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BizReport : Ecommerce archives : October 26, 2000

Exclusive Interview with Steve Abernethy, CEO of SquareTrade

The world of alternative dispute resolution (ADR) has always been one of personal contact. Arbitrators and mediators typically sit disputing parties down in a room and figure out a way to smooth over differences until they reach a compromise--or at least listen to both sides and make a decision. But the Internet has spurred the new field of online dispute resolution (ODR) in which cyberspace takes the place of a meeting room and electronic communications replaces face-to-face contact.

by Michael Grebb

Several new dot coms are salivating to become leaders this new space. Ebay, perhaps one of the most recognizable consumer sites in existence, has already inked a deal with San Francisco-based startup SquareTrade to handle its members disputes online. Steve Abernethy, SquareTrade's president and CEO, agreed to give BizReport his views on this new and competitive field.

MG: Explain SquareTrade's basic business model?

SA: SquareTrade provides a complete online solution to online problems--creating trust before the transaction and lowering costs and access to resolution if a dispute arises after a transaction. We do this through the SquareTrade Trust Seal and an online dispute resolution service. We charge an e-merchant an annual fee for the SquareTrade Seal--tiered from $100 to $6,400 based on company size--and we also charge marketplaces for inserting the ODR system to provide confidence to transact in their community. For the ODR system, we charge a $20 fee to both buyer and seller, plus each pays ½ a percent of the value of the transaction if it's greater than $1,000. The fee is only charged if a mediator is requested, meaning currently the direct negotiation service is free to users.

MG: What's the thinking behind the Trust Seal program? It doesn't seem to relate to the ODR side of the business.

SA: The seal is a key element in building trust upfront prior to a transaction ever taking place. We are helping create a framework for buyers to identify sellers on an objective basis. The SquareTrade seal shows a merchant's commitment to customer service standards and to providing a method of recourse--SquareTrade's online dispute resolution service should something ever go wrong. It also shows that a seller has historically performed, meaning a seller can build and display a collective reputation. We see this an essential link to the back-end dispute resolution. It is an important enforcement mechanic, as it is a means to avoid disputes in the first place by making the right buying decision from the start, and it lowers ambiguity of the rules of the game.

MG: There seem to be a lot of competitors in this field, including Cybersettle, Clicknsettle, eResolution, and so on. How does SquareTrade plan to compete?

SA: SquareTrade is the only fully Web-based, scalable solution on the market today designed specifically for e-commerce, offering 24-7 access, quick automated resolution, plus continuous user support. The tool is precedence driven, meaning we have data advantages with each case filed, and specific to each marketplace. With over 17,000 disputes filed to date we are able to automatically guide users to effective communication of a problem, identification of a reasonable solution. Our technology is also designed for rapid deployment - we are able to quickly model and execute on dramatically different dispute types--whether a simple auction to a complex multiparty service dispute. Distribution in markets with real liquidity is also driving network effects of SquareTrade value, including eBay, DoveBid, and eLance. We also have a network of more than 250 mediators and arbitrators around the world.

MG: What are the risks of being in this brand new space? Is it clear that it will gain the support of regulators and the ADR community?

SA: Overall almost all policy makers are encouraging solutions such as ours as the only effective means to provide consumer rights in a cyberworld where local juridiction and local law have little value. Because the parties retain full control over our voluntary mediation process, there is little danger of stepping upon people's rights, particularly if you adhere to traditional ADR best business practices such as ethical standards, confidentiality, neutrality, and transparency. In the context of arbitration, online arbitration closely resembles traditional, and accepted, document-based arbitration processes. Probably most importantly to all, we are also able to extend a solution where none existed before for recourse, leaving the possibility of escalation to the more expensive traditional legal system as an option. Overall, in SquareTrade's experience to date, the online forum has actually enhanced our opportunity to set high standards for mediation and arbitration because we have greater access and visibility to the services our mediators and arbitrators deliver.

MG: SquareTrade seems to be more focused on B2C than some of your competitors. Where does B2B (resolving business disputes rather than personal disputes) fit into this space and how big a part of the overall ODR marketplace do you see this becoming?

SA: Given our first partner is eBay, we do have clear auction leadership with the experience here clearly leveragable to other B2C areas and B2B. For example we have launched in key B2B spaces including surplus goods with DoveBid and eSasa, and services and intellectual property with eLance and HellowBrain. There are several others that we aren't able to talk about at the moment. So we definitely see the B2B space as being significant as well as being a major source of revenue moving forward.

Tags: online retailing, online transactions

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