Qualifying Bidders for Online-Only Auctions

When I first started conducting online-only auctions back in the late 1990's, my company did not bother qualifying bidders before allowing them to participate in an auction. The system was wide open - users didn't even have to provide a legitimate email address in order to register to bid. It was simple and very user-friendly. But unscrupulous bidders learned to exploit the open system, leading us to develop countermeasures aimed at maintaining the integrity of our online auction platform.

When designing our bidder-qualification system, we tried to retain as much of the simplicity and user-friendliness of our original open-registration system. The last thing we wanted to do was disenfranchise bidders through complex registration processes or stringent qualification requirements.

Here's the system that we came up with at AuctionMethod. It's ever-evolving, but these basics have served us very well when selling by online-only auction:

  • Users must have a valid email address in order to register. The registration process includes a confirmed opt-in (COI) procedure that requires users to verify their email address before placing any bids.
  • Users must have a valid credit card on file. The registration process uses address verification services (AVS) to match billing address information provided by the cardholder with the cardholder’s billing address on file at the issuing bank.
  • Not only must the users's credit card billing information match, but the card must be capable of successfully completing a small transaction as well. Another test transaction will be run against the card every time the user participates in a new auction.
  • Users must agree to allow a re-listing fee to be charged against their credit card in the event that they default on payment. We have found that it is easier for bidders to accept a re-listing fee than it is to put a deposit up-front.
  • There are special occasions that call for greater protection against non-paying buyers, in which case you can use the whitelist. When an auction is set to use a whitelist, then only those users who have been pre-approved by the administrators will be allowed to participate. The whitelist is usually used in conjunction with a deposit requirement.
  • A blacklist is the opposite of a whitelist, except that it applies to all auctions site-wide. Any user who is placed on the blacklist is prevented from accessing their account and from placing bids.
  • Take it a step further by welcoming new bidders via telephone. This reduces the anonymity on both sides of the transaction and engenders a greater feeling of trust. We have found that it is particularly effective to make these calls after a bidder has already placed some bids at an auction. It gives us an opportunity to introduce them to useful website features, reiterate important terms and conditions, and answer any questions the bidder may have.

What do you do to qualify bidders at online-only auctions?

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