The online market in late 2003 looks very different from the frontier territory of six years ago. This is in part due to the huge rise in the number of Britons online, which is now more than half of the population, with 12 per cent of users having broadband connection at home.
Significantly, the volume of consumer transactions conducted over the internet has increased even more rapidly. Figures from the Interactive Media in Retail Group, which specialises in e-tail research, show a 12-fold increase in online retail sales between April 2000 and April 2003, and suggest that transactions are on course to reach &£14bn-worth a year in the UK by the end of 2003.
Surveys of consumer purchases online consistently show that travel is the most popular online transaction, a testament to the success of sites such as Lastminute.com, Expedia and the Web-based low-cost airlines. According to MORI Financial Services, three in ten internet users (29 per cent) have booked travel and accommodation online, over 26 per cent have bought books, and 25 per cent have bought music or videos/DVDs via the internet. Interestingly, one in ten have shopped for groceries online, a transaction which for many marks a particularly big leap of faith.
But Office for National Statistic data suggests that not all internet users are prepared to shop online. While 85 per cent of internet users go online to access e-mail accounts, and 80 per cent use it to research goods and services, the proportion who have actually bought something for their personal or private use in the past 12 months is 59 per cent.
Despite the growing support for e-tail, some consumers are still holding back. Quantitative and qualitative research by MORI suggests that one of the main reasons consumers are reluctant to shop online is security. MORI Omnibus research shows that 32 per cent of adults believe that credit card fraud is the main disadvantage of buying online.
However, consumers’ fear of online fraud is often exaggerated compared to the reality – just as with perceptions of crime in general. Although 20 per cent of adults have heard rumours or a media report about online fraud, only six per cent know someone who has experienced online credit card fraud, and only one per cent have personal experience of this type of fraud. Security breaches are big news; stories of scams or accidental releases of data regularly make the headlines in the mainstream media.
Yet, it is important to recognise that consumer fears about security are not without foundation. While personal experience of fraud is low, the evidence from surveys conducted by security specialists and the Department of Trade and Industry (DTI) show that significant and widespread vulnerabilities exist. Hackers are a real and serious threat, and 44 per cent of UK businesses have reported one or more malicious security breaches, with an average cost of &£30,000 per serious incident.
These security threats, and the potential media exposure, should serve as a chilling warning to the industry. Since consumers’ fears about security are clearly top priority in their minds, just one incident of a breach of security being widely reported in the media is likely to have a serious effect on customer trust in the brand concerned.
The DTI figures suggest that many businesses in the UK may not be treating the threat as seriously as they might, with nearly three-quarters of companies spending one per cent or less of their IT budget on information security. Worryingly, just a third of businesses have software in place to detect any website intrusions.
When it comes to banking, one of the most sensitive online transactions, security measures dominate the list of barriers among the 38 per cent of internet users who do not bank online. However, online shoppers are becoming increasingly sophisticated and knowledgeable about security, with many looking for the padlock icon (of a secure socket layer HTTP connection) on Web pages that require personal or financial information. But it is important for businesses to remember that visible security can be taken too far.
Successful e-commerce sites also need to consider the entire online buying process, as it becomes increasingly similar to traditional buying habits. More than four in ten internet users say value for money is one of the most important factors in determining whether or not they shop online, 35 per cent cite ease of access and convenience, and 34 per cent say it is the ability to compare products.
Research by MORI highlights the need for systems to retain simplicity and ease of use. Twenty-three per cent of those internet users not banking online cite ease of use/functionality as a factor that deters them from making the leap. There is little point in an authentication system which requires multiple randomised passwords and ID numbers if they become so hard to remember that users have to write them down for reference.
Convincing consumers that online transactions are safe (from fraud) and reliable (in terms of technology and offline support) is the real challenge, and where the greatest potential for growth in e-tailing lies.