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The impact of private sale escrow in SA

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Escrow, a service whereby a third party holds money in an account on behalf of transacting parties until conditions are fulfilled, is not a new concept. In fact, there are numerous escrow companies in operation in South Africa and across the globe.
However, no one has quite utilised it like we have in South Africa, says Gumtree director-GM Johan Nel. “This is the first time a classifieds site has partnered with an escrow service – globally, it hasn’t been done before and many markets are eager to follow.”

Gumtree endorsed Shepherd, an escrow service powered by Standard Bank, in July and the two companies have been working in close collaboration as a means of offering a safe way of transacting on the classifieds site.

“The alliance has already revealed interesting trends,” says Nel. “A significant portion of interest has come from safety-conscious users who want to sell high-value items but are hesitant to meet buyers, as well as individuals who are new to informal trading.”

Since the initial launch, traffic to the Shepherd platform has doubled every day, growing their database of verified users.

Nel says that globally, classified advertisers are often approached by escrow service agents – not all of them are legitimate. “It’s not something that has cropped up locally yet, which is why we’ve decided to be the first classified site to endorse an escrow service. Our association with Shepherd and Standard Bank was born out of a lengthy research and authentication process, to ensure that we’re making the best recommendation possible for our users. We won’t endorse any service that we haven’t carefully vetted and ask users to only make use of official affiliates.”

At this stage, Shepherd is restricted by item size and do not typically transport items larger than “a big screen TV” but this may soon change. “We definitely recognize the convenience of having a third party transport and arrange the sale of large furniture and appliances and aren’t ruling out expanding the offering. Our main aim will be to offer a cost effective solution.”

Currently, the buyer or seller can request dealing through Shepherd. After the seller initiates the transaction, the buyer makes a payment into a secure trust account. Shepherd secures the funds until the buyer receives the item and accepts it and facilitates the delivery through Ram couriers. The buyer simply signs the courier waybill to accept the delivery if she is satisfied with the item. Shepherd then releases the funds to the buyer. If the buyer isn’t satisfied, the item is returned to the seller and the buyer’s payment refunded.

“It’s a very convenient and safe way to transact,” says Nel. “We believe it will not only open up the market to new users who have been afraid to use classifieds, but it will also relieve the headaches of many of our existing users who require a more convenient way to transact.”