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E-commerce Growing Pains

By Dave Marino-Nachison
November 25, 2003
E-commerce has officially made it. If you had any doubts, they should have been erased yesterday following the release of the 12th annual survey of consumer-protection agencies conducted by the Consumer Federation of America and the National Association of Consumer Agency Administrators. The big news: 2002 was the first year online commerce made the top 10 of categories that generated the most complaints.

That puts e-commerce, listed as a "major" source of complaints by 23% of the government and nonprofit agencies that make up the above organizations' memberships, in the same company as crooked auto salespeople, telemarketers, and sketchy mechanics and contractors, among others. (The report, a 12-page PDF file, is available online.)

This is great wisecrack fodder, but it's probably more worthwhile to look at the main sources of complaints (listed in order) to understand what people are talking about:

Bad merchandise: Customers complained that they didn't get what they ordered, or it came late -- or not at all. These problems were often associated with difficult-to-track overseas merchants.

Auctions: Complaints in this category were similar to those above, except that auction complaints were often consumer-against-consumer rather than consumer-against-business. These were commonly referred to law-enforcement agencies.

Internet service providers (ISPs): Consumers complained of bad billing -- companies didn't close accounts or cease service as directed.

Financial services scams: Credit, loans, and mortgages sold online -- especially through unsolicited offers -- were a frequent source of complaints.

Easy money: The Nigerian get-rich-quick scheme and other scams continue to be big problems.
That's a lot of bad business. How much of this can really be attributed to such legitimate businesses as eBay (Nasdaq: EBAY), Time Warner's (NYSE: TWX) AOL, Earthlink (Nasdaq: ELNK), Yahoo! (Nasdaq: YHOO), and others is difficult to say -- though, where business-to-consumer fraud is concerned, I'd guess it's minimal.

This does, however, suggest that on-the-level merchants must understand that their marketplace is still at times somewhat like the Wild West. Consumers must be careful to stay out of dark alleys and gunshot-riddled saloons, while honest shopkeepers must be extra careful whom they let in the doors.

Much of the increase in e-commerce-related complaints can almost certainly be attributed to the simple fact that e-commerce has grown. More users mean more problems. But it's also worth remembering that as much as business-to-consumer e-commerce has given us in terms of selection, pricing power, and convenience, it's created new problems as well.

Smart merchants will tackle these problems head-on. Smart customers will demand that they do.

Have an e-commerce tale of woe to tell? Spin some cyber-yarns on the E-commerce and Financial Scams discussion boards.

Dave Marino-Nachison can be reached at
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