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A Major Impediment to B2C Success is ...

the Concept 'B2C'

Roger ClarkeXamax Consultancy Pty Ltd, Canberra

Visiting Professor in eCommerce, Uni. of Hong Kong;Cyberspace Law & Policy, U.N.S.W.; and Computer Science,

ANU

http://www.anu.edu.au/people/Roger.Clarke/EC/...... ICEC06 {.html, .ppt}

ICEC’06 – Fredericton NB – 15 August 2006

Copyright1996-2006

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The Problem is the Concept ‘B2C’

Themes

• Growth Metrics in B2C• Research Method• Terms of Contract• Privacy Policy Statements• Change is Long Overdue

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GrowthMetrics

inInternetUsage

areSteep

‘Origins and Nature of the Internet in Australia’January 2004, at /II/OzI04.html

User count in leading nations reached saturation-point c. 2002

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Growth Metrics in B2C eCommerce1. Are Hard to Get

• Lots of pseudo-statistics from ‘consultancies’(‘blue-sky projections’ from minimal data)

• Little authoritative empirical research(but it’s very difficult and expensive to do)

• Considerable inconsistency over time• Fairly apparent massaging of the data

(e.g. conflating Internet Banking, shopping for a house, searching for information on products)

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Growth Metrics in B2C eCommerce2. Are Flat

“Australians who have tried online shopping”1996 - 18% of 0.75 million 0.15 m1997 - 21% of 1.00 million 0.21 m1998 - 7% of 1.27 million 0.90 m?

2001 - 50% of 2.25 million? in last yr 1.13 m?2002 - 18% of 3.50 million? in last 6 mths 0.63 m2003 - 10% of 5.00 million? (or 33%?) 0.50 m2004 - 20%? of 8.00 million?? 1.60

m?

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Growth Metrics in B2C eCommerce3. Are Thin

• Few committed online purchasers• Few success stories, and many arise

from stick rather than carrot (discount air tickets)

• Low transaction-values• Low conversion rates:

• Prospects / Visitors ==>> Customers

• Other Site-Customers ==>> Ours(i.e. low confidence transitivity)

• Info Searchers ==>> Customers• Still the same old reasons are given

viz. security, trust, privacy

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Use of B2C eCommerce is Fragile

Even in Internet Banking, security scares

• Viruses• Worms• Spyware, esp. keystroke-loggers• Phishinghave been associated with pauses ingrowth and even ‘negative adoption’

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Forrester: ‘Phishing Concerns Impact

Consumer Online Financial Behavior’

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The Research Undertaken• Aim: To test consumer marketer

performance in a couple of important areas

• Compare Against Normative Templates:• Terms of Contract• Privacy Policy Statements

• A Sample of 6 Consumer Marketing Organisations with varying characteristics

• No Consumer Sampling• No Interactions with the Marketers

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Segmentation & Sample

Some ‘Pure Internet’, Some ‘Clicks and Mortar’

Leaders: AmazonGoogle

Aggressive Marketers: Sears, Roebuck & Co.

Sensitive Products: Adultshop.comRegional Marketers: Autoteile-Meile.de‘Ethical’ / Not-For-Profit: National

Geographic

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The Normative Template forTerms of Contract for Consumer

Transactions

• Information• Terms• Security• Choice• Consent• Recourse• Redress

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The Normative Template forMarketer-Consumer

Communications

• Information• Terms• Security• Choice• Consent• Recourse• Redress

Recourse• Enquiry and Complaints Process

• accessibility• prompt acknowledgement• copy into the consumer's email-archive• responsiveness to enquiry or complaint

• acknowledgement• resolution

• Restitution• product quality shortfalls

• own products and services• third-party products and services

• fulfilment quality shortfalls• payment errors

• External Complaints Mechanisms• information provided about them• prompt and appropriate communications with

regulators

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B2C Web-Site Features Generally

There are Positives

• User-Interface• Basic User Assistance• Features designed to allay consumers’

fears about security, and about privacy

• Clarity about the point of contract• Order checking• Delivery Tracking• Policy re

return/exchange/credit/refund

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But the Overall Verdict: Pretty Appalling

• Terms of ContractNo consolidated document

• Clarity of TermsSplit Personality between chummy sales documents and the actual lawyer-written Terms. Inconsistencies have probable legal implications

• Prior Versions of TermsNo access

• Changes to TermsUnilateral, without notice, let alone consent; and even with retrospective applicability

• Warranties and LiabilitiesEmphatic denials of all forms of warranty and liability, generally way in excess of the legal position, even asserting no responsibility for merchantable quality or errors in product descriptions

• Complaint MechanismsVery poor accessibility (even no Acknowledgement!), and no information about complaints processes

• RedressNo information at all

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‘Shopping Online: ACCC survey of top 1000 Australian consumer websites – Rights and obligations when trading over the internet’,

June 2004

The clauses found in online contracts do appear to

raise significant trade practices issues.

Of the websites which contain a written contract: • 54.3 per cent have a clause attempting to

disclaim responsibility for the accuracy of information posted on the site

• 50.9 per cent have a clause which attempts to disclaim warranties

• 66 per cent have a clause which limits liabilities • 43.8 per cent have both a disclaimer of warranties

clause and a limitation of liability clause

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Life Isn’t GoodThe court found that LG made false or misleading

representationsabout the existence and duration of statutory conditions andwarranties implied by the Act and about the rights and remedies that were available to mobile telephone owners/consumers

Court orders require LG to: • refrain from making representations to similar effect in the future • implement an upgraded trade practices compliance program • arrange the publication of consumer notices on its website and in

all major Australian newspapers • provide each of its mobile telephones retailers with a notice

explaining the relevant provisions of the Act• pay the ACCC's costs

ACCC Media Release 149/06 - 5 July 2006

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The Normative Template forPrivacy Policy Statements

• Data Collection• Data Security• Data Use• Data Disclosure• Data Retention and Destruction• Access to One’s Own Personal Data• Information about Data Handling Practices• Handling of Enquiries, Concerns, Complaints• Enforcement• Changes to Privacy Undertakings

http://www.anu.edu.au/people/Roger.Clarke/DV/PST.htmlor Google < "Privacy Policy Statements" Template OR Clarke>

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Extraordinary Self-Declared Latitude

in the Handling of Personal Data

Amazon• collects personal data from wherever it wants

to, uses it however it wants to, and discloses it to whomever it wants to

• provides minimal information on data security• provides none about data retention /

destruction• provides little information about amendment• provides none about deletion of personal data

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No Access to Prior Versions

Amazon• makes no copies of earlier undertakings

available• gives no indication of changes made• has reneged on undertakings• has significantly increased its original scope

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Google• Google’s particular use of

cookies• The vagueness of the

statements about the purposes of the data Google collects

• Google’s 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

• The complete absence of protections in the event of merger, acquisition, or even sale of assetsHypocrisy, given its Carefully-Nurtured Public Image

http://www.anu.edu.au/people/Roger.Clarke/DV/PST-Google.htmlhttp://www.anu.edu.au/people/Roger.Clarke/II/Gurgle0604.html

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National Geographic• Arguably far worse even than Sears, Roebuck and Co. • Brutally frank about its vast array of

data collection, use and disclosure activities• Embodies a complete absence of choice: "If you do not agree

to this Privacy Policy, please do not use this Web site"• No apparent means to communicate complaints to the

company

• FTC’s downgraded suggestions are so weak that the PPS could conceivably be compliant (‘though not with 'Safe Harbor’)

• 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

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Was there any good news??

• The ‘Sensitive Goods’ Supplier Demonstrated a good understanding of consumers’ privacy needs

• The ‘Regional Marketer’Is subject to the DatenschutzgesetzHas a PPS that is a translation of Google!?

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Conclusions from the PPS Study• The 4 large marketers have done no more than

create a pretence of being privacy-protective• 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 them

• The pragmatic consumer is likely to be keeping an eyeopen for alternatives, and balancing availability and reliability of service against abuses of market power

• The desirable warm glow of trustworthiness of consumer eCommerce is distinctly lacking

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Phases of eMarketer Activity• "Billboards along the Information Superhighway" (1994-

95)• Closed Electronic 'Communities' (AOL, MSN – 1995-97)• Widespread adoption of the term 'B2C' (1996-)• Push Technologies, 'web-casting' and 'channels' (1996-98)• Info-mediaries (1997-99)• Portals, then Vortals (1998-)• Malware, from cookie abuse (1996-), via pop-ups (1999-)

and web-bugs (1999-), to adware and spyware (2000-)• Data rapaciousness and consumer profile construction• Identity management and the consolidation of

individual consumers' multiple identities• Consumer Location and Tracking

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Overall Conclusions‘Shallow Consumer Assurance’

• Bad Behaviour continues unabated• Dependence on Brand Image, Market Power,

Weak Regulatory Regimes, Apathetic Disorganised Consumers

• Maybe consumers will come to accept arrogant impositions by marketers; but it hasn't happened yet

• Alternatively:• growth will remain slow• penetration will stagnate• adoption will flatten out on a low plateau• consumer usage will be fickle and fragile

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Snakes and Ladders

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Snakes and Laddersin Consumer eCommerce

• Huge Investment in Image Factorsfor a reasonably small increase in Trust[or decrease in Untrust], i.e. short ladders

• Tiny Investment in Consumer-Orientedcontract terms and privacy policies (let alonethe business processes to implement them)When things go wrong, there is a largerdecrease in Trust [or increase in Untrust,or increase in Distrust!], i.e. long snakes

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

Copyright1996-2006

29

A Major Impediment to B2C Success is ...

the Concept 'B2C'

Roger ClarkeXamax Consultancy Pty Ltd, Canberra

Visiting Professor in eCommerce, Uni. of Hong Kong;Cyberspace Law & Policy, U.N.S.W.; and Computer Science,

ANU

http://www.anu.edu.au/people/Roger.Clarke/EC/...... ICEC06 {.html, .ppt}

ICEC’06 – Fredericton NB – 15 August 2006