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Roger Clarke's 'B2C is the Problem'

A Major Impediment to B2C Success is ... the Concept 'B2C'

Roger Clarke **

Version of 3 July 2006, as an Invited Keynote at ICEC'06, Fredericton NB, Canada, 14-16 August 2006

© Xamax Consultancy Pty Ltd, 2006

Available under an AEShareNet Free
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This document is at http://www.rogerclarke.com/EC/ICEC06.html

The accompanying slide-set is at http://www.rogerclarke.com/EC/ICEC06.ppt


Abstract

It's been over a decade now. We've forgotten how slow the adoption of consumer Internet commerce has been compared to other Internet growth metrics. And we're surprised when security scares like spyware and phishing result in lurches in consumer use.

This paper re-visits an old theme, and finds that consumer marketing is still characterised by aggression and dominance, not sensitivity to customer needs. This conclusion is based on an examination of terms and privacy policy statements, which shows that businesses are confronting the people who buy from them with fixed, unyielding interfaces. Instead of generating trust, marketers prefer to wield power.

These hard-headed approaches can work in a number of circumstances. Compelling content is one, but not everyone sells sex, gambling services, short-shelf-life news, and even shorter-shelf-life fashion goods. And, after decades of mass-media-conditioned consumer psychology research and experimentation, it's far from clear that advertising can convert everyone into salivating consumers who 'just has to have' products and services brand-linked to every new trend, especially if what you sell is groceries or handyman supplies.

The thesis of this paper is that the one-dimensional, aggressive concept of B2C has long passed its use-by date. Trading is two-way - consumers' attention, money and loyalty, in return for marketers' products and services. So B2C is conceptually wrong, and needs to be replaced by some buzzphrase that better conveys 'B-with-C' rather than 'to-C' and 'at-C'. Implementations of 'customised' services through 'portals' have to mature beyond data-mining-based manipulation to support two-sided relationships, and customer-managed profiles. It's all been said before, but now it's time to listen.


Contents


1. Introduction

Are consumers quarry? Or are Internet-era consumers different? Or, are they different, but nonetheless readily manipulable?

This paper examines the web-sites of a sample of B2C marketing organisations. It concludes that:

This is hardly new news. This author wrote and presented on these topics many times during the mid-to-late 1990s (Clarke 1996, 1998a, 1998b, 1999a, 1999c, 2000), and he was far from alone. What this paper offers is a new assessment of key aspects of the behaviour of leading consumer marketers in 2006, a decade into the Internet commerce era.

The paper commences by briefly reviewing the slowness of growth in B2C Internet commerce since its sudden emergence about 1995. An assessment is then undertaken of the terms of contract that apply to transactions between consumers and a small but reasonably representative set of consumer marketing organisations. This is complemented by an assessment of the approach to consumer privacy adopted by the same set of Internet merchants. The final section draws inferences from the study, and suggests future directions.


2. The Slow Growth of B2C eCommerce

So many Internet growth metrics have been so strong that it's easy to assume that everything in cyberspace moves quickly. Sober assessments of B2C growth are very hard to come by, however. The vast majority of references either provide pseudo-statistics (blue-sky projections and figures produced 'out of thin air'), or quote nominally authoritative data from Gartner and its ilk. These apply available sleight-of-hand techniques to the slimmest of historical data, using the vaguest of models of the dynamics of adoption.

Appendix 1 provides a summary of key data arising from two series of Australian data. The following are key points about B2C eCommerce are apparent from the data, supplemented by anecdotal evidence and observation over the last decade:

During the era of mass media, consumer marketing was aggressive and manipulative. The Internet created both scope for interactivity between marketer and marketee, and the expectation among consumers that the opportunity would be utilised. Have consumer marketers changed their stripes during the intervening decade?

The early signs were not good. The first 6-8 years of marketer exploitation of the Internet saw a succession of attempts to apply and adapt mass media techniques and impose marketer power over consumers. These attempts included:

If the 1994-2000 period showed little adaptation by consumer marketers to the new context, perhaps the new millennium has brought change. This paper considers the marketer-consumer relationship from the consumer's perspective, by examining in turn the terms under which transactions are conducted, and the approaches adopted to the privacy of consumers' data.


3. The Research Method Adopted

A small sample of organisations was selected, and the terms and privacy policy statements on their web-sites were assessed against normative templates. A more comprehensive picture could of course be gained by studying a larger sample, and through experiments, field surveys and ethnographic studies. And the results of course reflect the templates, whose contents are not subjected to critical assessment in this paper.

Although great care must be taken in generalising from a small number of instances, the sample was selected so as to provide at least some useful insights into the current state of play. In particular, the sample was designed to encompass a broad spread of the spectrum of consumer marketing organisations. This required segmentation of 'B2C' marketing organisations along several dimensions. It appeared to be particularly important to include both 'pure B2C' companies and others whose operations predate the Internet (sometimes referred to as 'clicks and mortar' operations). In addition, differences in company size need to be reflected, and marketers need to be included whose areas of operations are within individual countries with differing consumer protection and data protection regimes, and whose operations are international in nature.

The population segments and the sample of 6 organisations are explained in Exhibit 1.

Exhibit 1: Population Segmentation and Sample Selection

Company-Types and

Sample Selected

Definition
Justification for Company-Type
   
Dimension 1:

Company-Type

 Patterns in these categories may be materially different, because consumer trust is easier to achieve in an organisation with physical presence

A: 'Pure Internet' B2CCorporations that do not have a substantial physical presence 

Amazon.com

Google.com

Adultshop.com

Autoteile-Meile.de

NationalGeographic.com

B: 'Clicks and Mortar' B2CCorporations that have a substantial physical presence 
Sears.com
   
Dimension 2:

Business Characteristics

 Patterns in these two categories may be materially different, due to various characteristics of the business and its context
A: LeadersBusinesses acknowledged as trend-setters in this fieldIt would be valuable to over-sample this category, because it offers an indication of future directions
Amazon.com

Google.com

B: Aggressive MarketersBusinesses recognised as being strong and direct in their approach to consumers These businesses could be expected to be oriented towards image ('brand management'), disdainful of privacy, and manipulative of consumers
Sears.com
C: Marketers of Sensitive ProductsBusinesses that sell goods and services whose purchasers are likely to be particularly concerned about privacyThese businesses could be expected to be very well aware of the need for effective privacy and visible privacy protections
Adultshop.com
D: Regional MarketersBusinesses primarily active in particular jurisdictionsCompanies that are subject to strong laws relating to consumer protection and data protection could be expected to adopt different approaches to those that are not subject to such laws
Autoteile-Meile.de
E: 'Ethical' / Not For Profit MarketersBusinesses run by organisations that espouse strong values in relation to consumer rights and privacyThese operations could be expected to have adopted positive approaches to consumer rights and privacy protection
NationalGeographic.com

The following two sections describe the assessments that were undertaken of the web-sites of each selected organisation.


4. The Terms Applicable to B2C Transactions

This section reports on research undertaken in mid-2006 into the terms of contract applicable to transactions between consumers and a number of Internet merchants. The research design comprised the examination of the terms applicable to transactions conducted on the merchants' sites, and their evaluation against a normative template that reflects the interests of consumers.

4.1 A Normative Template

One possible source of such a normative template was fair trade practices and consumer rights legislation. But the market power of consumers and their representative organisations is far less than that of consumer marketing corporations and their industry associations, and hence all such laws are inevitably a result of political compromise, and fall short of consumers' real needs. An important source is, however, the OECD 'Guidelines for Consumer Protection in the Context of Electronic Commerce' (OECD 2000).

A normative template was prepared that reflects the OECD Guidelines, other relevant documents such as UN (2003), and the author's experience in the area, including its expression in Clarke (1998). The requirements are expressed in Exhibit 2.

Exhibit 2: Normative Template for Marketer-Consumer Communications

Information

Conditions

Security

Choice

Consent

Recourse

Redress

4.2 The Assessment

Each site was assessed against the normative template during mid-to-late June 2006. The process was based purely on the web-site as it presented to a consumer unconvinced about the advisability of conducting business through the site, and rational about their needs and concerns. The 'household names' are very substantial and very busy sites. The sites of the other, less-well-known organisations appeared to be entirely functional, and to have been operational for some time.

A number of positive aspects were fairly common across the sites. Most basic user-interface problems appear to have been overcome. Most sites offer reasonable assistance to users, provided that the consumer has some reasonable familiarity with web-browser use and web-site design and navigation, some basic understanding of searching and ordering procedures, and a modicum of commitment and patience. Most sites include features designed to allay consumers' fears about security, and about privacy.

Varying approaches are taken by the sites to communicating the terms of contract applicable to transactions. Thrusting a lengthy legal document in front of prospects is unlikely to encourage them. Most sites combine links to information about terms of contract (in the header, the footer or a side-panel) with display of particular terms, or of links to them, at a stage in the process judged to match the consumer's needs. Most provide sufficient clarity about when an order will actually come into being, together with some kind of assurance that a confirmation will be sent by email.

In many cases, the order can be checked on the site after it has been placed, and in some cases the package can be tracked. Consumer fear of disappointment when the goods arrive is addressed by most sites. Many, although not all, offer fairly liberal terms in relation to the return of goods, and exchange, credit or refund. Even where exchange is not supported, the terms are fairly clear.

On the other hand, most sites evidence many serious shortfalls from the consumer needs as they are identified in the Template. The remainder of this section identifies key problems.

Accessibility of Terms

Not one of the six sites sampled provides a consolidated list of the terms applicable to consumer transactions. In Amazon's case, not only are the terms scattered across a variety of web-pages, but they are interleaved with user instructions. Several sites suggest a split personality. In the case of National Geographic, the Terms of Service page, which is accessible only from the main site, is expressed in deeply legalistic terms; whereas the Shop sub-site is pleasantly-presented and usable, and its (far from complete) presentation of the Terms seems to be reasonably friendly from a legal perspective, unless the consumer has noticed the overall site Terms. Indeed, some of the extremist positions adopted in the Terms of Service are quite possibly negated by representations provided in the ordering pages.

In almost all cases, only the current versions of terms could be seen, and in almost all cases the page did not declare on what date the current version became applicable. Where the marketer-imposed terms have changed since the date of transaction, consumers are denied access to the terms that applied at the time they placed their order, and are even denied knowledge that any change has occurred.

Choice and Consent

The companies' arrogance in relation to terms of contract is compounded by the common claim that they have the unilateral capability to change terms without so much as notice, let alone informed consent. Even worse, Sears and possibly also National Geographic claim that the changes have retrospective applicability. As regards flexibility and negotiability of terms, the Google News site implies that users can approach Google to vary the terms; but that was the sole glimmer of understanding shown by any of the companies that consumers may have varying needs.

Warranties and Guarantees

Almost all of the sampled B2C operators emphatically deny all forms of warranty and indemnity. Only a couple have the grace to qualify their excessive legalese with phrases such as 'to the extent permitted by law'. National Geographic even attempts to deny responsibility for "merchantability and fitness for a particular purpose" - which are fundamental requirements of contract law. Particularly galling to the sceptical consumer is the common assertion that the supplier has no responsibility for errors in product descriptions.

Recourse

In many cases, no email-address is provided. In each case where a web-form was available, it failed to be accompanied by a commitment to provide a prompt acknowledgement containing the text of the communication, the date-time stamp when it was sent, and a reference and email-address to enable follow-up. In one case, it appears that no acknowledgement is even sent. Consumers are being denied even an appropriate starting-point for complaints. Further, in most cases very little information is provided about the complaints process, and about what regulatory environments transactions are subject to.

Redress

There is an almost complete absence of information about what redress is available in the event of malperformance. In almost no case was any information provided about the law applicable to the transaction, or about recourse to external regulatory processes. The exception was Autoteile-Meile, whose site declares that it is subject to specific German consumer protection law. In the other five cases, the terms are designed to make legal processes convenient for the company and not for the consumer, in particular by making it difficult for the consumer to take action within the jurisdiction where they live or from which they performed their part of the transaction.

Conclusions about Terms of Contract

On the basis of an assessment of this sample of Internet marketers' web-sites, marketers are still focussing on the facilitation of ordering, and what might be usefully referred to as 'shallow consumer assurance'. Sites address the most basic reasons why visitors are reticent to buy, in particular their concerns about the security of their credit-card details, their ability to know that their order has been accepted, and their ability to return shoddy goods.

Consumers have far more concerns than that, and they expect the marketer to understand them. The rational consumer would be very wary of conducting business with these companies. The terms of contract are vastly unfavourable, and the chances of gaining redress against a poorly performed supplier are remote.

Very large companies are particularly arrogant in the terms that they impose, and are clearly depending on their brand image, market power, weak regulatory regimes, and the apathy and lack of organisation of consumers. On the basis of National Geographic's site alone, it appears that large not-for-profit organisations may be no more 'ethical' than monster for-profit corporations like Sears and Amazon.

It is likely that many marketer-dictated terms would be overturned by the courts, but only if a consumer had the considerable money, time, expertise, energy and commitment to pursue the organisation, in many cases in a foreign jurisdiction, through the lower courts, to reach a sufficient level of court to gain redress and force the expression of more reasonable Terms.

On the evidence in this small sample, smaller organisations with less brand recognition understand that they need to try harder to instill confidence in visitors to their sites, and hence tend to be less vicious in the terms that they set. Those selling sensitive goods and services are likely to be even more careful. Some smaller marketers may perceive a significant opportunity to draw customers away from larger, more powerful competitors by offering more reasonable terms. All players are constrained, however, by the aura of serious unfairness that pervades the B2C arena.


5. The Approaches Adopted to Consumer Privacy

The previous section established that the sample of companies selected mostly adopted a commercial stance that was at best unfriendly to consumers. This section reports on an assessment of the privacy stances of the same set of organisations.

5.1 A Normative Template

A study was undertaken of the Privacy Policy Statements (PPS) published on the web-sites of the six organisations. Each PPS was compared with a normative Privacy Statement Template (Clarke 2005b, 2005c). The Template stipulates requirements in the areas of data collection, data security, data use, data disclosure, data retention and destruction, access by data subjects to personal data, information about data handling practices, the handling of enquiries, general concerns and complaints, enforcement, and changes to privacy undertakings. It was developed on the basis of the author's 30 years of research and consultancy activity in the area, including consideration of the various guides to and exemplars of PPS published by government agencies and industry associations.

5.2 The Assessment

The assessment was undertaken in January 2006. The outcomes evidenced a degree of marketer arrogance yet worse than that uncovered in the previous section. A substantial report on the outcomes of this study was published in Clarke (2006a).

The companies declare for themselves extraordinary latitude in their handling of personal data. The essence of Amazon's Statement, for example, is that it collects personal data from wherever it wants to, uses it however it wants to, and discloses it to whomever it wants to. It provides minimal information on data security, none on data retention and destruction, little on amendment, and none on deletion of personal data.

The companies provide no access to previous version of their PPS. This is particularly problematical in Amazon's case, because it has previously changed its PPS, reneging on previous undertakings, and providing itself with additional latitude (e.g. Rosencrance 2000a, 2000b), and it did so without even leaving copies of its earlier undertakings available on the Web (although they might be recoverable from the Internet Archive).

Autoteile-Meile's document is to a very considerable extent a German translation of the current Amazon PPS (to the extent that it appears that it may be in breach of Amazon's copyright). It therefore inherits a large proportion of the weaknesses of that document. It could be that the document is merely experimental or token, because it would seem to have little or no status under German data protection law, which sets requirements consistent with (and in some ways more substantial than) the EU Directive.

Sears PPS also represents an exercise of market power, with huge shortfalls from the consumer needs and expectations as expressed in the Template.

Google merits a little more attention. Its enormous shortfalls in many areas represent hypocrisy, because of its carefully-nurtured public image. Deficiencies include its particular use of cookies, the vagueness of the statements about the purposes of the data Google collects, its transfer of personal data across borders, the absence of assurances about relevance and quality of personal data, an apparent attempt to obfuscate the meaning of 'consent', failure to take any responsibility for personal data transferred to affiliates or to any other organisation, failure to even address data retention and destruction issues, failure to provide information about data-handling processes, even on request, the general unenforceability of the assurances given, and the complete absence of protections in the event of merger, acquisition, or even sale of assets. In short, the several positive aspects of Google's PPS are completely swamped by very serious deficiencies. Fuller reports on the examination of Google are in Clarke (2005d and 2006b).

Adultshop.com was the sole positive outcome, with its PPS expressly used as part of its positioning: "Our business success depends on our discretion and our understanding of the importance of your privacy. If you have suggestions for enhancing our privacy policy, please contact me directly ... Malcolm Day, Managing Director". All statements are directly expressed, and all options taken are privacy-sensitive. It too drops short of the Template's requirements, but many of the weaknesses are far less important because of the business process design.

National Geographic's PPS is remarkable in being brutally frank about the vast array of data collection, use and disclosure techniques it uses, and in embodying a complete absence of choice ("If you do not agree to this Privacy Policy, please do not use this Web site"). The privacy terms are arguably far worse even than those of Sears, Roebuck and Co. The site appears to provide no means to communicate complaints to the company. The PPS could conceivably be compliant with the letter of the FTC's downgraded suggestions, although very likely not with the additional requirements of the 'Safe Harbor' program. Perhaps large U.S. not-for-profit organisations have become imbued with the aggressive ethos of American corporations. National Geographic's ethicality seems to be limited to honesty about the organisation's privacy-hostile stance.

It is clear that, despite the lip-service paid around the world to privacy concerns being an impediment to consumer Internet commerce, the four large and very large companies sampled have done no more than create a pretence of privacy protection, and in some cases a pretence of compliance with their Government's suggestions.

The sceptical, privacy-sensitive consumer would be aghast at the level of abuse of their privacy, and would decline to conduct business with any of the four. The pragmatic consumer is very likely keeping an eye open for alternatives to large and clearly consumer-unsympathetic corporations, and balancing availability and reliability of service against abuses of market power. The fifth (Autoteile-Meile) would be acceptable partly because of its Terms, but particularly because it is subject to relatively effective regulatory regimes based on actual law, and the sixth (Adultshop) would be likely to be quite acceptable. But all marketers are suffering from the lack of consumer-friendliness of marketers generally.

The desirable warm glow of trustworthiness of consumer eCommerce is distinctly lacking. U.S. consumer marketers in particular would do well to heed the argument in Clarke (1999b), and the subsequent warnings of The Economist (2005), and of Senator Clinton (Clinton 2006) and the Consumer Privacy Legislative Forum (2006).


6. Conclusions and Implications

On the basis of the examination undertaken in this research, it is clear that the bad behaviour of consumer marketing organisations continues unabated. Whether this is socially responsible or ethical is not the point addressed here. What matters is that B2C operators are not acting in their own best interests, but are instead responsible for sustaining, and even creating, impediments to consumer use of Internet commerce.

Perhaps marketers are right, and consumers will come to accept the arrogant impositions of marketers en masse, and migrate to the Internet in droves. But it hasn't happened yet, and the alternative prospects exists that:

The implication is straightforward. Ample documentation exists about how to market one-to-one (Peppers & Rogers 1993), how to gain 'consumer insight' (e.g. Wells 2005), and how to design consumer-friendly business processes (e.g. Hoffman & Novak 1997, Clarke 1998a, 1999c, 2002 2001 and 2005a). Consumer marketers should pay heed to that longstanding advice, and make good the mistakes of the last decade.

As part of the conversion-process, consumer marketers must lay to rest the ill-judged expression 'B2C', and adopt an alternative catch-phrase that avoids the implication of projection 'to' and 'at' consumers, and instead implies a two-way relationship 'with' them.


References

The detailed assessments underlying this paper are available on theWeb from http://www.rogerclarke.com/EC/ICEC06-WkingPapers.html

URLs accessed 15 May 2006, unless otherwise stated

Clarke R. (1996) 'Issues in Technology-Based Consumer Transactions', Proc. Conf. Society of Consumer Affairs Professionals (SOCAP), Albert Park, Melbourne, 26 September 1996

Clarke R. (1998a) 'Direct Marketing and Privacy', Proc. AIC Conf. on the Direct Distribution of Financial Services, Sydney, 24 February 1998

Clarke R. (1998b) Conference Summary and Commentary on 'Electronic Commerce: Net Benefit for Australia?', Xamax Consultancy Pty Ltd, November 1998

Clarke R. (1999a) 'Key Issues in Electronic Commerce and Electronic Publishing' Proc. Information Online and On Disc 99, Sydney, 19 - 21 January 1999

Clarke R. (1999b) 'Internet Privacy Concerns Confirm the Case for Intervention', Communications of the ACM, 42, 2 (February 1999) 60-67

Clarke R. (1999c) 'The Willingness of Net-Consumers to Pay: A Lack-of-Progress Report', Proc. 12th International Bled EC Conf., Slovenia, June 1999

Clarke R. (2000) 'What Must E.C. Deliver Now?' Panellists' Statements for a Plenary Panel Session of the 13th International Electronic Commerce Conference, Bled, Slovenia, 19-21 June 2000

Clarke R. (2001) 'Trust in the Context of e-Business' October 2001, republished in Internet Law Bulletin 4, 5 (February 2002) 56-59

Clarke R. (2002) 'e-Consent: A Critical Element of Trust in e-Business' Proc. 15th Bled Electronic Commerce Conference, Bled, Slovenia, 17-19 June 2002

Clarke R. (2004) 'Origins and Nature of the Internet in Australia' Xamax Consultancy Pty Ltd, January 2004

Clarke R. (2005a) 'The Past, Present and Future of B2C eCommerce' Statement for a Panel Session in Sydney, Xamax Consultancy Pty Ltd, September 2005

Clarke R. (2005b) 'Privacy Statement Template' Xamax Consultancy Pty Ltd, December 2005

Clarke R. (2005c) 'About the Privacy Statement Template' Xamax Consultancy Pty Ltd, December 2005

Clarke R. (2005d) 'Evaluation of Google's Privacy Statement against the Privacy Statement Template of 19 December 2005' Xamax Consultancy Pty Ltd, December 2005

Clarke R. (2006a) 'A Pilot Study of the Effectiveness of Privacy Policy Statements' Proc. 19th Bled Electronic Commerce Conference, Bled, Slovenia, 5-7 June 2006, URL accessed 3 July 2006

Clarke R. (2006b) 'Google's Gauntlets' Comp. L. & Secy Rpt 22, 4 (July-August 2006) 287-29, URL accessed 3 July 2006

Clinton H. (2006) 'Senator Clinton Calls for New Privacy Bill of Rights to Protect Americans' Personal Information' U.S. Senate, 16 June 2006, URL accessed 3 July 2006

CPLF (2006) 'Consumer Privacy Legislative Forum Statement of Support in Principle for Comprehensive Consumer Privacy Legislation' Consumer Privacy Legislative Forum, 20 June 2006, URL accessed 3 July 2006

DCITA (1999) 'Australia's e-Commerce Report Card' Aust. Dept of Communications, Information Technology & the Arts, May 1999

DCITA (2002) 'Current State of Play - April 2002: % of persons 16 years and older purchasing online', Aust. Dept of Communications, Information Technology & the Arts, November 2002

DCITA (2004) 'Information Economy Index - 2004', Aust. Dept of Communications, Information Technology & the Arts, 2004

DCITA (2005a) 'The Current State of Play - 2004', Aust. Dept of Communications, Information Technology & the Arts, 2005

DCITA (2005b) 'The Current State of Play', Aust. Dept of Communications, Information Technology & the Arts, November 2005

DIST (1998) 'Electronic Commerce in Australia', Dept of Industry, Science & Tourism, April 1998, once at http://www.noie.gov.au/publications/NOIE/statistics/ecomstat.pdf

Economist (2005) 'Demon in the machine: Privacy laws gain support in America, after a year of huge violations' The Economist 1 December 2005

Hoffman D.L. & Novak T.P. (1997) 'A New Marketing Paradigm for Electronic Commerce', The Information Society, Special Issue on Electronic Commerce, 13 (Jan-Mar.), 43-54

NOIE (2004) 'The Current State of Play - Online Participation and Activities - December 2003' Australian National Office for the Information Economy, January 2004

OECD (2000) 'Guidelines for Consumer Protection in the Context of Electronic Commerce' Organisation for Economic Cooperation & Development, Paris, March 2000

Peppers D. & Rogers M. (1993) 'The One to One Future: Building Relationships One Customer at a Time' Doubleday, 1993

Rosencrance L. (2000a) 'Amazon Loses 2 Partners Over Privacy Policy' Computerworld, September 18, 2000

Rosencrance L. (2000b) 'Amazon.com's Privacy Policies in Spotlight Again, U.S., U.K. Probes Urged' Computerworld, December 11, 2000

UN (2003) 'Guidelines for Consumer Protection' United Nations, New York, 2003

Von Hippel E. (1986) 'Lead Users: A Source of Novel Product Concepts' Mngt. Sci. 32 (1986) 791-805

Wells M. (2005) 'Have It Your Way' Forbes 14 February 2005


Appendix 1: Australian B2C eCommerce Data

Australia can be characterised as having been a very early adopter of the Internet (e.g. Clarke 2004). Australian Government agencies have utilised surveys conducted by specialist consultancies to assemble data on its consumers' use of the Internet. The data collections have a moderate degree of consistency over the period 1997 to 2004. There are multiple ways in which the available measures are not directly comparable, however, such as the inclusion in the baseline of small business enterprises, different questions, different sampling periods, and different age-ranges as the basis for economically active individuals. This Appendix extracts key information from successive reports, and draws inferences from it.

* 1997

DIST (1998, p. 12) provided the following baseline data for 1997:

Further, 18% of respondents in June 1996 "reported having tried shopping online", rising to 43% of a larger sub-population in December 1997. 22% had done it more than once, and 14% once" (pp. 13-14).

The primary segments were software (c. 50% of purchasers), with books having grown rapidly between 1996 and 1997 from 20% to 35% of purchasers, music steady at 25%, magazine subscriptions at 15% and computer hardware (mainly smaller items rather than PCs) 15-20% (p. 15). The median transaction-size was $A 70-100, in many cases including shipping.

Security was a concern for 15% of purchasers, and privacy for 20% of the rest (p. 16).

* 1998

DCITA (1999, p. 12) reported that, in November 1998, "1.27 million households were online ... giving 4.2 million adults access to the web". Further, "E-commerce (business-to-consumer) is making slow progress over the Internet. Of those adults with online access, only 7% used it for commerce - or just 2% of all Australian adults - to make around 1.2 million purchases in the year to November 1998. Fewer than 1% used the Internet to pay bills or transfer funds. ... Those who used the Internet for e-commerce were relatively confident buyers ... About 36% of purchases cost less than $250, while a third cost more than $500".

* 2001

DCITA (2002) stated that "Internet shopping is still in its infancy ... Australians are yet to take up online shopping en masse". It reported estimates of 50% of Internet users over 15 had conducted purchases on the Internet during the 6 months to September 2001 (but did not discuss how people too young to have a credit card were paying for their purchases). This was said to represent 14% of the total population of that age-group, far less than the USA (36%), but comparable with the leading European countries except Sweden. No measure of 'shopper intensity' was provided. The level of activity was judged to be economically insignificant (0.17% of GDP).

The dominant uses were for purposes with no direct economic effect - in particular email, "general surfing", (gratis) software download, education and news. Searching for information about products and about companies was undertaken by 35% and 27% of users, a far higher proportion than had conducted purchases. One bright spot was that Internet banking appeared to be climbing rapidly from a low base of 12% of users in December 2000.

* 2002

NOIE (2003) reported that 18% of Internet users over 15 had purchased online in the 6 months to September 2002. The US appeared to have dropped slightly to 32%. European countries and Canada, like Australia, appeared to have grown a little. No measure of shopper intensity was provided.

Online banking was more highly adopted (35% of Internet users over 15), but security concerns were cited as an ongoing impediment to much higher adoption. Security was seen as an impediment to B2C traffic as well, but to that was added the need for "a high degree of trust between buyers and sellers" (pp. 41-42)

* 2003

NOIE (2004) again showed communication and information needs were the "top online activities". The sub-population was estimated by this stage at 6.8 million (pp. 5-8).

Internet banking had reached 37% of Internet users over 13 years of age (cf. over 15 previously). About 28% were "engaged in online buying or selling related activities" (cf. buying only previously). Of these, however, only 10% undertook the activity "Purchase goods/services", with most merely saying Yes to "Pay bills" and some presumably to "Sell goods/services" only. The lack of progress is somewhat obscured by drift in the definitions.

DCITA (2004) showed 33% of over 15s "purchasing online" between April and September 2003. The US led at 58%, the UK had joined Sweden in the 40-45% range, and Canada, Germany and The Netherlands were with Australia in 30-35% range. No indication of shopper intensity is provided by this data series. The comment was made that "in the last few years online shopping has carved itself a sizable niche within the menu of activities performed online by Internet users ... and is growing. The economic significance ..., however, remains modest" (p. 32).

* 2004

DCITA (2005a) did not provide a comparable total figure for 'users purchasing online'. It was notable by its absence from the "top 10 online activities", because the figures of the 10th activity were as low as 34% of home usage, 26% of work usage and 11% of other (e.g. in Internet cafes). Searching for information on products was high (2nd, at 55% of home usage and 54% of work usage), and paying bills online was 8th for home usage, at 34%.

Some figures were provided for particular segments of B2C eCommerce (pp. 18-20). The list of online shopping activities was topped by "buying/selling/renting property" (i.e. real estate), but this is incorreectly classified, because it is an informational activity not a B2C eCommerce transaction. The most popular segments of online shopping were:

There were a few bright spots:

DCITA (2005b) presented a conflicting view of data on B2C eCommerce. On the one hand, it did not make the 'Top 10 online activities', even though the last of them showed only 38% of users as being active. On the other, another graph showed "Internet users buying and selling online" as having reached 59% in April 2005 (up from 41% in September 2001, 56% in September 2003, and 58% in December 2004). But this again incorrectly classified "buying/selling/renting property", which had become a very substantial information-only activity, but for which transactions are not conducted online. The breakdown was not provided. It appears, however, that the 59% figure is greatly inflated by this error. No indication of shopping intensity was provided.

Paying bills online was shown as 39% (compared with 25%, 35% and 38% at the comparable dates), and Internet banking as a whole attracted 54% (compared with 40%, 50%, 51% and 54%).

* Inferences from the Available Data

Positive aspects include the following:

But harsh reality bites:


Author Affiliations

Roger Clarke is Principal of Xamax Consultancy Pty Ltd, Canberra. He is also a Visiting Professor in the Cyberspace Law & Policy Centre at the University of N.S.W., a Visiting Professor in the E-Commerce Programme at the University of Hong Kong, and a Visiting Professor in the Department of Computer Science at the Australian National University.



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