The perils of eBay, and why rough vendors like PayPal

I recently learned a few lessons about eBay and PayPal I'd like to pass on. The bottom line is that while I might use eBay to buy something from a regular person with a clear identity, I'll avoid eBay vendors. I've also reaffirmed and intensified my dislike of PayPal.

I bought a 'refurbished' Samsung i500 PalmOS cellphone from KM Electronics, an eBay vendor. I wasn't really trying to save money; the phone was the best option for my wife and her support staff (me) and it's no longer sold. I needed to go with 'refurb'. I took a gamble and lost, the phone has a defective digitizer. When I emailed KM Electronics I received a form response that made it pretty clear that they weren't going to be much help [1]. They also noted that if I produced a negative response on eBay they'd provide no further support or contact, irregardless of the terms of their warranty. Naturally I immediately submitted a negative response. (I have figured out ways to make the phone useful nonetheless.)

I learned a few interesting things about eBay and PayPal with this experience:

• eBay vendors put credit card icons next to PayPal buttons. It is true PayPal will manage a credit card transaction, but the vendor is paid by PayPal, not the credit card company. So good luck using AMEX to bludgeon a shady vendor -- they got their money from PayPal. The credit card relationship is with PayPal, not the vendor. Clever! A handy bit of indirection that's a win-win for PayPal, eBay and the vendor.
• eBay doesn't like negative reviews. I had to go through a little tutorial to write one. Helps explain why the reviews you see there are so often positive. I suspect the true 'negative experience' rate is several times higher than what's documented.
• This PayPal vendor is fairly typical in not having any contact method save email. (Sure I could try to track 'em down, but it's not worth it.) Email responses are automated.
• As noted above, vendors may go to some lengths to have positive comments; including intimidating anyone who might post a negative comment (voided warranty!). I think eBay ratings are very suspect.
  

I wonder how solid eBay's future really is. I'm kind of hoping Google's eCommerce solution vaporizes PayPal; though Google's product likely have the same beneficial (for vendors) "indirection" "feature".

[1] Selling refurbished phones is kind of a rough business, so it's not surprising they're a bit of a rough company. At least the phone's identifier was valid and Sprint could use it! I'm not their typical customer; I get the sense they specialize in selling things in bad net neighborhoods.

Update 11/24/05: After submitting my negative report, this is the (as expected) email I received from KM Electronics: "All service and warranty for your purchase has been cancelled." This is the type of vendor who sells on eBay -- submit a negative comment, void the support contract. Since this vendor sells a great deal on eBay, one presumes eBay approves. Clearly, the absence of negative ratings for some eBay vendors needs to be judged carefully.

Update 11/24/05b: This gets even more interesting. KM Electronics didn't respond to an email, but they responded very quickly to the negative rating. What an eBay vendor does under these conditions is give the customer a negative rating and some nasty comments, blocks the constumer from further correspondence, and then triggers an eBay mutual withdrawl option -- the simultaneous removeal of both negative comments.

Very interesting! eBay vendors like KM-Electronics (KMElectronics, etc) have more tools than I'd expected to keep their ratings positive. eBay is indeed a rough neighborhood, where advantage goes to the sharpest elbows. I wonder what's next -- goons at my door? If I had time to play the futures market I'd sell eBay short.

I'll post further updates here, I wouldn't be suprised if KM Electronics and eBay had more cards to play.

Update 12/20/05: MacSlash has a similar story. I wouldn't want to own stock in eBay.