E-BUSINESS SPECIAL REPORT
Cybercrime No Bar to Shopping Frenzy

Despite occasional but high-profile security breaches, shoppers have not been turned off by the Web experience. Experts say the chances of being financially victimized online are low because of built-in consumer protection and heightened security awareness. However, analysts' consensus is that e-businesses still need to be concerned about a general sense of skittishness among online shoppers.

GartnerG2 research director Richard Mogull said the findings of recent Gartner surveys point to worries about security and privacy -- even among people who are regular Internet users -- that could pose problems down the road if not addressed.

"The numbers were stunning," Mogull told the E-Commerce Times. "Consumers are concerned, and it could come to the point where it inhibits e-business."

Cause for Concern

For example, the Gartner (NYSE: IT) study found that nearly 80 percent of respondents were concerned that their bank accounts, social security numbers and other identifying information could be exposed on the Web. Many of those same respondents also were leery about disclosing their e-mail addresses.

Mogull said the responses indicate that a bad experience with just one company has the potential to turn off users -- not just from the offending firm, but from the Web as a whole.

For instance, 30 percent of those currently using the Web to shop on a regular basis said they would stop using the Internet for purchases if they lost US$25 by doing business with a company. That figure rose to 50 percent when respondents were asked about suffering a loss of up to $500.

Of those who said they were not regular Web shoppers, 58 percent said that a loss of less than $25 would keep them from purchasing anything else on the Web. The study found similar patterns for online banking services.

Firms Not Proactive

While there has generally been a boost in awareness about online scams, especially since last year's terrorist attacks, Mogull said that many companies are still not being proactive in their security measures.

The majority of companies are operating in reaction mode, furiously trying to keep up with patches in response to hacker threats. Mogull said this pattern of activity will need to change to bolster consumer trust.

"Enterprises have to address these concerns with a comprehensive, proactive plan if they want people to use these channels," he noted.

Yankee Group program manager Paul Ritter agreed that cybercrime will continue to pose a threat, but he said there are many measures in place to reduce the potential impact. For example, consumers increasingly have 100 percent fraud protection in cases involving credit cards.

Awareness Rising

In addition, Ritter said, online payment enablers like PayPal are helping to curb abuse. And the Federal Trade Commission has boosted consumers' awareness about ways to protect themselves online.

Ritter noted that identity theft -- which is among the top three complaints the FTC receives from consumers -- has implications that go beyond the use of names for fraudulent online transactions. For example, serious damage to consumers' credit reports can result from identity theft.

"However, it is easier for the average con artist gathering information on someone to steal their identity from offline methods -- such as going through someone's trash -- than it is through e-commerce transactions," Ritter told the E-Commerce Times.

Buying Goes On

While consumers need to be careful online, the Yankee Group does not expect cybercrime to be a major limiting factor in e-commerce growth rates over the next few years.

"As consumer awareness and protective measures increase, we predict the rate of consumer spending for online purchases will continue to increase at a compound annual growth rate of between 15 percent and 20 percent for the next five years," Ritter said.

And Gartner's Mogull said companies will have to be out in front to keep that momentum going.

"The concerns have been raised for a long time," he noted. "There needs to be a shift in tactics in the industry."