The Confidence Game

When it comes to shopping online, whom do you trust? The big guys, certainly: Amazon.com (AMZN), CDnow (dossier). But what about small retailers you’ve never dealt with before? How do you know whether you’re dealing with a reputable Web merchant or a fly-by-night operator? And even if you’re certain a site is legitimate, how can you be sure it’s reliable?To check out an online merchant, you’ve got several options: Do independent research, query a Usenet newsgroup, rely on a seal of approval from a private watchdog group or visit an independent Web site that monitors e-commerce retailers.

These methods have drawbacks. Not many people have time to conduct a thorough background check of an online business. And alternative approaches still require some consumer savvy.

Consider seals of approval. Over the last year, a bumper crop of Web business-watchdog groups has emerged. They charge merchants for enrollment, with fees ranging from hundreds to thousands of dollars. Companies undergo a background check, fill out questionnaires and agree to abide by a set of principles. Finally, shiny seals of approval are awarded, and just about everybody gets a gold star.

A few groups carry weight: WebTrust, a seal program run by certified private accountants and the VC-backed Business Ethics Bureau of Investigation, for instance. (The well-known TRUSTe seal program deals only with privacy.) Other outfits merely list information provided by each business.

“Some of the smaller seal programs are little more than for-profit operations that hand out a seal but have no ability to police anything. Everyone wants to get on this bandwagon,” says Russ Bodoff, COO for BBBOnLine, the Web arm of the Council of Better Business Bureaus.

BBBOnLine is the Rolls-Royce of seal programs. More than 2,200 companies have been certified. While most are brick-and-mortar businesses with an online presence, others are pure Internet plays, including eBay (EBAY), Quotesmith and Travelocity.

BBBOnLine conducts a rigorous investigation. A company must agree to abide by BBB’s advertising code and dispute-resolution program; consumers may challenge any claim of brand superiority made on the Web site. BBBOnLine staff visits the workplace of every business before issuing a seal.

“The process ensures the public that these businesses are who they say they are, and that they can deliver on what they promise,” says Steve Salter, who heads the group’s reliability seal program.

But BBBOnLine has shortcomings. Only businesses older than a year — an eternity in Internet time — are eligible. The group doesn’t include overseas merchants and doesn’t post customers’ complaints about service. And it has enrolled only a limited number of Web-based commerce sites.

Still, for member sites, BBBOnLine is the best recourse for resolving serious complaints associated with a purchase. And it’s useful for verifying the street cred of insurance brokers, financial institutions and the like. But what if you just want to go online to buy a VCR or send flowers to Mom?

Enter BizRate.com. A startup in Marina del Rey, Calif., with a staff of 35, BizRate is the only site that posts consumer evaluations of online merchants based on surveys filled out at the digital cash register. Nearly 500 merchants participate, including eToys, Egghead.com (EGGS) and Music Boulevard. The company is shooting for 1,000 by year’s end.

Unlike most comparison sites, BizRate doesn’t accept advertising, sponsorships or merchant fees. To generate revenue, it provides consulting services and sells market research based on customer data.

Says BizRate.com CEO Farhad Mohit, “Our model leverages what is best about the Internet: real consumers banding together to help create content and value for other consumers. We’re focused on helping users select the right merchants, so they can avoid problems before things go wrong.”

The company relies on more than 1,000 customer surveys each day that evaluate online merchants by 40 criteria, such as the product’s condition upon receipt, customer support and whether the right products get shipped. And staff reviewers place orders from each merchant to evaluate the shopping experience. Mohit says customers seem most concerned about ease of ordering and on-time delivery.

BizRate.com visitors can peruse categories like computers, music or housewares to summon up ratings criteria most important to them. America Online (dossier), Excite (ATHM) and Lycos (LCOS) use the company’s shopping ratings; in January, BizRate.com agreed to rate merchants listed on Microsoft (MSFT)’s MSN Shopping site.

Online merchants that reliably deliver the goods will ultimately win consumers’ confidence — and get their business.

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JD Lasica
Written by JD Lasica
JD Lasica is an entrepreneur, author, journalist, photographer and blogger. | CONTACT