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AuctionBytes is running a series of interviews with people who have had an impact in the online-auction industry in order to get their views on the current state of the auction world. In today's Industry Profile, we interview Steve Abernethy, President and CEO of SquareTrade. SquareTrade offers two services for online auction users: the SquareTrade Seal, a way for buyers to recognize good sellers, and Dispute Resolution, a way for buyers and sellers to work out problems http://www.squaretrade.com.
Background
AuctionBytes: Tell us a little bit about yourself. What did you do before becoming CEO of SquareTrade?
Steve Abernethy: My origins are in engineering, where I was an architectural engineer for Arup, an international building design firm. After a few years of that, I wanted a broader focus and involvement in business issues. So I went to business school, and from there found work at a large management consulting firm.
That was right around the time of a lot of the new competition and issues of the Internet hitting large corporations, so most of my clients were focused on launching new businesses and responding to new opportunities associated with the Internet. That's what got myself and other SquareTrade founders thinking through what still needed to be pioneered, what were the missing services? And so we launched SquareTrade, all three of us left McKinsey, and we started SquareTrade in 1999.
AuctionBytes: So you were involved with SquareTrade from the beginning?
Steve Abernethy: Yes, I was one of the founders along with Ahmed Khaishgi and Lalitha Vaidyanathan
AuctionBytes: What does SquareTrade do for eBayers, in a nutshell?
Steve Abernethy: SquareTrade builds trust between buyers and sellers. It is focused on helping buyers feel more comfortable purchasing from sellers, and helping sellers provide greater service and build trust with consumers. Backing that up, SquareTrade provides the world's largest online dispute resolution service, which helps both avoid and resolve problems, should they occur.
Most broadly speaking, we built our business around supporting online markets and ecommerce, providing the neutral trust services to help them create a safer place to buy and sell. The largest area of our business currently relates to buyers and sellers on eBay, but we also serve other markets. We recently started a program, which you wrote about, with Overture, which is the search engine that drives the adword advertising in Yahoo and Microsoft network. It's advertiser seal and reliability program with a similar emphasis of creating systems to help consumers get the clarity they need to feel comfortable in a seller and make a more informed purchase decision. The service helps differentiate sellers who want to compete with the big guys, and the new markets (like Overture), and tools, (like SquareTrade's Seal Program) are enabling that to happen. And SquareTrade fills a really important role of creating ways to build trust with the small guy.
AuctionBytes: Have you ever had occasion to use SquareTrade resolution services?
Steve Abernethy: No, thankfully I haven't, but there would be a neutrality issue if I wanted to,…
AuctionBytes: You mean there might be a conflict?
Steve Abernethy: Just because I'm president of the company, I would not want to ever get in an issue where there would be a perceived neutrality issue.
AuctionBytes: Oh, I didn't even think of that. But you are saying you haven't had any bad experiences?
Steve Abernethy: No I haven't. But I've learned a lot. The interesting thing about creating dispute resolution systems and processes is learning how to listen, learning how to hear both sides of the story. I think that's half of dispute resolution is just assisting in better communications.
State of the Industry
AuctionBytes: How has the online-auction industry changed since you first became involved?
Steve Abernethy: SquareTrade incorporated in mid-1999, the service was launched in the beginning of 2000. Obviously there's been a lot of growth. But there's also been clearly a lot of consolidation. When we started, there was a lot more auction activity going on with Amazon and Yahoo who were much more predominant in the U.S.
There were a lot of marketplaces emerging at the time. There was excitement and innovation in all these different markets, which have largely consolidated or some were possibly too soon for their time. There's still clearly a few individual marketplaces. But eBay in the U.S. has taken the lion's share of that.
I think the other change, in addition to absolute growth, is the increase in mainstream activity. The emergence of such categories as auto sales and at such huge volume of transactions make auctions something that's not just perceived as much as one-off individual sales or just collectibles. So I think we're still on the tip of the iceberg here, but there really has been significant evolution.
I think the other thing that's different is that the first few years consisted of, in many ways, the early adopters. And because of that, those are folks who are by their very nature slightly higher risk-takers. And so the next stage of growth is really getting more mainstream participation, those who have a bit more inhibitions of taking part in even mainstream ecommerce activity. I still see the same basic needs being there to attract more of mainstream America or mainstream Europe and other parts of the worlds.
AuctionBytes: Do you feel that online merchants are in a better position now than 4 or 5 years ago? Why or why not?
Steve Abernethy: There's clearly more competition amongst sellers, but at the same time there's so many more bidders, including the international growth of the opportunity for sellers to sell to other countries, unique things or even mainstream things.
I think there's also exciting new and real other channels in addition to eBay that are attracting buyers, which I think are good for sellers, with the emergence of Yahoo's and Google's adwords, which have created real viable channels for the smaller merchants to cost-effectively attract buyers. So I think by and large it's been a really great thing for sellers. It's clearly more competitive, but I think it's a much larger market and more credible than when we started.
AuctionBytes: What are the challenges users are facing?
Steve Abernethy: I think competition will continue to put good pressure on sellers to distinguish themselves, and to deliver cost-effective customer service. I think the pressures of other channels and comparison tools and search engines and branded retailers will clearly be there, but fundamentally the most important thing for sellers is, how do you cost-effectively attract a buyer or bidder? And give the appropriate incentive for consumers to take the risk to buy from you. If you think of the majority of sellers on eBay, they're not the branded large-name retailers, which is what is exciting about the Internet and exciting about what we're focused on. But still, the main challenge is, how do you give consumers the incentive to take that risk in buying something from them that could also be purchased from a branded retailer online or down the street? So it's not just, is it cheaper, but is it going to be a safe transaction. Is it going to work when I get it, etc. And I think that's what all sellers that sell any volume will really be focusing on.
Future of the Industry
AuctionBytes: Where do you see the industry headed?
Steve Abernethy: I think as I said before, it's really the tip of the iceberg. While there's obviously enormous growth if you look at the numbers of increased registered users on eBay and active sellers, but still it's truly the tip of the iceberg in terms of attracting mainstream buyers. I think there's so much opportunity to bring in much more supply of goods that you would buy at Target or Macy's, the mainstream new and used sporting goods, CDs, clothes jewelry, makeup, whatever. So I think that the future of the industry will be continuing to build out these categories with small and larger sellers focused on these more mainstream items. That's really what's going to bring in the buyers.
It's a sort of a chicken-and-the egg, how you get more bidders? You need more supply of sellers to do that. That's where it will continue to evolve, and international growth is clearly an exciting opportunity that will continue to evolve to allow sellers to reach different parts of the world. I think it will evolve in terms of new services that will make it easier, so the drop-off stores for the one-off sellers, new auction hosting software to make it easier for new businesses to participate.
AuctionBytes: You mentioned international trading, is that something SquareTrade is looking at, do your existing services encompass that?
Steve Abernethy: We have Seal members in over 80 countries now. So we have broad global membership. While our mediators are capable of providing mediation in multiple languages, our core online interface is only in English today, but definitely over time we will internationalize the language component also. We've handled disputes in I believe over 120 countries, and in 5 different languages, so it's clearly a global service. And when you think of the future of the industry, it's not just selling U.S. to U.S. or Asia to Asia or Germany to Germany, it's how you link some of these consumers to sellers in the U.S., or vice versa., to get access to things they might not otherwise be able to find.
And so it's the software to facilitate to do that, it's the trust infrastructure to facilitate that, it's the payment capabilities to enable people who don't necessarily have bank accounts or credit cards, to get access to things they might not otherwise have.
AuctionBytes: What are some of the biggest challenges facing online-auction sellers in the next 5 years?
Steve Abernethy: I'm obviously somewhat biased, but I believe trust is absolutely essential to get the mainstream user there. It's also a need for an even greater supply of items, to get enough goods to make them say, I can buy this here versus at my big box retailer. But I also have to have enough confidence to buy from someone I've never heard of. We, as eBay community focused people, know a lot about the idiosyncrasies of how to use some of these powerful mechanisms like feedback, but a lot of new users just won't understand that for quite awhile. So it's getting people to take that leap and make a purchase. So it's everything from what SquareTrade's doing, to how merchants professionalize their customer service and listings and creating retail-like competence and follow-through. I think it's a big challenge to really scale the industry. I think it will happen. But creating trust and confidence in finding a near retail-like experience will be one of the biggest things to grow online auctions to more mainstream proportions.
Future Plans
AuctionBytes: Is SquareTrade working on projects for the future?
Steve Abernethy: We're always focused on improving what we do, making it easier for buyers to build confidence in verified sellers, helping sellers deliver better and communicate better to their bidders, helping make it easier to communicate so you avoid disputes and making it easier if you do get in a dispute to deescalate it and solve it. We're focusing on expanding the value much more broadly. The Overture/Yahoo example is a great one. We're also doing a pilot program with the Federal Trade Commission for international disputes in a program called econsumer.gov, which is an exciting use of technology to help people from all over the world more safely transact.
AuctionBytes: That's interesting, is there any information about that Pilot Program?
Steve Abernethy: It's in early stages, but if you go to http://www.econsumer.gov you can file a dispute for transactions anywhere in the world, and the FTC and other FTC-like entities around the world for other countries have collaborated to create a central place to help consumers resolve issues. It's an early-stage project where SquareTrade is handling all disputes with sellers in countries other than the U.S., Canada, Japan and South Korea. All other seller disputes are sent to SquareTrade. It's a new way where regulatory bodies are saying we realize it's not always practical or reasonable to pursue traditional legal action, but we can create new opportunities to link consumers to services that can help them in a virtual process.
That's another exciting area where policy makers are making a large effort to reach out to say, how can we be facilitating trust and recourse without having to step in and necessarily regulate.
AuctionBytes: Where do you see SquareTrade in 5 years?
Steve Abernethy: Most broadly speaking, we see ourselves as associated with trust and ecommerce. Providing a global platform to neutrally build trust, to resolve disputes, to attract bidders to sellers, to help attract buyers to eBay, and Yahoo and other search mechanisms, and really be seen as a core part of how buyers and sellers feel comfortable transacting and get things solved if something goes wrong.
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