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A Major Impediment to B2C Success is ...

the Concept 'B2C'


Roger Clarke
Xamax Consultancy Pty Ltd
Visiting Professor, Uni. of N.S.W.
Sydney, A.N.U. Canberra
and Uni. Of Hong Kong
+61 2 6288 1472
Roger.Clarke@xamax.com.au

ABSTRACT It's all been said before, but now it's time to listen.
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
Categories and Subject Descriptors
scares like spyware and phishing result in lurches in consumer
use. J.1 [Administrative Data Processing]
This paper re-visits an old theme, and finds that consumer
marketing is still characterised by aggression and dominance, not General Terms
sensitivity to customer needs. This conclusion is based on an Management, Economics, Security, Human Factors
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,
Keywords
marketers prefer to wield power. eCommerce, marketing, terms of contract, privacy, privacy policy
statements, adoption, impediments
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- 1. INTRODUCTION
conditioned consumer psychology research and experimentation, Are consumers quarry? Or are Internet-era consumers different?
it's far from clear that advertising can convert everyone into Or, are they different, but nonetheless readily manipulable?
salivating consumers who 'just have to have' products and services
brand-linked to every new trend, especially if what you sell is This paper examines the web-sites of a sample of B2C marketing
groceries or handyman supplies. organisations. It concludes that:

The thesis of this paper is that the one-dimensional, aggressive • the penetration-levels of consumer Internet marketing are
concept of B2C has long passed its use-by date. Trading is two- low, and are fragile;
way – consumers' attention, money and loyalty, in return for • consumer marketing philosophy and models have barely
marketers' products and services, and vice versa. changed since the mass media era;
So B2C is conceptually wrong, and needs to be replaced by some • a different philosophy and models are needed.
buzzphrase that better conveys 'B-with-C' rather than 'to-C' and This is hardly new news. This author wrote and presented on
'at-C'. Implementations of 'customised' services through 'portals' these topics many times during the mid-to-late 1990s (Clarke
have to mature beyond data-mining-based manipulation to 1996, 1998a, 1998b, 1999a, 1999c, 2000), and he was far from
support two-sided relationships, and customer-managed profiles. 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.
Permission to make digital or hard copies of all or part of this work for The paper commences by briefly reviewing the slowness of
personal or classroom use is granted without fee provided that copies are
growth in B2C Internet commerce since its sudden emergence
not made or distributed for profit or commercial advantage and that
copies bear this notice and the full citation on the first page. about 1995. An assessment is then undertaken of the terms of
To copy otherwise, to republish, to post on servers or to redistribute to contract that apply to transactions between consumers and a small
lists, requires prior specific permission and/or a fee. but reasonably representative set of consumer marketing
ICEC’06, August 14–16, 2006, Fredericton, Canada. Copyright organisations. This is complemented by an assessment of the
2006 ACM 1-59593-392-1. approach to consumer privacy adopted by the same set of Internet

441
merchants. The final section draws inferences from the study, • consumer location and tracking
and suggests future directions.

If the 1994-2000 period showed little adaptation by consumer


marketers to the new context, perhaps the new millennium has
2. The Slow Growth of B2C eCommerce brought change. This paper considers the marketer-consumer
So many Internet growth metrics have been so strong that it's easy relationship from the consumer's perspective, by examining in
to assume that everything in cyberspace moves quickly. Sober turn the terms under which transactions are conducted, and the
assessments of B2C growth are very hard to come by, however. approaches adopted to the privacy of consumers' data.
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
3. The Research Method Adopted
A small sample of organisations was selected, and the terms and
apply available sleight-of-hand techniques to the slimmest of
privacy policy statements on their web-sites were assessed against
historical data, using the vaguest of models of the dynamics of
normative templates. A more comprehensive picture could of
adoption.
course be gained by studying a larger sample, and through
Appendix 1 provides a summary of key data arising from two experiments, field surveys and ethnographic studies. And the
series of Australian data. The following are key points about B2C results of course reflect the templates, whose contents are not
eCommerce are apparent from the data, supplemented by subjected to critical assessment in this paper.
anecdotal evidence and observation over the last decade:
Although great care must be taken in generalising from a small
• consumer eCommerce has achieved substantial penetration number of instances, the sample was selected so as to provide at
in only a few market segments, where special conditions least some useful insights into the current state of play. In
exist; particular, the sample was designed to encompass a broad spread
• many people visit companies' sites, but the conversion-rate of the spectrum of consumer marketing organisations. This
from information-seekers to buyers is very low; required segmentation of 'B2C' marketing organisations along
several dimensions. It appeared to be particularly important to
• confident use of one B2C site does not appear to result in include both 'pure B2C' companies and others whose operations
confidence in other sites; predate the Internet (sometimes referred to as 'clicks and mortar'
• consumer confidence is fragile, and is subject to substantial operations). In addition, differences in company size need to be
disturbance. Even in the relatively successful, B2C-related reflected, and marketers need to be included whose areas of
area of Internet banking, successive scares relating to operations are within individual countries with differing consumer
viruses, worms and spyware have been associated with protection and data protection regimes, and whose operations are
pauses in growth, and the flurry of 'phishing' exploits in international in nature.
2005-06 may have even resulted in many users suspending
The population segments and the sample of 6 organisations are
their activities.
explained in Exhibit 1.
During the era of mass media, consumer marketing was
The following two sections describe the assessments that were
aggressive and manipulative. The Internet created both scope for
undertaken of the web-sites of each selected organisation.
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 4. Terms Applicable to B2C Transactions
decade? This section reports on research undertaken in mid-2006 into the
terms of contract applicable to transactions between consumers
The early signs were not good. The first 6-8 years of marketer and a number of Internet merchants. The research design
exploitation of the Internet saw a succession of attempts to apply comprised the examination of the terms applicable to transactions
and adapt mass media techniques and impose marketer power conducted on the merchants' sites, and their evaluation against a
over consumers. These attempts included: normative template that reflects the interests of consumers.
• "billboards along the Information Superhighway" (1994-
95) 4.1 A Normative Template
One possible source of such a normative template was fair trade
• Closed Electronic 'Communities' (AOL, MSN – 1995-97) practices and consumer rights legislation. But the market power
• widespread adoption of the term 'B2C' (1996-) of consumers and their representative organisations is far less than
that of consumer marketing corporations and their industry
• Push Technologies, 'web-casting' and 'channels' (1996-98)
associations, and hence all such laws are inevitably a result of
• Info-mediaries (1997-99) political compromise, and fall short of consumers' real needs. An
• Portals, then Vortals (1998-) important source is, however, the OECD 'Guidelines for
Consumer Protection in the Context of Electronic Commerce'
• malware, from cookie abuse (1996-), to pop-ups (since (OECD 2000).
1999), web-bugs (1999-), adware and spyware (2000-)
A normative template was prepared that reflects the OECD
• data rapaciousness and consumer profile construction Guidelines, other relevant documents such as UN (2003), and the
• identity management and the consolidation of individual author's experience in the area, including its expression in Clarke
consumers' multiple identities (1998). The requirements are expressed in Exhibit 2.

442
Exhibit 1: Population Segmentation and Sample Selection

Company-Types Definition Justification for Company-Type


andSample Selected

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' B2C Corporations that do not have a
substantial physical presence
Amazon.com
Google.com
Adultshop.com
Autoteile-Meile.de
NationalGeographic.com
B: 'Clicks and Mortar' B2C Corporations that have a substantial
physical presence
Sears.com

Dimension 2:Business Patterns in these two categories may be materially


Characteristics different, due to various characteristics of the
business and its context
A: Leaders Businesses acknowledged as trend- It would be valuable to over-sample this category,
setters in this field because it offers an indication of future directions
Amazon.com
Google.com
B: Aggressive Marketers Businesses recognised as being These businesses could be expected to be oriented
strong and direct in their approach to towards image ('brand management'), disdainful of
consumers privacy, and manipulative of consumers
Sears.com
C: Marketers of Sensitive Products Businesses that sell goods and These businesses could be expected to be very
services whose purchasers are likely well aware of the need for effective privacy and
to be particularly concerned about visible privacy protections
privacy
Adultshop.com
D: Regional Marketers Businesses primarily active in Companies that are subject to strong laws relating
particular jurisdictions 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 Businesses run by organisations that These operations could be expected to have
Marketers espouse strong values in relation to adopted positive approaches to consumer rights
consumer rights and privacy and privacy protection
NationalGeographic.com

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Exhibit 2: Normative Template for Marketer-Consumer Communications

Information
• Corporate Identity and Location
• The Goods or Services Choice
- appropriate description • Flexibility of Terms
- safety-related information • Notice of Changes to Terms
- any constraints on sale • Negotiability of Changes to Terms
- any constraints on use Consent
• The Delivery Process • re the transaction
- order tracking - clarity of the point of contract
• Accessibility of Terms of Contract • re data collection and usage
- before transacting • re changes to Terms
- after transacting Recourse
- long-term, version-numbered and dated • Enquiry and Complaints Process
• Completeness of Conditions
- accessibility
• Clarity of Conditions: - prompt acknowledgement
- price - copy into the consumer's email-archive
- payment - responsiveness to enquiry or complaint
- security - acknowledgement
- retraction or termination of contract - resolution
- warranties and guarantees • Restitution
- any after-sales service - product quality shortfalls
- contingent liabilities - own products and services
• Ability to Switch to Phone, Fax or Mail - third-party products and services
• Acknowledgement / Confirmation of Transaction - fulfilment quality shortfalls
- at user's option (i.e. email-address not mandatory) - payment errors
• Legal Context • External Complaints Mechanisms
- information provided about them
Conditions - prompt and appropriate communications with
• Appropriate Undertakings re Product Quality regulators
• Appropriate Undertakings re Fulfilment Quality Redress

• Appropriate Conditions re Contingent Liabilities • Law (cf. mere 'self-regulation')

• Appropriate Conditions re Return and Refund/Credit • Enforcement Accessibility


- a jurisdiction convenient to the consumer
- limited formality, delay and expense
Security
• Enforcement Scope
• Funds
- action available for restitution, costs, damages and
• Payment-Related Data, in particular credit-card details
exemplary damages
• Personal Data - action available re misrepresentation
• Malware - action available re non-compliance with
• Pseudonymity undertakings
- class action available
• Application of the Law

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In almost all cases, only the current versions of terms could be
4.2 The Assessment seen, and in almost all cases the page did not declare on what date
4.2.1 Application of the Research Method the current version became applicable. Where the marketer-
Each site was assessed against the normative template during imposed terms have changed since the date of transaction,
mid-to-late June 2006. The process was based purely on the web- consumers are denied access to the terms that applied at the time
site as it presented to a consumer unconvinced about the they placed their order, and are even denied knowledge that any
advisability of conducting business through the site, and rational change has occurred.
about their needs and concerns. The 'household names' are very
substantial and very busy sites. The sites of the other, less-well- 4.2.4 Choice and Consent
known organisations appeared to be entirely functional, and to The companies' arrogance in relation to terms of contract is
have been operational for some time. compounded by the common claim that they have the unilateral
capability to change terms without so much as notice, let alone
The following sub-section identifies aspects of the sites which
informed consent. Even worse, Sears and possibly also National
addressed consumer’s requirements well, or at least satisfactorily.
Geographic claim that the changes have retrospective
But most sites evidence many serious shortfalls from the
applicability. As regards flexibility and negotiability of terms, the
consumer needs as they are identified in the Template. The
Google News site implies that users can approach Google to vary
remaining sub-sections identify key problems.
the terms; but that was the sole glimmer of understanding shown
4.2.2 Positive Aspects by any of the companies that consumers may have varying needs.
All of the sites that were assessed satisfied a moderate proportion
4.2.5 Warranties and Guarantees
of the requirements. Most basic user-interface problems appear to
Almost all of the sampled B2C operators emphatically deny all
have been overcome. Most sites offer reasonable assistance to
forms of warranty and indemnity. Only a couple have the grace
users, provided that the consumer has some reasonable familiarity
to qualify their excessive legalese with phrases such as 'to the
with web-browser use and web-site design and navigation, some
extent permitted by law'. National Geographic even attempts to
basic understanding of searching and ordering procedures, and a
deny responsibility for "merchantability and fitness for a
modicum of commitment and patience. Most sites include
particular purpose" – which are fundamental requirements of
features designed to allay consumers' fears about security, and
contract law. Particularly galling to the sceptical consumer is the
about privacy.
common assertion that the supplier has no responsibility for errors
Varying approaches are taken by the sites to communicating the in product descriptions.
terms of contract applicable to transactions. Thrusting a lengthy
legal document in front of prospects is unlikely to encourage 4.2.6 Recourse
them. Most sites combine links to information about terms of In many cases, no email-address is provided. In each case where
contract (in the header, the footer or a side-panel) with display of a web-form was available, it failed to be accompanied by a
particular terms, or of links to them, at a stage in the process commitment to provide a prompt acknowledgement containing
judged to match the consumer's needs. Most provide sufficient the text of the communication, the date-time stamp when it was
clarity about when an order will actually come into being, sent, and a reference and email-address to enable follow-up. In
together with some kind of assurance that a confirmation will be one case, it appears that no acknowledgement is even sent.
sent by email. Consumers are being denied even an appropriate starting-point for
complaints. Further, in most cases very little information is
In many cases, the order can be checked on the site after it has
provided about the complaints process, and about what regulatory
been placed, and in some cases the package can be tracked.
environments transactions are subject to.
Consumer fear of disappointment when the goods arrive is
addressed by most sites. Many, although not all, offer fairly 4.2.7 Redress
liberal terms in relation to the return of goods, and exchange, There is an almost complete absence of information about what
credit or refund. Even where exchange is not supported, the terms redress is available in the event of malperformance. In almost no
are fairly clear. case was any information provided about the law applicable to the
transaction, or about recourse to external regulatory processes.
4.2.3 Accessibility of Terms The exception was Autoteile-Meile, whose site declares that it is
On the other hand, not one of the six sites sampled provides a
subject to specific German consumer protection law. In the other
consolidated list of the terms applicable to consumer transactions.
five cases, the terms are designed to make legal processes
In Amazon's case, not only are the terms scattered across a variety
convenient for the company and not for the consumer, in
of web-pages, but they are interleaved with user instructions.
particular by making it difficult for the consumer to take action
Several sites suggest a split personality. In the case of National
within the jurisdiction where they live or from which they
Geographic, the Terms of Service page, which is accessible only
performed their part of the transaction.
from the main site, is expressed in deeply legalistic terms;
whereas the Shop sub-site is pleasantly-presented and usable, and 4.2.8 Conclusions about Terms of Contract
its (far from complete) presentation of the Terms seems to be On the basis of an assessment of this sample of Internet marketers'
reasonably friendly from a legal perspective, unless the consumer web-sites, marketers are still focussing on the facilitation of
has noticed the overall site Terms. Indeed, some of the extremist ordering, and what might be usefully referred to as 'shallow
positions adopted in the Terms of Service are quite possibly consumer assurance'. Sites address the most basic reasons why
negated by representations provided in the ordering pages. visitors are reticent to buy, in particular their concerns about the

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security of their credit-ãard details, their ability to know that their The companies declare for themselves extraordinary latitude in
order has been accepted, and their ability to return shoddy goods. their handling of personal data. The essence of Amazon's
Consumers have far more concerns than that, and they expect the Statement, for example, is that it collects personal data from
marketer to understand them. The rational consumer would be wherever it wants to, uses it however it wants to, and discloses it
very wary of conducting business with these companies. The to whomever it wants to. It provides minimal information on data
terms of contract are vastly unfavourable, and the chances of security, none on data retention and destruction, little on
gaining redress against a poorly performed supplier are remote. amendment, and none on deletion of personal data.

Very large companies are particularly arrogant in the terms that The companies provide no access to previous version of their
they impose, and are clearly depending on their brand image, PPS. This is particularly problematical in Amazon's case,
market power, weak regulatory regimes, and the apathy and lack because it has previously changed its PPS, reneging on previous
of organisation of consumers. On the basis of National undertakings, and providing itself with additional latitude (e.g.
Geographic's site alone, it appears that large not-for-profit Rosencrance 2000a, 2000b), and it did so without even leaving
organisations may be no more 'ethical' than monster for-profit copies of its earlier undertakings available on the Web (although
corporations like Sears and Amazon. they might be recoverable from the Internet Archive).

It is likely that many marketer-dictated terms would be overturned Autoteile-Meile's document is to a very considerable extent a
by the courts, but only if a consumer had the considerable money, German translation of the current Amazon PPS (to the extent that
time, expertise, energy and commitment to pursue the it appears that it may be in breach of Amazon's copyright). It
organisation, in many cases in a foreign jurisdiction, through the therefore inherits a large proportion of the weaknesses of that
lower courts, to reach a sufficient level of court to gain redress document. It could be that the document is merely experimental
and force the expression of more reasonable Terms. or token, because it would seem to have little or no status under
German data protection law, which sets requirements consistent
On the evidence in this small sample, smaller organisations with with (and in some ways more substantial than) the EU Directive.
less brand recognition understand that they need to try harder to
instill confidence in visitors to their sites, and hence tend to be Sears PPS also represents an exercise of market power, with huge
less vicious in the terms that they set. Those selling sensitive shortfalls from the consumer needs and expectations as expressed
goods and services are likely to be even more careful. Some in the Template.
smaller marketers may perceive a significant opportunity to draw Google merits a little more attention. Its enormous shortfalls in
customers away from larger, more powerful competitors by many areas represent hypocrisy, because of its carefully-nurtured
offering more reasonable terms. All players are constrained, public image. Deficiencies include its particular use of cookies,
however, by the aura of serious unfairness that pervades the B2C the vagueness of the statements about the purposes of the data
arena. 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',
5. Approaches Adopted to Consumer Privacy
failure to take any responsibility for personal data transferred to
The previous section established that the sample of companies
affiliates or to any other organisation, failure to even address data
selected mostly adopted a commercial stance that was at best
retention and destruction issues, failure to provide information
unfriendly to consumers. This section reports on an assessment of
about data-handling processes, even on request, the general
the privacy stances of the same set of organisations.
unenforceability of the assurances given, and the complete
5.1 A Normative Template absence of protections in the event of merger, acquisition, or even
A study was undertaken of the Privacy Policy Statements (PPS) sale of assets. In short, the several positive aspects of Google's
published on the web-sites of the six organisations. Each PPS PPS are completely swamped by very serious deficiencies. Fuller
was compared with a normative Privacy Statement Template reports on the examination of Google are in Clarke (2005d and
(Clarke 2005b, 2005c). The Template was developed on the basis 2006b).
of the author's 30 years of research and consultancy activity in the Adultshop.com was the sole positive outcome, with its PPS
area, including consideration of the various guides to and expressly used as part of its positioning: "Our business success
exemplars of PPS published by government agencies and industry depends on our discretion and our understanding of the
associations. importance of your privacy. If you have suggestions for
The Template stipulates requirements in the areas of data enhancing our privacy policy, please contact me directly ...
collection, data security, data use, data disclosure, data retention Malcolm Day, Managing Director". All statements are directly
and destruction, access by data subjects to personal data, expressed, and all options taken are privacy-sensitive. It too
information about data handling practices, the handling of drops short of the Template's requirements, but many of the
enquiries, general concerns and complaints, enforcement, and weaknesses are far less important because of the business process
changes to privacy undertakings. design.
National Geographic's PPS is remarkable in being brutally frank
5.2 The Assessment about the vast array of data collection, use and disclosure
The assessment was undertaken in January 2006. The outcomes techniques it uses, and in embodying a complete absence of
evidenced a degree of marketer arrogance yet worse than that choice ("If you do not agree to this Privacy Policy, please do not
uncovered in the previous section. A substantial report on the use this Web site"). The privacy terms are arguably far worse
outcomes of this study was published in Clarke (2006a). even than those of Sears, Roebuck and Co. The site appears to
provide no means to communicate complaints to the company.

446
The PPS could conceivably be compliant with the letter of the 6. Conclusions and Implications
FTC's downgraded suggestions, although very likely not with the On the basis of the examination undertaken in this research, it is
additional requirements of the 'Safe Harbor' program. Perhaps clear that the bad behaviour of consumer marketing organisations
large U.S. not-for-profit organisations have become imbued with continues unabated. Whether this is socially responsible or
the aggressive ethos of American corporations. National ethical is not the point addressed here. What matters is that B2C
Geographic's ethicality seems to be limited to honesty about the operators are not acting in their own best interests, but are instead
organisation's privacy-hostile stance. responsible for sustaining, and even creating, impediments to
It is clear that, despite the lip-service paid around the world to consumer use of Internet commerce.
privacy concerns being an impediment to consumer Internet Perhaps marketers are right, and consumers will come to accept
commerce, the four large and very large companies sampled have the arrogant impositions of marketers en masse, and migrate to
done no more than create a pretence of privacy protection, and in the Internet in droves. But it hasn't happened yet, and the
some cases a pretence of compliance with their Government's alternative prospects exists that:
suggestions.
• growth will remain slow;
The sceptical, privacy-sensitive consumer would be aghast at the
level of abuse of their privacy, and would decline to conduct • penetration will stagnate, and adoption will flatten out on a
business with any of the four. The pragmatic consumer is very low plateau; and
likely keeping an eye open for alternatives to large and clearly • consumer usage may be fickle and may be fragile, subject
consumer-unsympathetic corporations, and balancing availability to considerable buffeting each time that a 'bad news story'
and reliability of service against abuses of market power. The about consumer rights, security or privacy makes
fifth (Autoteile-Meile) would be acceptable partly because of its headlines.
Terms, but particularly because it is subject to relatively effective
The implication is straightforward. Ample documentation exists
regulatory regimes based on actual law, and the sixth (Adultshop)
about how to market one-to-one (Peppers & Rogers 1993), how to
would be likely to be quite acceptable.
gain 'consumer insight' (e.g. Wells 2005), and how to design
But all marketers are suffering from the lack of consumer- consumer-friendly business processes (e.g. Hoffman & Novak
friendliness of marketers generally. The desirable warm glow of 1997, Clarke 1998a, 1999c, 2002 2001 and 2005a). Consumer
trustworthiness of consumer eCommerce is distinctly lacking. marketers should pay heed to that longstanding advice, and make
Consumer marketing companies domiciled in many countries are good the mistakes of the last decade.
subject to substantive and substantial data protection legislation. As part of the conversion-process, consumer marketers must lay
U.S. consumer marketers would do well to heed the argument in to rest the ill-judged expression 'B2C', and adopt an alternative
Clarke (1999b), and the subsequent warnings of The Economist catch-phrase that avoids the implication of projection 'to' and 'at'
(2005), and of Senator Clinton (Clinton 2006) and the Consumer consumers, and instead implies a two-way relationship 'with'
Privacy Legislative Forum (2006). them.

447
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Appendix 1: Australian B2C eCommerce

Introduction 2001
Australia can be characterised as having been a very early DCITA (2002) stated that "Internet shopping is still in its
adopter of the Internet (e.g. Clarke 2004). Australian infancy ... Australians are yet to take up online shopping en
Government agencies have utilised surveys conducted by masse". It reported estimates of 50% of Internet users over 15
specialist consultancies to assemble data on its consumers' use had conducted purchases on the Internet during the 6 months to
of the Internet. The data collections have a moderate degree of September 2001 (but did not discuss how people too young to
consistency over the period 1997 to 2004. There are multiple have a credit card were paying for their purchases). This was
ways in which the available measures are not directly said to represent 14% of the total population of that age-group,
comparable, however, such as the inclusion in the baseline of far less than the USA (36%), but comparable with the leading
small business enterprises, different questions, different European countries except Sweden. No measure of 'shopper
sampling periods, and different age-ranges as the basis for intensity' was provided. The level of activity was judged to be
economically active individuals. economically insignificant (0.17% of GDP).
This Appendix extracts key information from successive The dominant uses were for purposes with no direct economic
reports, and draws inferences from it. effect – in particular email, "general surfing", (gratis) software
download, education and news. Searching for information
1997 about products and about companies was undertaken by 35%
DIST (1998, p. 12) provided the following baseline data for and 27% of users, a far higher proportion than had conducted
1997: purchases. One bright spot was that Internet banking appeared
• 88% of the c. 1 million users (of a population of 20 to be climbing rapidly from a low base of 12% of users in
million) said they used email; December 2000.
• 65% said they used the Internet for 'entertainment'; 2002
• 53% said they used it for 'business/research'; NOIE (2003) reported that 18% of Internet users over 15 had
purchased online in the 6 months to September 2002. The US
• 21% of Internet users view online shopping as "a
appeared to have dropped slightly to 32%. European countries
secondary or 'derivative' activity", and only 0.5% cited it
and Canada, like Australia, appeared to have grown a little. No
as their "primary activity". Hence "'hardcore' online
measure of shopper intensity was provided.
shoppers numbered only 5,000, while 'sometime' online
shoppers number more than 200,000. Online banking was more highly adopted (35% of Internet users
over 15), but security concerns were cited as an ongoing
Further, 18% of respondents in June 1996 "reported having tried
impediment to much higher adoption. Security was seen as an
shopping online" (although by December 1997, 43% of a
impediment to B2C traffic as well, but to that was added the
particular sub-population had tried it). 22% had done it more
need for "a high degree of trust between buyers and sellers" (pp.
than once, and 14% once" (pp. 13-14).
41-42)
The successful market-segments were software (c. 50% of
purchasers), with books having grown rapidly between 1996 and 2003
1997 from 20% to 35% of purchasers, music steady at 25%, NOIE (2004) again showed communication and information
magazine subscriptions at 15% and computer hardware (mainly needs were the "top online activities". The sub-population was
smaller items rather than PCs) 15-20% (p. 15). The median estimated by this stage at 6.8 million (pp. 5-8).
transaction-size was $A 70-100, in many cases including Internet banking had reached 37% of Internet users over 13
shipping. years of age (cf. over 15 previously). About 28% were
Security was a concern for 15% of purchasers, and privacy for "engaged in online buying or selling related activities" (cf.
20% of the rest (p. 16). buying only previously). Of these, however, only 10%
undertook the activity "Purchase goods/services", with most
1998 merely saying Yes to "Pay bills" and some presumably to "Sell
DCITA (1999, p. 12) reported that, in November 1998, "1.27 goods/services" only. The lack of progress is somewhat
million households were online ... giving 4.2 million adults obscured by drift in the definitions.
access to the web". Further, "E-commerce (business-to-
DCITA (2004) showed 33% of over 15s "purchasing online"
consumer) is making slow progress over the Internet. Of those
between April and September 2003. The US led at 58%, the
adults with online access, only 7% used it for commerce – or
UK had joined Sweden in the 40-45% range, and Canada,
just 2% of all Australian adults – to make around 1.2 million
Germany and The Netherlands were with Australia in 30-35%
purchases in the year to November 1998. Fewer than 1% used
range. No indication of shopper intensity is provided by this
the Internet to pay bills or transfer funds. ... Those who used
data series. The comment was made that "in the last few years
the Internet for e-commerce were relatively confident buyers ...
online shopping has carved itself a sizable niche within the
About 36% of purchases cost less than $250, while a third cost
menu of activities performed online by Internet users ... and is
more than $500".

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growing. The economic significance ..., however, remains had become a very substantial information-only activity, but for
modest" (p. 32). which transactions are not conducted online. The breakdown
was not provided. No indication of shopping intensity was
2004 provided. It appears, however, that the 59% figure is greatly
DCITA (2005a) did not provide a comparable total figure for inflated by this error.
'users purchasing online'. It was notable by its absence from the
Paying bills online was shown as 39% (compared with 25%,
"top 10 online activities", because the figures of the 10th
35% and 38% at the comparable dates), and Internet banking as
activity were as low as 34% of home usage, 26% of work usage
a whole attracted 54% (compared with 40%, 50%, 51% and
and 11% of other (e.g. in Internet cafes). Searching for
54%).
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%.
Inferences from the Available Data
Some figures were provided for particular segments of B2C Positive aspects include the following:
eCommerce (pp. 18-20). The list of online shopping activities
was topped by "buying/selling/renting property" (i.e. real • a larger percentage of a bigger proportion of the
estate), but this is incorreectly classified, because it is an population has performed at least one purchase on the
informational activity not a B2C eCommerce transaction. The Internet;
most popular segments of online shopping were: • some individuals have become habituated to performing
• "purchase travel plus related" 17% of metropolitan users / one or more particular categories of purchasing online.
15% of non-metropolitan (apparently reflecting to a large But harsh reality bites:
extent the availability of cheap airline tickets exclusively
• even though solid foundations appeared to be in place as
via the airlines' web-sites);
early as 1997, progress in eCommerce, defined as
• share transactions 7%/4%; ordering and payment online, has been very slow;
• books 8%/7%; • the only categories of online shopping that appear to have
• tickets (presumably event tickets) 9%/6%; achieved very strong penetration are those for which
consumers have been forced into it, in particular discount
• recorded music/video 6%/7%; airline tickets;
• software 6%/6%; • some much-hyped market segments have achieved very
• PC hardware 4%/3%; limited penetration (even books);
• food/grocery/items 3%/2%. • a very low conversion rate of prospects is evident, with
There were a few bright spots: the proportion of buyers far lower than the proportion of
information-seekers;
• pay bills online was 37%/32%, and other aspects of
Internet banking ranged from 16%/15% to 50%/43% for • even now, only a little over half of all Internet users use
'check account balance'; Internet banking, and only 70% of those use it to make
payments; and this was before the phishing epidemic of
• searching for information was 55%/54% for information 2005-06 undermined public confidence;
on products, and 35%/32% for information on
companies. • user-confidence in dealings with one merchant appears
not to translate into confidence in dealing with others;
DCITA (2005b) presented a conflicting view of data on B2C
eCommerce. On the one hand, it did not make the 'Top 10 • changes in the definitions used by the score-keepers have
online activities', even though the last of them showed only 38% sustained an appearance of progress, because 'e-
of users as being active. On the other, another graph showed commerce' has been adapted to include much-used
"Internet users buying and selling online" as having reached information-gathering functions as well as far-less-used
59% in April 2005 (up from 41% in September 2001, 56% in ordering and payment functions;
September 2003, and 58% in December 2004). But this again • it is clear that some serious impediments to the adoption
incorrectly classified "buying/selling/renting property", which of online shopping remain.

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