Blog

The eBay Defect Rate: What It Is, Penalties, and Management Strategies

Published at Jun 23, 2017.

Your eBay defect rate is the single most important metric you have to worry about as a seller. If it gets bad, you can expect search penalties, selling limitations, store downgrades, and even higher fees. Knowing how to keep yours as low as possible is one of the most important survival skills a seller can have.

What Is a Defect or Defective Transaction?

Absent Basketball Hoop

“I’m pretty sure the listing for the basketball hoop said it would, in fact, include a hoop somewhere.”

eBay states that there are three kinds of defect:

  1. Transactions canceled by the seller.
  2. eBay Money Back Guarantee cases where eBay decided in favor of the buyer.
  3. PayPal Purchase Protection cases where PayPal decided in favor of the buyer.

Any one of these will count as a defect. It takes as little as four defects for your account to start getting hit with penalties, so let’s look at the three ways you can get one:

1. Seller-Canceled Transactions

This is perhaps the most common cause of defects for honest sellers. If you have to cancel the transaction for any reason—for example, if you run out of stock—it counts. (Problems that are completely the buyer’s fault, like them failing to pay, don’t count.)

2. eBay Money Back Guarantee Claims

Burning $100 Bill

The eBay Money Back Guarantee comes into play under either of two circumstances:

  1. The item you sent to the buyer doesn’t match your description.
  2. The buyer doesn’t receive the item.

The buyer also has to meet several conditions, including reporting the issue within a time limit (generally 30 days of receiving / not receiving the item) and contacting you first. You have plenty of chances to resolve the problem. But if you don’t, and eBay decides in favor of the buyer as they usually do, it counts as a defect.

See our eBay seller protection guide for a quick overview of when you should be safe from a defect.

3. PayPal Purchase Protection Claims

PayPal Purchase Protection applies to the same situations as the eBay Money Back Guarantee: when the item isn’t received or isn’t as described. However, PayPal has less demanding requirements for the buyer than eBay. They also have a deadline of 180 days rather than 30.

Just like with eBay, the buyer needs to reach out to you for resolution first. Settling with the buyer directly will allow you to avoid the risk of a defect.

What Is the eBay Defect Rate?

Your eBay defect rate consists of the number of defects you’ve had (as described above) divided by the number of non-defective transactions. If you had four defects after selling 100 items, your defect rate would be 4%.

When Does My Defect Rate Become a Problem?

Mall Security

“As soon as I get to the bottom of the escalator.”

Quickly. Exactly when it affects your account depends on several conditions.

An important qualifier to note here is the “evaluation period”:

  • If you’ve sold less than 400 items in the last three months, your evaluation period is the last 12 months.
  • If you’ve sold at least 400 items in the last three months, your evaluation period is those three months.

Everything listed below is dependent on your evaluation period. If it happened before your current one began, it doesn’t count.

  • A Top Rated Seller’s defect rate only counts against them if they’ve had defects from at least four different buyers. If that happens:
    • You will lose Top Rated Seller status if your defect rate exceeds 0.5%.
    • You will be penalized for seller non-performance if the rate of eBay Money Back Guarantee and/or PayPal Purchase Protection claims decided against you exceeds 0.3%.
  • Non-Top Rated sellers’ defect rates start counting if they’ve had defects from at least five different buyers. If this happens:
    • You will be penalized for seller non-performance if your defect rate exceeds 2%, or if the rate of eBay Money Back Guarantee and/or PayPal Purchase Protection claims decided against you exceeds 0.3%.

Examples

Headache

1. Anna has had defective transactions with five buyers within the last year, two of them within the last three months. Since she sold 500 items in the last three months, only the most recent two count. She has nothing to worry about since she doesn’t have at least four defects in the last evaluation period.

2. Sarah’s also had five defects within the last year but only managed to sell 398 items in the last three months. All five defective transactions now count toward her defect rate. Since she sold 1200 items over the last year, her defect rate is 0.42%.

Luckily, only one of those was a PayPal Purchase Protection case and none of them fell under the eBay Money Back Guarantee. The rest were transactions she had to cancel when she ran out of inventory. Just 0.08% of her defects are Guarantee/Protection cases, so she’s safe for the time being.

3. Top Rated Seller Hakim’s 500th sale for the last three months also turned out to be his fourth defect. That puts his defect rate at 0.8% and costs him his Top Rated Seller status. On the plus side, all four were just transactions he had to cancel, so he’s in no danger of seller non-performance.

4. Top Rated Seller Steve has sold 850 items in the last three months. He’s just been hit by his fourth defect in that period—and unfortunately, three of them were eBay Money Back Guarantee and PayPal Purchase Protection claims that were decided against him.

Steve now has a defect rate of 0.47%, which isn’t quite enough to strip him of Top Rated Seller status. However, the rate of lost Guarantee/Protection claims has now hit 0.35%. He has lapsed into seller non-performance and eBay will decide how it wants to punish him.

How Do I Keep My Defect Rate Down?

Golden Retriever

“I thought by ‘down’ you meant lie down ON the couch, not off it.”

Defects are clearly a huge threat to any seller. Since even a tiny handful of defects out of hundreds of sales can be enough to get you slapped hard, you have to do everything in your power to prevent them.

Keep Customer Service Efficient

Slow responses dramatically increase the chances of a customer getting upset, and if you don’t respond to a buyer within three business days, then the case qualifies for the eBay Money Back Guarantee.

If you ever reach the point when it takes you more than three days to respond to all of your eBay messages, then things are way too bogged down. You need to start responding faster before your Feedback score and defect rate are irreparably damaged.

Connecting eBay with a helpdesk is the best way to speed things up. Helpdesks give you access to powerful tools like canned responses, saving you from having to retype common answers and letting you automatically fill in details like the customer’s name. They also let you have multiple users answering your eBay messages at once.

Professional helpdesks Zendesk and Desk.com can both be made compatible with eBay.

Accept Returns Readily

Receiving a Damaged Package

Accepting eBay returns costs time and money, so you can’t be blamed for wanting to turn down some, especially when they seem unreasonable. And you absolutely should if the buyer is completely out of their rights. But the more readily you accept returns, the better for your defect rate.

A buyer who has returned an item and gotten a refund from you has no grounds for claiming you did not resolve the situation. If you always offer to accept a return, you will be virtually immune to Money Back Guarantee and Purchase Protection claims.

Improve Inventory Management

The last step is making sure you don’t have to cancel any transactions. If you always know exactly how much you have of every product, then cancellations should pose no problem.

A number of software solutions are available to track your inventory automatically. TradeGecko is an affordable option for unlimited orders, and Ecomdash works great as well. Either will make sure you never get caught with a product listed as out of stock again.

My eBay Defect Rate Is Under Control. Now What?

Now you can get back to selling! Learn how to compete on eBay to keep your profits growing and leverage your streamlined operation.


What People Say About Us
Start 14 Days Free. No Credit Card Required.
Start Free Trial