Sure, You Can Trust Us

E-commerce promises consumers a great deal, but it also poses new risks. Because transactions are not face to face, people have to accept on faith that their credit-card numbers are safe from hackers, that their personal information won't be sold without their permission, and even that the goods they order will actually fit the online descriptions when they are delivered. Sometimes that faith is misplaced, and if companies are to persuade the masses to hit the “confirm order” button with any degree of regularity, they must reassure consumers on those counts.

A recent study of the practices at online auction house eBay indicates some of the possibilities and pitfalls for companies hoping to generate online sales. The study's authors looked specifically at how eBay handles matters involving privacy, security and the integrity of the marketplace. Their findings hold lessons for all kinds of online operations.

Integrity. No business can function unless buyers, to put it bluntly, get what they pay for. Likewise, in the case of auctions, sellers must be confident that they will receive payment for their wares.

EBay has several ways of trying to ensure the integrity of its auctions. Its well-known feedback forum allows the buyer and seller in any transaction to rate the experience; a negative rating may lead other auction participants to steer clear in the future. EBay also has an insurance program designed to protect buyers who send money but do not receive the goods. Such methods aren't perfect — the insurance program caps payouts at $200, and frauds have found ways to trick the rating system — but they may be enough to allay the fears of many online-auction participants.

Security. Clearly, any e-business must have sophisticated security systems to combat hackers bent on thievery. Companies may face a bigger security problem, however, in the form of viruses and denial-of-service attacks.

EBay suffered such an attack in the summer of 2000. The real risk to eBay in such situations is that its sellers, who are in effect the company's suppliers, will move on to find a more secure environment. The authors of the study did not have access to eBay's security configuration, but they do recommend ways for companies to counter external threats.