I was linked through some sort of advertisement to the website BIDZ.com. Without trying to come off as arrogant, I was born in the beginning of the Internet Age, and so I've had it all my life; I know it very well. Just seeing the BIDZ.com site sent up a red flag, and I immediately Google'd consumer reports for the site.
I spent about 25 seconds looking through the auctions pertaining to designer sunglasses, as I now remember I was drawn in by an ad for "95% Off Oakley Sunglasses". I clicked the link because I wanted to see what kind of scam this was. After those few moments I immediately realized this has to be some enormous con job, considering I was looking at prices that were often close to that 95% off as advertised. I assist several of my friends, eBay power sellers, who really make it a professional business. None of them would ever think of selling any of the items BIDZ.com advertises for the prices they do, not even with their business model, specifically, the procurement of their stock; BIDZ mainly obtains it's merchandise through purchasing from close-outs, liquidations, etc. To put it simply, why sell a piece of jewelry, valued at $10,000USD, for only $500USD, for any reason?
It seems this Ripoffreport.com has done a pretty good job of bringing things to light, but it also seems that there's no one else here who hasn't already been screwed by BIDZ.com.
I'd like to provide this article, featured in the Los Angeles Times, February 19th, 2008, regarding BIDZ.com. Hopefully, with the exposure, more people will learn it's not good enough these days just to research what you are buying, but from whom you are buying, as well. And hopefully, they'll realize how easy it is today with the internet to just Google "(comany name) consumer reports".
Criticism Puts Auction Site Bidz.com Under Microscope
February 19, 2008 in print edition C-1
A few weeks ago, the chairman of online auction site Bidz.com forecast good news ahead. The company was headed for another blowout quarter, David Zinberg said, with sales topping the already-rosy projections made in November.
The announcement was designed partly to quell questions that had been swirling around the Culver City-based company for months.
The questions involve, among other things, what critics say are irregularities in bidding patterns on the site, as well as persistent customer complaints that have led the Better Business Bureau to give the company a grade of F.
Critics also have raised questions about Bidz.com's relationship with Saied Aframian, a primary jewelry supplier who served time in prison for receiving stolen property.
Zinberg, an immigrant from the former Soviet state of Moldova, attributes much of the criticism to short sellers investors betting on a drop in a company's stock price, and who aren't shy about trying to push it in that direction.
Indeed, public records indicate that investors had sold short nearly 3.9 million Bidz shares as of Jan. 31, a significant proportion of the roughly 10 million shares available for public trading.
Still, the questions appear to be having an effect; Bidz.com's shares have tumbled more than 30% since Zinberg's upbeat Jan. 14 announcement.
As Zinberg tells it, there's no mystery to the company's success. He says Bidz is enjoying strong growth because of the allure of its auction style and management's hard work.
We come here at 7 a.m., we're the first ones to show up, and we love what we do, he said in an interview at the company's 52,000-square foot headquarters and warehouse.
But there may be reasons for the stock's downdraft other than short sellers' innuendo. Nearly half of Bidz's shares are owned by Zinberg and his sister, Marina Zinberg and they have been selling relentlessly, unloading 210,000 shares for nearly $2 million since Aug. 15, regulatory filings show.
In recent months, moreover, the company's two largest institutional stockholders dumped their combined 1.5 million shares. Neither would discuss their reasons for divesting.
Zinberg says his stock sales make up for his decision to take no salary from Bidz. Nevertheless, he cut the pace of sales back sharply starting in December.
The successor to a chain of 12 Southern California pawn shops Zinberg owned in the 1990s, Bidz offers fast-moving online auctions, mostly for cheap costume jewelry but occasionally featuring precious gems and fine watches it says are worth tens of thousands of dollars.
The auctions start at $1 and carry no reserve price, meaning that bids don't have to reach a minimum level to win an item. Unlike EBay, which brings individual sellers and buyers together, Bidz is the seller of almost every item on its website.
The company raised its first $20.5 million in capital through a series of private stock sales dating back to the late 1990s. In regulatory filings, the company has acknowledged that these sales were in violation of federal and state securities laws.
Bidz.com, which trades on the Nasdaq stock market, never completed a conventional public offering of the sort that normally involves extensive scrutiny by the Securities and Exchange Commission.
The company's leading supplier of jewelry is Los Angeles Jewelry Production Inc., a downtown jewelry district firm managed by Aframian, who also is listed in regulatory filings as a co-owner of the firm.
An Iranian immigrant, Aframian served a two-year term in state prison in the 1980s for receiving stolen property. In a 2006 civil suit, a New York jewelry wholesaler accused him of stealing $285,000 in jewelry that he had left overnight in Los Angeles Jewelry's office safe. The case was settled on confidential terms.
Aframian, who declined to comment, is the third-largest shareholder of Bidz, behind the Zinbergs.
As for its customer service, the Better Business Bureau says Bidz's F is based on customer complaints of shoddy merchandise and misrepresentation of items' quality or value.
A frequent target is the company's compare price, a dollar figure Bidz posts for many auctioned items that purports to represent the maximum price that has been advertised online for items that are similar or the same.
Karen Leonard, a Philadelphia-area resident who filed a complaint last month with the Better Business Bureau, said she paid $800 for a diamond ring on which the compare price was $10,769.
After getting the shipment, I knew immediately that it couldn't be worth $10,000, she said in an interview. But the description [on the Bidz website] made you think you were getting a really good deal.
She said Bidz has refused to refund the full purchase price on grounds that the item was as described and therefore subject to a 15% restocking fee.
Bidz.com often offers buyers an appraisal of their item for a $33 charge. The reports are invariably produced by Woodland Hills-based American International Gemologists, which acknowledged to The Times that it does not physically inspect every item for which it provides an appraisal.
That raised a red flag for Jeanine Woodling, director of education at the nonprofit International Society of Appraisers. For a solid appraisal, It's important for them to actually be able to see the piece, Woodling said.
Critics of Bidz, including some who claim to be customers, say they suspect shill bidding has driven up the prices of many auctions.This allegation was published onlinein November by Citron Research, a Los Angeles website run by short seller Andrew Left, and has also appeared in postings on Ripoffreport.com, a website that collects consumer complaints.
As evidence, they cite auctions in which prices were bid up to implausible levels on items available at retail for much less. Late last year, for example, buyers mysteriously bid as much as $11,000 for big-screen TVs that retailed elsewhere for as little as $800.
Zinberg said that the company forbids shill bidding. He said he believed that some of the TV bids came from a party that was interested in damaging our reputation.
A further curious bidding pattern occurred in November during an auction for what the company described as a 50.71-carat diamond ring. Bids rose to more than $600,000, a level that led skeptical securities analysts on a conference call Nov. 27 to question Zinberg about the bidders' legitimacy.
Zinberg replied that they were legitimate people with intention to buy the jewelry.
Soon after the conference call, bids that had been made over a period of more than three weeks disappeared from the diamond auction, including all the six-figure bids. Auction records archived on Bidz.com show a 26-day gap for which no bids are listed.
Zinberg told The Times that the company had decided to delete all bids for which bidders could not verify funds. Bidding resumed at just over $63,000. The diamond eventually was won by a buyer using the screen pseudonym 11219bp, who had not participated in the auction at all before posting his winning bid for $75,407. Zinberg described him as a very happy customer.
Following the conference call, one securities analyst, Elizabeth Pierce of Roth Capital Partners, told clients that Bidz had defended itself well against some allegations, but had a tougher time addressing the questionable bidding practices.
The company claims to have a critical mass of loyal buyers and repeat customers. It says it has been gaining roughly 50,000 new customers per quarter, or more than 200,000 a year.
Zinberg, 50, said he founded Bidz.com as a way to remarket huge volumes of inexpensive jewelry that retailers had returned to their manufacturers. He said he is able to offer the jewelers 20% to 40% over meltdown value by purchasing the closeouts in bulk.
Bidz has been less successful at raising capital in the public markets. A planned $57.5-million initial public offering collapsed in 2006 when the majority of the company's original shareholders refused to sign customary lock-up agreements prohibiting them from selling their shares for six months after the IPO. Such agreements are often required by IPO underwriters to keep the market from being flooded with old shares.
One major shareholder says he refused to sign because he was irked at being asked for a lock-up after having waited years for my [investment] return from his private investment in the company.
The investor, Mark Abrams, an Orange County business executive, said he was still a large shareholder in Bidz. I believe in the model and believe in what they're doing, he said.
As Bidz's appetite for inventory grew, it entered into a close relationship with Los Angeles Jewelry Production, or LAJ.
During 2005 and 2006, LAJ accounted for as much as 45% of Bidz inventory purchases. That share has recently dropped to 10%, according to Lawrence Kong, Bidz's chief financial officer.
The relationship between Bidz and LAJ's Aframian was not merely that of customer and supplier. Bidz paid Aframian with shares for some merchandise. Aframian bought other shares on his own and was listed in his most recent SEC filings as the owner of 1.3 million Bidz shares, or 5.6% of the company.
In 2004, LAJ made Bidz a $500,000 loan secured by a lien on Zinberg's Agoura house, according to Los Angeles County real estate records and a Bidz spokesman.
Zinberg, questioned about the relationship between Bidz and Aframian during the Nov. 27 conference call with analysts, said that he had learned of Aframian's criminal background the previous day.
He said Bidz was reevaluating its relationship with Aframian but that it had no reason to question [LAJ's] integrity.
A Bidz spokesman contended last week that Aframian's background has nothing to do with the way Bidz does business . There's been no accusation of Bidz doing anything wrong.
Contacted by The Times, Aframian declined to talk about his record or his dealings with Bidz. I was advised not to talk about any issue, he said.
A bigger problem for Bidz may be accusations of poor customer service, which are regularly posted and occasionally contradicted on such public consumer comment sites as Ripoffreport.com and Epinions.com.
Zinberg argues that given the company's stated sales volume of about 2,700 orders per day, its complaint rate is small; the Better Business Bureau, he notes, has clocked only 249 complaints about Bidz over the last 36 months.
Many of the complaints filed with the BBB or posted to consumer complaint sites online follow similar patterns.
One customer who posted on Ripoffreport.com said that he ordered an inexpensive pendant with a single stone of triangular-cut Alexandrite, a greenish-purple stone. He said he received a piece with three round red rubies instead.
The customer, who posted the complaint under the pseudonym Aussie shopper, talked to The Times but asked not to be further identified to avoid provoking the company.
He said that after he asked Bidz to send the correct item, he discovered that on its website the photograph of the item he ordered had been changed to show the three-stone ruby pendant he had received although the text on the page still described a single triangle-cut Alexandrite.
That description was still posted on the Bidz website Monday.
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