Internet security: A red herring?

Navigation: Main page

Author: Rosner, Hillary

Consumers give their credit-card numbers over the phone every day. So why are shoppers and stores so resistant to Internet transactions?

As an icon for timeless conservatism, Brooks Brothers has concerns that aren't often shared by other brand marketers. Surprise. The haber-dashery preferred by George Bush has the same worries as every retailer when it comes to jumping onto the Internet's World Wide Web.

"I am not comfortable with the security on the Net," said Jonathan Murphy, vp-direct marketing. Brooks has been selling its preppy staples on CompuServe's Electronic Mail for five years. But when the firm launches a home page later this year, credit-card transactions will not be done on the Net.

"I don't think there's enough business to be had via the Net to warrant taking any risk. We'd just as soon wait," Murphy said.

The issue for retailers is a chicken-and-egg dilemma: will the presence of respected brand names on the Net provide the perception of security that consumers are after? Or should retailers demonstrate their commitment to customer protection by waiting until the water is safe?

The problem is that "security" is subjective. Consumers regularly reveal their precious credit-card account numbers over the phone. But the current perception of both retailers and consumers is that the Internet is loaded with hackers ready to filch your credit-card number and head off to South America. However, sending encrypted credit-card info over the Net is "far more secure than the way you would do it" in a store or restaurant, said Randy Pitzer of Spyglass, an Illinois-based provider of Internet technology. "The issue is getting people to understand that."

One solution, Pitzer said, is for retailers to participate in consumer education. "Maybe part of your web site is, 'Are you fearful of having transactions over the Net?' Click on this hypertext and we'll show you how it works."

"The market reality is that there is no technical limitation to secure credit-card transactions," said John Uppgren, chief information officer at Gage Marketing in Minneapolis. "It's more a customer culture." Uppgren said consumer resistance to using credit cards on the Internet will thrive for another 12-18 months, an inevitable reaction to a new medium.

In June, MasterCard and Visa joined forces to support a unified set of specifications for secure credit card transactions, which should be available by April 1996. In mid-July, American Express announced partnerships with four technology companies to establish safe electronic shopping for cardholders. The official Amex view is that it is premature to determine whether a standardized system is necessary.

For retailers, there is a growing attraction to going on-line. Revenue from Net transactions last year was $20 million, according to Modem Media, an interactive advertising agency. This figure is expected to double by 1995, and hit the billion dollar mark by the year 2000. And a December '94 Interactive Age/Gallup poll found that 24% of respondents currently online or planning to go online would purchase products electronically, and 34% would consider it.

The decision for retailers, according to Pat Hagen, Internet marketing manager at Periscope productions, a Minneapolis-based interactive marketing agency, is not whether the Net is secure, but whether getting a web site is a smart business venture. And for most retailers, he said, "the penalty for being a late entrant is going to be severe."

Establishing a retail presence on the Net also offers lesser-known companies a chance to strengthen brand identity, said Periscope's Hagen. "If you're an also-ran in the physical world, you have the opportunity to become the majority player in the virtual world."

Upscale chocolatier Godiva opened its own Web site earlier this year in order to "get in early to do some learning," according to director of marketing Adam Rockmore. Visitors can buy chocolate, converse with other chocaholics and get recipes. Rockmore said he expects the site to "grow on the coat-tails of the Internet." Godiva lists its Web site address at the bottom of its print ads.

There are over 250 Web sites referenced by the keyword "shopping" in Yahoo, the Web's directory of record. A slim segment of these are high-profile names, however, and even a stroll through any of the more than 30 Internet mails produces few recognizable brands. Commercial on-line services like America Online, Prodigy and Compuserve are home to a much wider array of major retailers, like Tower Records, Officemax and Alamo Rent-a-Car.

Brand-name merchants with stores on the Net are primarily those already heavily involved in the catalog business, like the Chicago-based Hamreacher Schlemmer.

"Look at the track record of some retailers who are using the Internet," said Anne Hollows, MasterCard's director of interactive marketing. "[Some] have said they're converting 10% of the people who come to look at the site into buyers."

Because there are other clear benefits besides sales, Hollows advised merchants to at least research the feasibility of a Web site. "It opens up a huge amount of opportunity to make your brand responsive to the customer base".

~~~~~~~~

By Hillary Rosne