How do people sell on eBay below cost?

Well, I've got to say I've always wondered this myself. There are constant calls and emails to us asking for price matches to eBay for items being sold as "Brand new" for far below our cost. But how do they go about doing this? Simple: Fraud.

But it's not the type of fraud that you first think of with eBay. This is a smarter fraud. One that we've had the pleasure recently of being on the wrong end of. We let our guard down and got nailed, so our internal policies are changing. They're having online merchants ship the products to whoever buys the item... but placing the order with a stolen credit card.

You see, online business isn't where credit card fraud originates. Sure, there are select cases where that's happened. But, for the most part, credit card fraud begins offline with someone getting a credit card via physical means, then moves to online to do the fraudulent transaction. Rand Fishkin says we're all going to have to figure out how to put an end to this soon (and he had a nifty credit card image that I borrowed for this post). I hope someone who can act on this is listening.

So, by selling a $700 item for $500 and using a stolen card to send the item to the buyer, the seller ends up having the buyer looked at as guilty of fraud and gets $500 in their pocket to boot. As I said, a smarter eBay fraud scheme, and one that we're going to make sure we don't get involved in any more.

On the brighter side of this incident, the guy that called us about it got one a week before from our biggest competitor as well, and they weren't sure how to handle it at all. We at least know what we're going to do about it.