• The Listener
  • North & South
  • Noted
  • RNZ

All that glitters

Online shopping is the latest craze. And New Zealanders love a bargain - there were more than 900,000 shopper visits to the Trademe site last month. But online auctions hold dangers as well as delights.

A cigarette is bent double in the tinfoil ashtray. Outside, Gothic bells mark the hour. It's mid-morning in Bucharest. Evening over here. See two youthful hands moving like those of a concert pianist. Dimitri, 19, is hunched in front of a PC in a cybercafé. He's drinking strong coffee and logging onto New Zealand's latest retail obsession: online auctions.

Is he a collector? Does he have a fetish for Formica tables from Huntly? A hankering for pre-1950s Crown Lynn dinner sets? Or does our mysterious Romanian friend have a thing for obscure Flying Nun vinyl? Sadly, no.

We can't see his face. He's a composite figure. A profile. Perhaps he doesn't smoke. Maybe this person is a woman who takes her coffee white, as she dangles her bait online. At this end, on the screen in New Zealand, all you see is a thumbnail photo on the auction site. A 42" plasma television. How cool would that look on your wall? Just imagine it. And the price tag? A mere two grand. Your experience, your parents, your crusty fourth-form economics teacher, have all said: "If it's too good to be true, it probably is." Ah, but maybe they were wrong, a voice says. And in this magical age of possibility, perhaps we're all meant to have sexy technology in our homes for next to nothing. Isn't it our right as Western consumers to have such essentials?

It's that ever so slightly hypnotic voice that Dimitri relies on. It's the enduring lure of an unrepeatable bargain that's so resonant in the culture that gave us the Warehouse and the Two Dollar Shop. Ah ... Shopping. The quickening of the heart and raspiness of breath is also symptomatic of that other S word that in online auctions is, well, "strangers".

Tragically, the plasma telly that in your mind's eye is already gracing your lounge is an invention. It doesn't exist. Dimitri has cut and pasted the picture from another auction site. He lights another cigarette, sips his coffee and (we might imagine) casually prepares to pick a cyber pocket or two. There are plenty to choose from. Tapping the letters T-r-a-d-e-m-e into his address box, he has access to nearly a million New Zealanders and their wallets.

Log onto trademe.co.nz at any time of the day or night and you will find up to 17,000 people buying, selling or just browsing around the 200,000 items that are up for grabs to the highest bidder. Everyone knows someone who has found a sweet deal: the near-new lounge suite in a perfect shade of terracotta for $300; the new designer shirt - "still in the wrapper!" - for $10. There were 901,965 visits to the site last month. It's New Zealand's biggest garage sale and it never closes.

If you haven't heard of Trademe, don't be surprised. They don't advertise. All of their business is from word of mouth. And what business. It grew by 1000 percent last year. Trademe, the country's second fastest-growing company, have just moved into the sixth floor of a warehouse building in Wakefield St, Wellington.

It's difficult to judge their success by the surroundings. There's no name plate by the lift and although the sparkling blue carpet, splatter paintings on the wall and espresso machine all say Saatchi, soggy fifth-birthday balloons, an exposed concrete ceiling, the eager young faces and the cast-off desks give it the air of a student job search centre. Yes, they bought the office furniture through their own auction site.

"You've got to believe," says Sam Morgan, who is not as nerdy as you might imagine an après dot.com boomer to be. The 28-year-old founder of Trademe, Morgan is still playing catch-up with the meteoric growth (6000 auctions in March 2000; 713,332 in March this year). He set up the website on his father's laptop.

Shy of talking profit or turnover, he modestly evades the term "millionaire" as if it were an accusation. But with 20 million auctions projected this year, at an average value of $45 ... five percent commission ... That's a sweet $45 mil.

Morgan sees Trademe as a step up the evolutionary chain from car fairs and garage sales. "On Trademe, you can sell something in five minutes."

It's that sense of immediacy and instant gratification that is part of the allure. That and the fact that it's priced for a thrifty demographic. Real-life gavel-wielding auctioneers generally take 12 percent off buyers and sellers. Morgan asks less than half that. At car auctions, the charge is up to $450 a vehicle. Trademe do it for $20.

The latest market to get the online auction treatment is real estate. Trademe have only just got their foot in the Tuscan front door and already there are five or six hundred houses on the site. With a flat rate of $50 per sale, this is enough to give real estate agents something of an indoor/outdoor flow. As a gimmick, they auctioned off 28 sections in Auckland's Botany Downs. In a few weeks all had sold to the tune of $4.5 million.

Property might be the future, but for now it's more likely to be grandad's old box Brownie, the complete set of Enid Blyton books or a heated towel rail. The idea is elegant in its simplicity. You want to shift some stuff. Update your stereo, for instance. Simply go online and put it up for auction. People check out the description or digital photo and make bids. The highest bid wins. You contact the winner, who sends money to your account. You send them the stereo or they can pick it up. And, according to regular users, it can be addictive.

"Okay, I admit it," says one regular trader. "I've woken up in the morning and found myself logging onto Trademe in my dressing gown. I've excused myself from dinner parties to slip away and catch an auction that's ending soon."

The lure of auctions is that of the race. You run to win, even if you don't want the prize. Successful bidders are called winners in language not a million miles away from gambling - although Morgan sees no need for Onliners Anonymous just yet. "We're flattered that we can be considered as having such an addictive product. But I don't think that's a major issue for us."

What started as a few thousand enthusiasts a few years ago has mushroomed into an online community bigger than Wellington or Christchurch.

The message boards associated with the website are full of the detritus of everyday lives. There are chatrooms for the terminally bored that are impossible to stop reading. "It's like having 15,000 soap operas," says another regular. "I used to be into knitting and gardening," writes Grannypam. "Then I found Trademe. Nuff said." Another confesses: "I am guilty of doing 'buy nows' when hubby is urgently needing his tea."

It's not a new idea. Unless you've been living under a rock for the past five years, you will no doubt have heard of eBay - Trademe's older and more snappily named American cousin. eBay was set up by Pierre Omidyar in 1995 and now he's definitely a millionaire. It started in the US, but has spread to over 20 countries, with at last count, 105 million users worldwide. The deal's exactly the same: post goods online, people bid, auction closes, highest bidder wins. It arrived in New Zealand a few years later, but there's no mistaking our enthusiasm.

"We believe New Zealanders have a particular affinity for auctions, given the wheeling and dealing and the Kiwi desire to get a good deal," says Morgan.

However, that desire for a deal can lead some to take risks that leave them badly out of pocket. There are accusations that Trademe has played host to scams that have left New Zealanders many thousands of dollars poorer and there are claims that Trademe have done little to close down the scammers and instead shut out those trying to protect naïve newcomers.

Annie, a 19-year-old student, spent $900 buying mobile phones through Trademe. She sent money to - you guessed it - Romania. "That person said it will take three days to arrive. I waited for two weeks, emailed the person but no reply."

Annie doesn't want her surname used because she's ashamed and she's scared that her parents will find out. She earned the money working in their shop for $2 an hour. "I feel like an egg," she admits, "but I've talked to other Trademe members and I'm not the only one."

No, it's $2000 here, $230 there, $300 somewhere else. Romanian scammers are skilled at reeling in their victims. They will email the buyers and, as proof of their honesty, ask them to send just half the money up front. Pay the rest once you get the gear. But the goods never arrive, because they don't exist. Sure, the money's not big, not enough to call the Serious Fraud Office away from afternoon tea, but it may add up to tens of thousands of dollars.

Romanian Radu Croitoru works in Christchurch as a senior IT systems engineer. He's surprised that Kiwis are sending money to his homeland. "It's the trusting New Zealand character. It's a real pity to see this happening. I couldn't be more ashamed."

He doesn't know any scammers, but has an idea of who they might be: probably professionals with jobs, 16 to 25 years old and with a good knowledge of the mechanics of the Internet. "The average monthly wage is just $NZ200. They're frustrated economically and professionally and want a little extra on the side. They think New Zealand is a rich Western country."

Croitoru believes that, along with the economic imperative, these scammers have a certain ego, imagining that they're so good they won't get caught. Which is probably correct.

"In Romania, it would be regarded as less serious than speeding. By targeting overseas countries, there's little chance of the authorities knocking on the door. I really hope this is going to come to an end. Otherwise, there'll be others coming from all over Eastern Europe."

When the Romanian scams are mentioned, Morgan grabs the Listener's microphone and turns off the recorder. (His explanation later: he was young and nervous and felt under too much pressure.) We continue. Morgan argues that they have spent a lot of time and money trying to educate buyers and protect them from fraudsters. "It pains me to see people ignoring our advice."

But that's not good enough for some.They call themselves the Scambusters and they have started a ruckus in New Zealand's biggest online community. Last year, a group of Trademe regulars got together to monitor the site and warn others of the scams that were operating. They have taken on the role of trying to protect unsuspecting buyers like Annie.

In March last year, when Trademe spokesman Nigel Stanford was asked by the NZ Herald whether the problems of fraud and stolen goods on eBay could happen here, the reported answer was: "No, thanks to our proactive protections systems and good relationship with the police." Morgan claims that it's only in the last six to 12 months that they have been hit with buyer and credit-card fraud.

The Scambusters have been identifying up to 50 scams a day on the Trademe site and using the complaint buttons to vote scammers off the site. They also posted warnings on message boards. The eclectic enthusiasts comprise a Christchurch company director, a Queenstown web developer, the CEO of an Auckland community organisation, a Kapiti management consultant and a Lower Hutt real estate agent. Between them, they have clocked up about 2500 successful trades on the site. They have never met, except online.

Alf West is one of the Scambusters: "The most insidious scam involves people selling non-existent goods. At the end of the auction, the happy buyer deposits money into the seller's account and the seller promptly disappears into the ether."

Trademe claims that the Scambusters are overdramatising the problem and scammers make up a minuscule number of online sellers. "Anecdotal evidence is that the number of people getting hit is quite small. We get reports from the police. Maybe 10 a month."

Many who have been scammed are too embarrassed to admit it. Every now and again, the fraudsters are locals. Police have just opened a file on a scammer who goes by the trading name Shakmar. He had built up a good feedback-record by buying and selling small items over several months. Then, in February, he listed 90 auctions in the same week. Laptops, cellphones, radar detectors, all high-value items that started at a mere $1 reserve. He attracted hundreds of bidders.

The Scambusters emailed Trademe. They were suspicious about Shakma's sudden change in trading habits, disproved his claims of international warranties and pointed out that his assertion that the goods were in China broke Trademe's rules. They got an email back to say that the company had looked into Shakmar and "everything seems to check out".

The Scambusters used the message boards to warn people of the scam and alerted the top bidders. The reaction: "I got two written warnings from the company for leaving a message suggesting that someone had bought off a scammer," says Scambuster Clive Hill.

Sixty auctions ran to completion before Trademe finally disabled Shakmar. Within a couple of days, he had fled to South Africa with the cash - "$21,000 from gullible people", estimates West.

"A good apple gone bad," says Morgan.

Trademe say that they did email bidders and warn them to use the SafeTrader service.

"For most of the victims," says West, "that email came days after they'd already paid the scammer."

Trademe say that the Scambusters are just duplicating their own security measures. Morgan claims that they have secret software that allows them to identify such fraud and four staff who liaise with police and look out for fraudsters. "In part, they [the Scambusters] were helping, but our software was picking them up as well, so they were duplicating our efforts."

"Rubbish," counters West. "If that was the case, why were some scams still running for five days after a group of us had hit the complaint button?"

For security reasons, Morgan wouldn't say exactly what the software did. So, how much responsibility should Morgan take for what happens on his site? His line is that they are simply a venue, just like printed classifieds, and that this removes him from the requirements of the Auctioneers Act. "If people decide to leave the handbrake off and walk behind the car, what can you do?"

Morgan points to the safeguards on the site. First, the SafeTrader facility. For an extra fee, buyers send Trademe the money and it's not released to the seller until the goods have arrived. A great thought, but what proportion of customers use it? "One percent." Apparently, the figure is higher for more expensive items, but he couldn't give details.

"If they're that worried about it," says Hill, "why don't they make the service free?"

Trademe, like eBay, has a feedback section where people can check the seller's track record and see what other buyers have said, but not every buyer bothers to check before bidding.

The Scambusters say that if the company are serious about stopping sellers from offshore, then they should block them out. Just forbid access to people whose computer (IP) addresses are from certain countries. Trademe contend it's not that easy.

West points to a clause in Trademe's Privacy Policy: "users who login have their IP addresses recorded". "That's cool," he says. "They have the technology, so why haven't they locked out the Romanian IP blocks already?"

"Technically, the Romanians are impossible to close down," says Morgan. "There is no blunt instrument." He claims that countries such as Romania and Indonesia have no laws on fly-by-night Internet servers called open proxies and if they go through a proxy server, they can't pick up the IP address. "If it was easy, of course we'd do it."

"That's a red herring," says West. "A hacker using an open proxy server in Romania would appear to be coming from that country and, given that country's reputation for corruption, that's the last thing any scammer would want."

And, what about checking where they come from? Make everyone verify their physical address. A seller gets a code posted to their home, they enter that on the website and the letters "AV" appear beside their trading name, proof that their address has been verified. At present that's optional and limited to New Zealand addresses only. By extending AV to overseas addresses, the company could easily refuse membership to people from certain countries.

"If we put in that protection, it would impact on our growth," says Morgan. "It would also be a pain to customers, because it would take a week to list something for the first time."

"Another red herring," says West. "There's not one genuine trader from Romania selling on Trademe. The only people who would suffer from compulsory AV are the scammers."

The Scambusters feel that they have touched a nerve. They contend that most scammers pay a $10 authentication fee, even if they do use stolen credit cards. They believe that the scammers might be an extra revenue stream for the company.

Morgan: "It doesn't make us money, it costs us a fortune. Do you think those scammers pay their bills? They cost us a lot of money, they piss us off and we want them gone."

But it seems that Trademe also want the Scambusters gone.

Three weeks ago, just after the Listener started making enquiries, the Scambusters were banned from posting messages about new scams. They claim that Trademe have removed any mention of scammer.

"They may think that by removing the word 'scam' from the site that they've solved the problem," says West. "Unfortunately, the Romanians are still listing new scams every day."

"If I wanted to scam," says Hill, "within a week I'd have half a million dollars in my account."

Trademe deny any such sanitising. "They're attention seekers," says Morgan. "They're not representative of our

community of users."

Trademe say Scambusters were spamming the message boards - the online community's corner shop where opinions are exchanged. "We need to keep them [the message boards] open for everyone."

"Spamming?" asks West. "I was banned for listing four scams in one day. Another of our members was banned for only a single post." West believes that scams are an embarrassment to the company "and they wanted to shut us up". The Scambusters have now set up their own website at scambusters.co.nz as a venue for free debate on scams and scammers.

When Morgan started Trademe, he had visions of expanding into other countries, taking on eBay and the world. Those thoughts have rapidly turned introspective. How can he protect his cyberspace empire from the ravages of international fraud? "Instead of how about we take on the world, it's a matter of turning off the world."

It's easy, he explains, for anyone to download hundreds of stolen credit card numbers. "Anyone can get a number - even from the eftpos machine where I buy my coffee. They can't even make online banking secure."

The 1996 Declaration of Independence of cyberspace put the case for the Internet to be an unfettered and self-regulated field of dreams. "Governments of the Industrial World," it boomed, "you weary giants of flesh and steel, I come from cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone."

As the Guardian's Jack Schooled says, "If cyberspace is a country, it has no defences, no police force and a rapidly diminishing sense of morality."

It may be that a change in the laws governing online auctions will place more of a duty of care on Trademe to make sure they authenticate all of their sellers. But if things tighten up, one option for Morgan is to move to Australia or the Pacific Islands: "Wonder what the Internet service is like in the Cook Islands?"