Is Online Commerce Starting to Peak? If So, Thank the Crooks, the Banks, and Bill Gates Equally
This may not constitute proof of a definitive trend, but three items relating to online commerce are troubling and certainly point in that direction:
1. Internet Users Cut Back Because of Fears
WASHINGTON (AP) - As identity theft has grown, so has fear of being victimized through high-tech means.
Nearly a third of Internet users are cutting back on time spent surfing the Internet and a quarter say they have stopped buying online altogether, according to a study from Consumer Reports WebWatch.
Some 80 percent of Internet users say they’re at least somewhat concerned someone could steal their identity from personal information on the Internet. Fifty-three percent of Internet users say they’ve stopped giving out personal information on the Web.
Among those who shop online, 54 percent say they’re now more likely to read a site’s privacy policy or user agreement before buying and 29 percent have cut back on how often they buy online.
A more detailed article is at eWeek.
2. Not Just Reducing Buying, But Also Banking
There are many troubling stats at this PC World link, but the ones most relevant to this post are these:
73% of consumers said personal data theft is a deterrent to online banking.
41% of Net users say they’re buying less online due to security threats.
3. Consumer Worries Are Beginning to Hit Companies’ Bottom Lines
Amazon’s disappointing results and outlook may be directly tied to users’ reluctance to buy online:
The retailer, which began as an online book seller and has become the second-most popular Web commerce site behind eBay Inc., forecast revenue below some Wall Street expectations for the holiday season, when it generates the bulk of its sales.
“It confirms what I’ve been thinking about revenue deceleration,” said Martin Pyykkonen, an analyst at Hoefer & Arnett, who noted that Amazon anticipated fourth-quarter sales to increase between 13 percent and 24 percent, well below its 31 percent sales jump in the fourth quarter of 2004.
Amazon said third-quarter net income fell to $30 million, or 7 cents per share, compared with $54 million, or 13 cents per share a year earlier.
It’s looks to me like Amazon may have geared up for more growth than is taking place. Based on technology developments alone (more Net users, more broadband users, faster speeds, etc.), it should be happening, but it’s not, or not as fast as one would expect.
The growth of online commerce and the cost reductions that should result from it together represent an important factor in future economic growth. The fact that online commerce hasn’t blossomed more, and could be in real jeopardy of leveling off, can primarily be traced to three things:
- Enterprising criminals, especially those outside the US, who appear to be able to operate with near impunity, thanks to overextended and/or indifferent law enforcement.
- Microsoft’s chronic failure to respond to and plug security holes inherent in both its Windows operating system and its Internet Explorer web browser.
- The financial system’s indifference to identity theft and fraud prevention. Banks and lenders have treated losses as a cost of doing business instead of working to prevent their occurrence. The casualties, namely consumers whose identities are stolen and who have to endure the recovery process, have continued to mount. At some point, and we may be there, the horror stories will begin to affect everyone’s willingness to buy and bank online. The industry’s only visible answer thus far has been to cynically attempt to turn identity theft into a profit center by selling insurance against it.
I’d be tempted to add a fourth (consumers themselves), but the fact of the matter is that consumers can follow every sensible step for preventing online identity theft and fraud, and still get taken through absolutely no fault of their own.
It is long past time for the two Holy Grails of protection against fraud and identity theft to get enacted into law: first, credit freezes; and second, mandatory encryption of personal information by those who hold and store it (to prevent negative consequences from the seemingly endless security breaches and data exposures that are occurring).
It will be very difficult to lure consumers who conclude that online commerce is hopelessly unsafe back into the fold, so the time frame for a comprehensive and credible fix is short indeed.
