create the perfect online trust solution and all current and future solutions can be judged against these elements. We have carefully built buySAFE to provide all five and be that perfect online trust solution. The five elements are:

1) Merchant inspection, verification and certification

Buyers must know who they are dealing with and whether the merchant has the character, capacity and capital to perform as promised.

Ø Character – Are they trustworthy and reliable? Can you trust they will try to do what they promise you? Will the product shipped be authentic?

Ø Capacity – Can they actually do what they’ve promised to do? Do they have the product, are they experienced enough to professionally deliver the product and handle any issues that might arise?

Ø Capital – Do they have the financial means to deliver on the promises made? Are they about to go bankrupt? Will their suppliers continue to give them credit to ship more inventory? Are they a viable business?

The buySAFE initial inspection and certification process looks at each of these factors to ensure a buySAFE Merchant has the character, capacity and capital to reliably deliver on every promise made to a buyer. And if a merchant doesn’t qualify, they do NOT become a buySAFE Merchant. Period.

 2) Continuous monitoring to ensure continued performance

Buyers need to know that a merchant who is good enough to become certified initially, CONTINUES to be good enough to earn that certification every day. This means an ongoing monitoring process is needed to ensure the merchant continues to deliver on promises made, stays financially strong and stable, etc.

buySAFE performs frequent check-ups on many of its initial screening criteria and it monitors every transaction a buySAFE Merchant is involved in. buySAFE also receives a fast feedback loop from buyers of bonded transactions via our dispute resolution process. If a good merchant goes “bad”, we know about it very quickly and can take immediate corrective action.

 3) Third-party endorsement that guarantees performance, where the third-party is held accountable for claims made about the merchant

A third-party obviously needs to be the one performing the inspections (#1 above) and the continuous monitoring (#2 above) for any representations of the merchant’s reliability and trustworthiness to be meaningful. But making the claim that the merchant is a good merchant because they’ve passed your inspection and verification process is an empty promise if you aren’t willing to put your money where your mouth is. Clearly, there’s a great incentive to just qualify everyone if there are few repercussions when you are wrong. Therefore, for a third-party to credibly make a claim about a merchant, they need to take the legal and financial responsibility for the claims they are making about the merchant.

buySAFE, via a surety bond backed by Liberty Mutual, Travelers and ACE USA, guarantees each and every bonded transaction up to $25,000. If we’re wrong – that is, the buySAFE Merchant doesn’t perform - we’ll step in and fully reimburse the buyer for his or her loss. If a third-party providing a trust signal doesn’t trust its own signal enough to guarantee it, how can a shopper possibly have any trust in the signal at all?

 4) Accountability, for both the buyer and merchant

There must be a mechanism in place to hold both the buyer and merchant accountable for their actions. If there is no penalty for cheating, there is too big of an incentive to cheat (e.g. merchant ships counterfeit item instead of real thing, doesn’t respond to return/refund requests, etc).

buySAFE protects buyers only if they’ve paid in full for the item purchased, so there’s a disincentive to avoid payment. When a purchase is bonded, buySAFE assumes the liability and accountability for a buySAFE merchant’s promises and will make the buyer whole in the event the merchant doesn’t deliver. That said, if the merchant makes a promise but doesn’t deliver, buySAFE will go back to the merchant and hold them accountable for the loss they’ve caused. The merchant decides what promises to make and buySAFE will fully back those promises, but if the merchant is dishonest or incompetent and doesn’t deliver, then it’s only right that they be held accountable for their actions.

 5) Independence, neutrality & regulatory oversight…

Finally, and most importantly, any trust solution must be unbiased and independent from the rest of the transaction, but be still held accountable for representations made about a merchant/third party. Since disputes will inevitably arise between buyers and merchants, the third-party trust solution must have a responsibility to each party in equal amounts. Just as a judge is required to be completely impartial and unbiased when deciding a court case, the third party trust solution must be the same for it to have any credibility and legitimacy. This means anyone with a vested interest in seeing one party of the transaction win cannot play the role of the trust solution.

A strong oversight function (via government regulation) and a high degree of transparency into the accuracy and legitimacy of decisions made by the trust solution (via government and third party oversight) are absolutely critical for ensuring all participants are looked after and kept safe. A trust solution with no accountability or oversight means that if they make a decision that your disagree with, you have no recourse, no appeal. You are simply forced to accept whatever judgment is handed down, regardless of whether it is right, fair or appropriate. If this non-accountable, non-transparent trust solution also has a great deal of control over you or your business, (e.g. they can effectively shut down your business on a whim), you are then effectively held hostage to the judgments of that solution.

buySAFE’s independence makes it a neutral third party to a transaction. It does not have a bias toward a buyer or a seller, but it does have a contractual, legal and regulatory obligation to both. To eliminate any chance of bias, buySAFE intentionally subjects itself to a great deal of oversight so that its role as an independent, discerning mediator can never be influenced. Via the bond and as a licensed insurance agency in all 50 states, buySAFE is subjected to regulatory oversight of every insurance commissioner in the country and every claim is decided by a fully licensed and regulated claims adjuster. Further, buySAFE’s partners (Liberty Mutual, Travelers, ACE USA) also serve  an oversight function as they are careful to ensure every interaction with a buyer or a merchant is handled professionally, appropriately and in a manner that is consistent with their own brand and corporate values. Only by being a neutral and independent third-party that is subjected to regulatory oversight, can buySAFE truly live up to its role as being the ideal eCommerce trust solution.

So there you have it: all the essential elements of the ideal solution for creating a justified and sufficient level of trust. buySAFE is a solution that INCREASES TRUST by reducing both real and perceived risk. It greatly reduces the likelihood of problems occurring by ensuring the merchant is reliable and trustworthy, by continuously monitoring performance, by holding the merchant and the trust provider accountable for the promises each make and it does so in an environment of openness, independence, neutrality and government oversight.

buySAFE’s trust solution is far superior to betting on the “wisdom of crowds” via feedback scores or merchant ratings which rely on imperfect information and are subject to significant biases and manipulation. It is also much better than relying on back-end financial protection programs like buyer charge-back protection or satisfaction guarantees which do nothing to ensure a reliable and trusted transaction. Because buySAFE HELPS BUYERS AVOID PROBLEMS in the first place – rather force them to fight for a refund after a problem occurs – it builds trust, reduces worry and makes for a much more enjoyable online shopping experience. This is essential to creating sufficient trust. I’ve talked to literally thousands of people about shopping online and 100% of them have told me, they’d rather avoid a problem in the first place by knowing which merchants are reliable and trustworthy, than rely on getting reimbursed after a transaction goes bad. Buyer protection and satisfaction guarantees are band-aid solutions that treat the symptoms of the problem, but not the problem itself.

By incorporating the five essential elements for ensuring sufficient trust, buySAFE transforms more shoppers into buyers … which lifts revenues and margins … which grows and deepens markets …which gives buyers more choice and better prices … which ensures the health and continued growth of online marketplaces. The invisible tax of discounting and lost sales is repealed. The viability and promise of eCommerce can be fulfilled. Problem solved!