Wednesday, May 14, 2008

Ebay Diamond Scams

MODUS-OPERANDI : Ebay Diamond Scams
by Robert James, President, International School of Gemology

The Gemstone Forcaster
March 2008

(Editor: This is an informative article written by Robert James, President, International School of Gemology. It outlines how Ebay scamsters make money and get high positive feedback by selling grossly embellished diamonds. It is reprinted with permission.)

How the bad guys are getting away with it.
I want to say that there are a lot of really good sellers on eBay. Honest people doing honest business. But today, I want to give you some insider information regarding how so many of those sellers using deceptive trade practices can continue in business. I have learned this information from years of trying to do consumer awareness regarding some of these eBay seller practices as reported by consumers. This is case history, not conjecture.

We need to first remember that in spite of eBay’s claim that they are just a venue and not responsible for the deceptive trade practices going on, eBay has a collateral interest in the auctions. eBay makes a percentage off of every sale (not to mention the additional 3% they make from payments via PayPal). So it is in eBay’s interest to make as many sales as possible, regardless of what it take to do so. Which not only makes eBay a partner in a deceptive sale, it makes eBay an accomplice in a deceptive sale by their refusal to take action. That is perhaps the biggest deception going on at eBay, their claim that they are not responsible for the actions of the sellers. In fact, eBay is the partner of these sellers.

Bad Guys with 100% Positive Feedback Ratings

I have always found it interesting how many eBay sellers using really deceptive selling practices always seem to boast about their 100% Positive eBay rating, or are even able to maintain a 99% positive rating. Well, it’s easier than many people may realize.

Take, for example, the seller we looked at yesterday, Number1Solutions. This is the seller who had the 2.00 Carat Canary Yellow Diamond that turned out to be a cubic zirconia. This seller has a 99.5% positive feedback in spite of offering auction after auction of these deceptively titled auctions. There are two ways to maintain a high positive rating when you are doing stuff like this.

The first is simply to pad your auctions feedback with your own shill bidder ID. It is quite easy for a person to open multiple eBay accounts. Buy your own goods, give yourself a high rating, and then you build a huge positive number within a short period of time. You can also work in cahoots with other buyers of your ilk and trade off giving each other big positive feedback numbers.

The second is a bit more sinister. And this is how it often works. When a customer realizes that they have been ripped off and demands a refund, the seller agrees to provide a refund but only after the customer posts up a positive feedback for their auction. The buyer is usually so frustrated and so concerned about getting the refund that they will do just about anything to get their money back. So they post up a positive feedback for the seller in spite of the situation, and then the seller issues the refund and receives yet another positive feedback number to their rating.

This has been reported on multiple occasions on the eBay Consumer Forums and there is little anyone can do since you only get one opportunity to leave a feedback on a purchase. And the other issue is that new customers not familiar with seller will look at the 100% positive feedback rating and think that this must be a good seller. Not knowing that the positive feedback is due to coercion.

Making Money Without Really Selling Anything

There is an easy way to make huge profits on eBay that many of the really sneaky sellers use. No one talks about it much because it sounds too logical. And quite honestly it’s legal. Here is how it all works:

First, they get a few rings that are obviously junk. Then put them up at auction claiming they are really excellent quality pieces, require a shipping charge that is in excess of the actual cost to ship, then sell them at a really low price for the kind of ring listed. And as part of their auction in the fine print, they offer a full refund if the customer is not satisfied minus a 10% restocking fee. The seller knows in advance that the item has been misrepresented. And they know the buyer is going to be unhappy with the purchase and demand a refund. But here is where the whole scheme pays off…..

When the buyer calls demanding a refund, the seller tells the buyer this: "I will take the ring back but there is a 10% restocking fee, I do not refund the shipping fee, and you must leave a positive feedback for me before I will do anything for you since I am taking good care of you."

Can you see where this is all headed now?

Consider if I offered for sale a Certified 1.50 carat D-VS1 loose round diamond with an appraisal for $16,000.00, and I offered it at a Buy It Now price of $2,000.00. That would be quite a deal. But when I sent you the diamond you were horrified to find that you got a 1.02 carat L/I2 round diamond. You would become very worried about getting your money back and contact me.

I would tell you that I am so sorry you are not satisfied. And I will give you the refund exactly as promised because I want you to be happy with my company. All you need do is post up a positive feedback for me since I am taking such good care of you. Once done I will issue your refund minus the $200.00 restocking fee, and I would also have the $10.00 left over on the excess shipping charges. Leaving $210.00 in my pocket after all is said and done.

My cost for the whole affair: $15.00.
Time involved: 1 day to post the auction. 5 days for the auction to run. 3 days for the customer to get the ring and start demanding a refund. 3 days to do the dance on the refund. Total time 12 days.

Now, if I have 10 doggy looking diamond rings. Post them up in these kinds of auctions 2 times a month each, and each time I make $210.00 in restocking fees and excess shipping fees, my monthly gross income without ever having to actually sell any of my doggy diamond rings is $4,200.00. And I never actually sold anything.

That is one reason we continue to see such wonderful diamonds apparently being sold for such low prices on eBay. The whole point is not to sell diamonds; the whole point is to collect restock fees.

You get to keep the diamond ring. You get to keep the restock fee. You get to keep the shipping fee. And you get to add yet another Positive Feedback to your rating with every sale.
And with millions and millions of new visitors on eBay reading your positive feedback, and the fact that eBay makes money every time you make a sale so they are not going to do anything about it, it’s really a pretty good living if you can sleep at night by doing it.

There are a lot of variations on the above. But this is just a look at some of the antics going on with some of the bad eBay sellers who are giving the good sellers a bad name.

1 comment:

Anonymous said...

This was a great article. Thank you.
I also find it amazing that Ebay does not do something about this. But as I have discovered Ebay protects the buyer always. After all that's were their money comes from.
I also rarely buy on Ebay for that reason.

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