Online Sales to Rise Despite Security Fears

More shoppers are turning to online channels this holiday season, despite growing fears of identity theft and other security issues, according to research from analytics and research applications provider SPSS. The company polled more than 1,000 shoppers and discovered that about one quarter of holiday gift lists will be filled online. "With shopping in regards to the Internet, convenience is king," says Dan Coates, vice president, SPSS survey and samples. "Consumers are drawn to the convenience of 'Net shopping, even though they realize it can be a bit risky." Credit-card fraud continues to be a growing problem for Internet businesses. During the 2002 holiday-shopping season, Internet merchants lost nearly $500 million due to fraudulent orders. Compared with their brick-and-mortar counterparts, online merchants are facing a risk of fraud that is 19 times higher, according to Gartner. Despite these inherent risks and the increased visibility given to identity theft and fraud stories by the news media and financial services advertisers, consumers are increasingly turning to the Internet for their holiday shopping. The SPSS survey found that consumers plan to conduct 25 percent of their shopping online this year, an increase of 6 percent from 2002. At the same time, more than half (52 percent) are at least somewhat more concerned about using their credit card online this year than last. Identity theft is considered to be the greatest concern for 54 percent of consumers, with credit card theft second at 26 percent. While concerns about fraud are increasing, most consumers feel they are doing their part through secure passwords. While 84 percent feel their passwords are at least somewhat secure, only 44 percent of respondents never change their passwords. The longer a consumer has been shopping online, the more likely they are to change their passwords. Coates says that security features are improving, and once perfected could lead to even more of a boom in online shopping. "But until sophisticated tool sets are available that enable businesses to apply smart solutions to help this problem, security measures will be seen as more of a hindrance than a helper," he says. "Stringent security standards are not enough," Coates adds. "Internet retailers need to take a more proactive approach to combating online fraud through the use of technologies that can help them to detect and prevent fraud before it occurs."