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E-commerce under the microscope
The spread of broadband and the growth of web familiarity continues to fuel exponential growth in e-commerce. But as it increases in importance as a revenue channel so too its methodologies are being scrutinised with increasing vigour. Ed Waller investigates.
For those of you who might still think e-commerce is a bit geeky or only for guys looking for gizmos or porn, here are a few stats from market research body Key Note as evidence to the contrary. The internet now claims around 18% of total consumer spending in the UK, the firm said in a recent study. That stat is driven by increased uptake of broadband in the home as well as rising levels of consumer trust and familiarity. Home shopping, which is mostly web shopping these days with a little mail-order left in the mix, was worth an estimated £58.34bn in 2007, more than double the £28bn spent in 2003.
Key Note further believes that the home shopping market will continue to expand at a rapid, albeit decelerating pace over the next four years and that by 2012, it will account for around a third of all retail sales in the UK, with the internet accounting for around 30% alone. Further uptake of broadband and its integration with mobile will boost demand for e-commerce, and the major grocery retailers are consequently expected to expand their home shopping services across much of the country.
All told, Key Note sees the e-commerce sector booming over the next four years, subsuming mail-order and eating away at high street sales. It's not surprising that as internet shopping becomes more and more mainstream (ie. something that even politicians have now experienced), it should fall under a higher degree of regulation and scrutiny.
Last December, the Office of Fair Trading and Local Authority Trading Standards Services conducted a 'sweep' of some 530 of the UK's biggest retail websites (mostly clothing and electrical goods vendors) to see if basic rules were being followed. In many cases, they weren't.
Around one in seven sites (14%) didn't list their full address, only PO Boxes or nothing at all, for instance. A similar proportion didn't tell their customers about their right to cancel the transaction within seven working days. A whopping 30% seemingly weren't fully refunding, as required by OFT rules, and over half deducted delivery costs from refunds. Furthermore, around 40% of sites still use the old trick of waiting till the customer has entered all their details and got through to the final page before hitting them with some extra charges. Oldest trick in the e-commerce book...
"We will be sending the report to the businesses reviewed," said Heather Clayton, OFT's senior director of markets and projects. "We encourage all online retailers to check their sites to ensure that they comply with regulations, so that shoppers can be confident that their rights are respected when they shop online."
The industry looks set for some further scrutiny, particularly the burgeoning price comparison sector. The number of these sites has grown tremendously over the past few years, as consumers prefer going to one or two sites as opposed to wading through dozens to find the lowest prices for anything from flights and holidays, to mortgages and insurance, gas and electricity.
Given that most of these sites receive some kind of commission from the companies whose services they are including in their comparisons, "there needs to be an independent authority which can check the information is impartial," said Catherine Waddams of the Centre for Competition Policy (CCP) at the University of East Anglia.
Under a voluntary accreditation code overseen by Energywatch, current regulations stipulate that comparison sites must include all service providers not just the ones that pay it a commission, but this only extends to gas and electricity - not other services such as insurance, credit cards and savings accounts.
Consumers are now starting to complain that different price comparison sites give differing results when the same consumer data is entered, suggesting there is more at work than simply calculating what's the best deal for the consumer - as opposed to working out the best deal for the price comparison website in question. They are not charities, after all.
The Financial Services Authority (FSA) is currently looking into the price comparison sector but for the moment the best thing that consumers can do is to go to a few of these price comparison sites - that is, to compare price comparison sites. Thus an idea to reduce the workload for the consumer actually ends up creating more.
Perhaps a new generation of sites will emerge that compare price comparison websites with each other? This cycle of comparison could continue ad nauseam or until the consumer gets bored and sticks with their existing service provider. Hmmmm...the penny drops. Maybe that's what the confusion-marketers wanted all along?
