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Calming Consumer Fears with buySAFE

Posted on 11.20.2006

As Black Friday and Cyber Monday near and the holiday shopping season kicks into high gear, consumers still appear to have the jitters when shopping online through unfamiliar, lesser-known merchants.

Recent surveys suggest that 33% of respondents have abandoned an online transaction with an unfamiliar merchant due to concerns over getting something different than what was purchased and 29% ended the transaction because of non-delivery concerns. These concerns are commonly being referred to as merchant non-performance risk, and they rank close to concerns with identity theft (37%) and credit card fraud (40%). So how does the smaller, less-known online retailer allay these fears and compete with the Amazon's of the online world?

BuySAFE, who conducted the survey along with market research service Insight Express, believe they have a solution. BuySAFE offers a guarantee to shoppers in the form of a surety bond, backed by firms Liberty Mutual, Travelers and ACE USA. There are currently two models of the bond available for purchase.

The first is to offer the bond for purchase to the buyer. Typically, for a cost of 2-4% of the item cost, the buyer can purchase the bond as a guarantee that what they pay for is what they get, or the bond offers a full refund. BuySAFE's current data shows that approximately 15-20% of consumers are buying these bonds.

The second option is for the merchant to buy bonds for all purchases made by buyers. The rate works out to between 1/2-1% of all items purchased. Here, the buyer does not incur an additional fee, and seems to be the best long-term solution for an online retailer. With the former model, the merchant may be forced to lower prices on their items to make up for the bond option to buyers.

Of course, the overall model is to ensure that consumers feel safe making purchases online and, ultimately, that leads to higher conversion rates - enough to more than make up for the expense of the bonds. Adding to the bottom line for merchants is also a profit sharing system, where buySAFE reimburses the merchant a percentage of every bond purchased. This works out to approximately 25% of revenue from the bonds, or 1% of every transaction bonded.

But before any of this takes place, the merchant must obtain the buySAFE seal to display on their website. This is accomplished through an application process that examines a merchant's reputation, financial strength and stability and their history. Currently, a merchant must sell at least $1,000 per month so that a selling and delivery track record can be established. According to buySAFE CEO Jeff Grass, about 80-90% of merchants pass the initial screening. However, buySAFE continues to monitor a merchant's transactions to ensure trustworthiness and continue their endorsement of the site. A monthly fee applies for the buySAFE seal but current promotional efforts are all but waiving the fee for merchants.

Does it work?

BuySAFE has made its biggest impact to date through eBay, where their name is becoming widely recognized. A recent test of the buySAFE seal on eBay using 2.5 million listings, half auctions and half fixed-price, revealed a 7% increase in conversions. Also, the more an item costs, the higher the conversion rate, as consumers want to be sure that a high-ticket item is guaranteed in some way. This especially applies to electronics, jewelry and other items that the buyer is not completely sure of what they are getting in the end.

Currently, buySAFE customers must use a partner platform to take advantage of the bonding service, such as the aforementioned eBay,,, Zoovy, Inc. and another, large platform soon to be announced in the coming weeks. There are plans to allow merchants to use buySAFE independent of their partner platforms as soon as January.

The real usefulness of buySAFE to the independent, small and medium-sized merchant will ultimately depend on name recognition. Does the average online consumer know about buySAFE? Clearly, eBay shoppers are catching on, but not everyone shops on eBay, especially the non-Internet savvy customer. BuySAFE hopes that factors such as their eBay reputation, merchants promoting the value of the bonded product and integration into third-party applications such as search results among shopping tool providers and an effort to highlight merchants using buySAFE in search results will get the word out.

With fees being nominal or waived entirely, it seems like an option to take for a test drive. Displaying a buySAFE seal and offering the consumer-purchased bond will not cost the merchant anything, and can only serve to bolster a trustworthy reputation.

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