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The Value of Reputations Online

By Bobby Buys

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Published: 13May2010
Word count: 535
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On online consumer-to-consumer marketplaces, people buy from strangers and sell to strangers. How can the buyer, who is expected to send the money and then wait for the goods, be sure that the seller is not exaggerating the quality of the wares?

Online marketplaces have come up with an ingenious way of establishing sellers' (and buyers') reputations. It is called a rating system. In this system, buyers and sellers can rate each other's performance with a positive, a neutral, or a negative. Users' net reputation scores are calculated as the total of positive feedback minus the total of negative feedback. Neutrals are not counted. Users can also leave a text comment. It is important to read those comments, for they can tell a lot about a specific situation or about the seller or buyer in question.

Your score as a seller can be seen by all participants in the marketplace. In "real" life, the reputation of a retailer may be good with some people, not-so-good with others, and be unknown to newcomers. Online, reputations are common knowledge, or at least commonly available knowledge.

The system works so well that some sellers known for allowing their imagination to run away when making a sales pitch to a prospective buyer (for example, used car dealers) have admitted that the transparency of an online trading platform's rating system has made them toe the line.

Several studies conducted in the USA have tried to set exact monetary value on the reputations of sellers on online marketplaces. One study found that sellers with more than 675 positive comments earned a premium of more than 10 percent of the average selling price, as compared to new sellers with no feedback. Another study claims that a move from two to three negatives cuts the price by 11 percent. Although it is impossible to factor in all the variables that come into play - from the quality of the merchandise, layout of the listing, item description, to the skill in answering enquiries, experience confirms that buyers are more likely to buy from sellers with a good reputation and to pay slightly more for products sold by such sellers.

The monetary reward is only one of the reasons why sellers on online marketplaces strive to have positive ratings. Another reason is pride. For them, there are few sights that give such satisfaction as 100 percent positives.

One experienced seller gives this formula for ensuring a good rating record:

1) Describe your item thoroughly and honestly.

2) Answer all questions.

3) Do not try to make a profit on shipping.

4) Rate your buyers as soon as they pay: they have fulfilled their end of the deal.

5) Ship promptly.

6) Keep the customers updated on every step of the process.

7) When you send thank you e-mails for orders, also let your buyers know about how important it is to leave a positive rating.

8) Always treat your customers politely. Even if a buyer occasionally steps out of line, do not take it personally and keep your end of communications strictly professional and courteous.

9) Do not agonise over an occasional negative. If all your attempts to please a customer fail, simply leave a politely-worded explanation in a response to a negative rating, and move on.

bidorbuy.co.za is South Africa's largest online marketplace. Buyers and sellers come to bidorbuy to buy and sell virtually anything in auction format or at fixed prices. Contact details: bidorbuy Marketing Department; email promotion@bidorbuy.co.za, web site www.bidorbuy.co.za

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