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Call it the privacy penalty for e-commerce. In a survey of 250 people who don't use the Internet to shop, 65% of respondents cited concern about privacy as a barrier to getting online and shopping, according to San Francisco-based market reseacher Cognitiative. But Cognitiative CEO Laurie Windham doesn't think that concern is limited to potential newbies. While only 32% of 570 online shoppers surveyed by the market researcher in January cited privacy as a barrier to buying more this holiday season, Windham says that based on the responses she has seen in focus groups, that percentage could now easily be around 50%. This is quite amazing. By now, people should be feeling comfortable about buying online -- both seasoned cybershoppers and newbies. What's sending this trend in the wrong direction is that some e-tailers are dealing with the privacy issue in ways that aggravate the problem. Case in point: At the end of August, Amazon.com revised its privacy policy in a way that seemed to brush off the concerns raised by consumers. The e-commerce giant finally outlined in detail the many ways it collects information about consumers. But at the same time, it severely limited any say consumers have in how that information is used by the company and its many partners. And Amazon also did away with a previous option that allowed consumers to request that personal information about them never be sold. This is a head-scratching move, since Amazon is one of the more enlightened companies and famously obsessed with pleasing customers. LEGAL BASES. Amazon didn't ignore the concerns about privacy: It acknowledged them and then said that it owned pretty much any information it collected and could do whatever it wanted with that data. Basically, the company was covering all its legal bases. If Amazon ever sells any of its businesses, or puts itself on the block, the company should be protected from consumer lawsuits or government intervention. That way, Amazon can avoid the problems dogging Toysmart. The now-defunct online toy store in June sought to auction off its list of customers, unleashing a public outcry about whether Toysmart should be able to sell the information. Even the Federal Trade Commission got involved to broker a settlement stipulating that any company that purchased the data would have to abide by the privacy policy under which the information was originally collected. (A bankruptcy court declined to set any conditions until a buyer stepped forward.) But at a time when privacy concerns are on the rise, not allowing people a way to opt out of information collection is insensitive. The reality is, as e-tailers already know, that most people don't opt out. Only about 12 people a day opted out at DoubleClick this winter, and that was at the height of the debate about whether the company, which serves up ads on over 1,300 online properties, should be allowed to track individuals online. (It had already collected 80 million profiles at that point.) Normally, most people don't even read privacy policies. But they certainly pay attention when a company is lambasted in public for revising its privacy policy and making it weaker. Amazon managed to reinforce consumers' fears. JUST PARANOIA? Some companies are being a lot smarter. Online travel service Expedia, for instance, is taking an entirely different tack. It also revised its policy to better explain its data collection policies. But it now has stronger consumer protections, not weaker ones. The company explicitly says it won't sell or rent information about its customers. It also won't share that information with marketing partners unless consumers explicitly say they want to receive those offers or promotions. For years, online companies have argued that worrying about privacy is just paranoia and that over time, as people become more savvy online, their concerns will lessen. It appears that the opposite is happening. So, without some very public reassurance on the part of companies, those people who are concerned probably won't get online and shop. That's the last thing e-tailers can afford right now. Green covers the Internet for Business Week in New York. Have a question or a comment? Let her know at heather_green@ebiz.businessweek.com. |
