Behind the Gavel: Addressing the uncertainty of selling online

You might be a crook. Your products might be of poor quality. You might not deliver once you’ve got my money. You might have misrepresented your product.

These are the attitudes of the nearly one-third of U.S. Internet users who are still not buying online. With about 245 million Internet users in the United States (www.internetworldstats.com/top20.htm), one-third constitutes about 80 million Americans who have never made an Internet purchase. Some of those are too young to buy and some don’t have credit cards, but the remaining number — close to 50 million, certainly — just don’t trust products sold online or the online trading process.

In some cases they don’t trust the merchants who are selling online, either.

Those who do buy online — some 160 million of us — have adopted defensive practices to mitigate our mistrust. One such practice is “showrooming,” wherein consumers take a hands-on look at a product in an offline store before they order online. Another is keeping our bids low. Yet another is avoiding auctions where the “deal just seems too good to be true.” All of these “defensive buyer” actions are costly to sellers.

These defensive actions are not surprising, really. Trust has always been an issue when buying anything. The term “caveat emptor” (buyer beware) was coined in 1523 and consumers have been quoting the phrase for the past 490 years.

Lack of merchant and/or product trust is why manufacturers put warranties on products and retailers offer return policies. It’s why escrows and feedback systems have become an integral part of online selling. If consumers find it difficult to trust products that they can touch, try on and view up-close, why is it surprising that they don’t trust online transactions?


This article originally appeared in Antique Trader magazine

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Indeed, what surprises me is that so many consumers are willing to load up an online shopping cart and then give up their credit card number and home address to a stranger.

To what extent does lack of trust affect online commerce? What can merchants do to increase trust in their products?

Despite the high level of overall online sales, lack of trust results in both lower hammer prices and failed sales. Research has shown that even when a seller offers high-quality products, buyer-mistrust results in unfairly low prices for their merchandise. Selling high-quality goods at consistently low prices has caused many sellers to leave the online marketplace.

Fortunately, there are some specific actions that merchants can take to increase trust in themselves and their products.

A paper titled “Understanding and Mitigating Product Uncertainty in Online Auction Marketplaces” presented by Angelika Dimoka and Paul A. Pavlou at the annual conference of the Alfred P. Sloan Foundation addresses these issues. The paper identifies five fundamental causes of seller uncertainty (in a buyer). They are:

  1. Seller’s inability to describe product quality
  2. Seller’s ignorance of product quality
  3. Sellers unwillingness to honestly describe a product
  4. Lack of third-party certification
  5. Difficulty for buyers to substantiate seller claims.

We’ve all seen auction descriptions that start with the phrase “I don’t really know much about (fill in the blank) but I found this at an estate sale and it looks OK to me.”

How’s that for building trust? It may be honest, but the seller admits ignorance of product quality and without an understanding of the product, how can a proper description be written?

Professional antique sellers generally know their products, but conveying the details through print alone is challenging.

The study demonstrates that long descriptions sell better than short descriptions and that photos can mean the difference between selling and not selling an item.

In fact, the more photos the better. Online venues that offer multimedia capabilities like zoom, audio and video have a higher conversion rate than sites that don’t offer such “bells and whistles.” Multimedia works because it simulates a hands-on inspection.

Third-party certification can mean appraisals, feedback, customer reviews or a manufacturer’s warranty. Third-party proof should be offered whenever claims are made; otherwise, the claim counts as a negative, not a positive. In general, a solid return policy helps on all counts.

In addition to good descriptions (text, visual and multimedia) and third-party certifications, there are two more mechanisms that sellers can use to increase a buyer’s perception of quality. They are posted prices and intrinsic product characteristics and usage.

Posted prices refer to an item’s reserve price, starting price and buy-it-now price. The authors cite five studies which demonstrate that consumers consistently associate a high price with high value. You and I know that high price and high quality don’t always equate, but the price/quality correlation has become ingrained in our consumer consciousness and it’s not going away any time soon. As a strategy, a relatively high buy-it-now price and high opening bid serve as value anchors that encourage higher bids and consequently achieve higher prices.

No-reserve auctions with opening bids of 99 cents and no buy-it-now price seem to declare “This item isn’t worth very much and my (the seller’s) expectations are low.” Such auctions are suspect, and rarely achieve high prices (although they occasionally do).

The final trust-building bridge that is discussed in the study is to state a product’s intrinsic characteristics; specifically its book value and usage. Book value provides a third-party anchor price that consumers can use to judge a product’s value.

For example, a description might state: “This Roseville Pink Apple Blossom basket is valued up to $250 in the 2014 Antique Trader Antiques & Collectibles Price Guide.”

“Usage” refers to how much wear the product has, or to how it was used. “This Apple Blossom basket sat on my grandmother’s mantle for over 30 years” gives the buyer additional confidence in the product.

The study’s bottom line? To get higher prices in your auctions, use long descriptions that include your products’ intrinsic characteristics, lots of pictures, video whenever possible, third-party testimonials/certifications and a high starting bid and buy-it-now price. Make no unsubstantiated claims, and offer guarantees whenever possible.

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Wayne Jordan is a Virginia licensed auctioneer, certified personal property appraiser, and accredited business broker. He specializes in the valuation and liquidation of estate and business assets. Learn more at www.waynejordanauctions.com, 276-730-5197 or auctioneer.wayne@yahoo.com.

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