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Consumers@shopping

An international comparative study of electronic commerce

Programme for Developed Economies and Economies in Transition

Executive summary

With more and more retailers setting up shop on the world wide web, and more and more consumers online, internet shopping is accessible to ever-increasing numbers of people. In theory, it offers convenience, speed and choice to the consumer, but how well does it work in practice?

This report, Consumers@shopping, gives the results of an international comparative study of real-life experiences of shopping in the borderless world of the internet. The aim of the research was to find out how easy it is to shop, both at home and abroad, on the internet; and to identify good and bad practice, as well as potential problem areas.

The shopping survey which forms the basis of this report was carried out in late 1998 and early 1999, involving consumer organisations in 11 countries, whose researchers ordered a total of 151 items from sites based in 17 different countries.

The recommendations that arise from it, and from the literature research carried out in parallel with it, are aimed at international and national policy-makers, and at internet retailers and their industry bodies.

As work continues around the world, at national and international level, on developing guidelines for electronic commerce, this study provides concrete evidence of the consumer experience, thus helping to identify where consumer protection measures are required.

Conclusions

The results of this study show that regulators and retailers have much work still to do before the internet can offer a reliable environment in which consumers can shop with confidence.

Choice

Despite a proliferation of web shops for certain popular products (eg books and compact discs), choice is severely limited in many product areas. Although many retailers have a web site giving information about their company, it can be difficult to find sites to actually buy from: the global shopping mall is still a long way off.

Information

Retailers need to take steps to improve the quality of information they provide on key issues such as delivery charges, order progress, and their own policies on privacy, returns and redress. In many cases, the consumer is offered no information at all on these aspects at present.

Reliability of service

In an unacceptable number of cases, goods arrived very late, or not at all. Many retailers were very quick to charge purchasers for goods long before they arrived, but such speed was not evident when it came to returning money owed to customers. In many cases, our shoppers had a long wait before receiving their refund. With such poor levels of service, electronic commerce cannot be hailed as a brave new world for consumers.

Redress

In too many cases, consumers were not provided with essential information about complaints procedures. To make matters worse, the identity of the company was sometimes unclear, and `real world' contact details, such as an address, were not provided. If something does go wrong, obtaining redress can be very difficult without such information.

There are still many obstacles to overcome before consumers can shop in cyberspace with complete trust. There is a very real need for some cyber-rules of commerce.

Recommendations

Much work is going on around the world to establish whether changes need to be made to bring electronic commerce within existing legislation and codes of practice. However, there has been little empirical research evidence to guide these efforts. Consumers International set up this study, bringing together an international team to conduct an extensive practical research exercise, with the aim of determining where the real problems for consumers lie.

Once consumers start buying from abroad, there are complex consumer protection issues to resolve - in particular, whose legislation they are covered by. International bodies are fully aware of the need for work in this area.

This report makes a number of recommend-actions that we hope will focus the energies of policy-makers, providing evidence that there are certain key consumer protection issues that must be addressed.

Many specific recommendations arise from the detailed research findings. These are summarised below, and can also be found in context within the main body of the report. In addition to these specific recommendations, most of which are aimed at retailers, we offer three more general recommendations that require international consideration and implementation.

General recommendations

• If consumers are to take full advantage of the global shopping mall theoretically offered by the internet, they must feel confident of receiving a consistent standard of consumer protection wherever they shop. In order to make this possible, a co-ordinated international approach is needed to the formulation of guidelines governing electronic commerce. National governments should be encouraged to adopt best practice guidelines developed at international level (eg by OECD).
• Because adherence to many aspects of best practice guidelines is voluntary, consumers need a way of recognising internet shops which offer high standards of consumer protection with ease, wherever in the world those shops are based. The development of an internationally recognised certification or labelling scheme, which indicates that shops meet agreed minimum standards on a range of key issues, would go a long way to offering this international reassurance.
• As online consumers experience many types of problem, such as non-delivery of goods or obstruction in obtaining refunds, so there is a need for a third-party redress mechanism that offers a further channel to the consumer retailer that offers a further channel to the consumer once deadlock has been reached with the retailer. Such mechanism needs to cover all companies selling goods to consumers on the internet. It needs to be accessible, affordable, fast, consumer-friendly, and binding on the company concerned. For such a mechanism to have teeth regardless of where a consumer shops, it must be supported by national governments.

Specific recommendations

Information about supplier

Consumers must be provided with details of the retailer's identity and physical location. Consumers should be made aware of the full name of the company they are dealing with, as this may not always be the same as the web address. The Consumers must at least be provided with the retailer's geographic address, the country the company is registered in, a phone number, and an e-mail address. Where applicable, the consumer should also be given the registration number or licence number for the retailer, and contact information for the body with which the business is registered or authorised, to enable the consumer to check legitimacy.

Information about delivery

Sites should make it clear to the consumer which countries they deliver to, before the order process is embarked upon. This information should be clearly signposted from the home page, and should be kept up to date.

Price information

Sites must display one overall total price to the consumer before the order is completed, which should include any delivery charges. If sites are marketing to consumers in other countries, it is important that they design their sites with the facility to incorporate the delivery charge in the total price, once the consumer has provided the relevant information about where they live and what form of delivery they want. Delivery charges can make a significant difference to the overall cost, so it is not acceptable to ask the customer to contact the retailer separately to obtain delivery costs.

Retailers supplying to other countries can also do much more to assist consumers in converting prices into their own currencies. Only one in four of the sites in other countries that we purchased from gave any assistance with converting prices (eg by providing a currency converter). This is not a difficult facility to provide, and helps the consumer considerably when deciding whether to make a purchase.

Terms and conditions

Terms and conditions contain essential information such as cancellation and cooling-off rights, payment and delivery terms, and dispute resolution, so it is essential that they be presented to the consumer before the purchase is completed. Retailers should design sites to ensure that purchasers are shown the terms and conditions before confirming their order, or are offered a link to click on to the terms and conditions before confirmation. Terms and conditions must be clearly signposted/titled, and clearly differentiated from other information, so that consumers can identify that this is the legal part of the contract.

Terms and conditions should be provided in a manner that can be readily printed off and kept by the consumer for future reference.

Applicable law

Consumers International and other consumer groups are firmly of the belief that the law governing internet transactions should be the law of the consumer's home country, in order that he or she is familiar with the protection available. This is a controversial area which is engendering much debate at present. Some retailers do stipulate within the contract which law they would like to apply, but a final decision on this, should a dispute arise, will be taken by the judge hearing the case.

If a retailer specifies that the law governing transactions on its site is that of the retailer's own country, rather than the consumer's country of residence, that condition must be highlighted to the consumer in a clear and unambiguous manner.

If a consumer agrees to such a contract, the consumer must not be deprived of the key consumer protections offered in his/her own country. Equivalent levels of protection must be offered. In addition, the consumer must have the right to pursue any dispute within his/her own country of residence.

Unambiguous ordering process

Prior to the conclusion of the contract, the process of finalising the contract should be clearly explained to the consumer. The retailer should tell the consumer where the contract will be filed, and how to access it.

Site designers should use a three-stage (or triple-click) ordering model to ensure that there is no ambiguity in the ordering process.  The three key stages are:

• The customer expresses an interest in buying the product (eg adds it to `shopping cart')
• The customer gets the opportunity to review all details of the order (without having to scroll back manually), and to confirm that they are correct
• The customer agrees to go ahead and place the order, having had the opportunity to read the terms and conditions. It should be very clear that they have reached the final stage of placing the order.

Site design should also allow the consumer the opportunity to cancel the order immediately (before quitting the order process).

The legally binding terms and conditions of the contract must be clearly presented to the consumer before the order is finalised. Any terms and conditions that have not been presented to the consumer before the final offer is made shall only be regarded as binding on the consumer if subsequently accepted by him or her.

In order to complete the contract, the consumer should be sent an acknowledgement or confirmation of the order.

The agreement to purchase, and all information relating to the contract, must be printable by the consumer.

Privacy

All sites should have a privacy policy that is easy to understand and clearly signposted. The ideal privacy policy should include the following:

• Compulsory data collection should be limited to information that is necessary and reasonable for the transaction
• The consumer must be told what information is being collected and why, and how it will be used
• The consumer must have the right to refuse further communication from the company or associated companies, and must be clearly told how to exercise that right
• There should be a named individual within the company responsible for data protection, and consumers should be informed of this
• Consumers must have the right to review and correct any information held about them
• Consent to passing of data to third parties should be actively sought from the consumer, rather than being a negative default.

Security

Sites should offer information about security issues. This information should be accurate and easy to understand. It should be clear to the consumer when they are giving any personal information whether they are in a secure environment. Consumers should also be provided with information about their legal rights and liability for any losses should a fraudulent transaction occur.

Cookies

A cookie is a piece of information, or unique identifier, that is placed on your computer which enables web sites to remember information about the choices you make when you visit their sites. Cookies can be used to save you having to type in all your personal information and password every time you visit a site. They can also be used to build up a profile of your interests by tracking what sites and pages you visit. This can be used by advertisers to tailor their marketing to you. Some people see this as an invasion of privacy.

Sites should have a clear policy regarding their use of cookies, which informs consumers that they can set their web browser to alert them that a cookie is being received. Sites should tell consumers what will happen if they reject cookies.

Returns

Consumers should have the right to return goods, within a specified time limit, without having to give a reason. All sites should have a clear policy on returning goods, which is clearly signposted before goods are ordered. Information on how to return goods should be displayed on the site, and included with the goods when delivered. This policy should include information about any costs to be incurred by the consumer.

Complaints

Sites must include clear information on their complaints procedure, explaining to consumers how to go about making a complaint and who to contact. Sites should outline their policy for dealing with complaints, including any targets for responding to communications.

Consumers should be provided with information on any dispute resolution arrangements that exist should a complaint not be resolved satisfactorily by the retailer.

Information on order progress

Retailers should improve the information they provide to the consumer at every stage of the order process. This should include:

• Information on whether the item is in stock, before the consumer places an order
• If the item is not in stock, an indication of when more stock is expected, and a clear explanation of how they will keep the consumer informed
• Once the order has been placed, confirmation that the order has been successfully received
• Notification that the goods have been despatched, and of when the consumer should expect them to arrive.

Despatch and delivery

Retailers should display clear target times for despatch and delivery of goods, so that customers know what to expect.

Customers should be informed when goods have been despatched, so that they know to expect their goods shortly, and are thus made aware of any delivery problems. Retailers should provide a clear procedure for customers to follow if goods fail to arrive within the specified time, and customers should be clearly informed of their rights if the goods take an unreasonable time to arrive.

Money should not be debited before goods are despatched.

Returns and refunds

Sites should:

• Provide a policy on returns which makes the process as simple as possible
• Make this policy easily accessible by linking it to the order page and providing information to accompany the goods
• Clarify within the policy what costs the consumer will incur
• Process requests for refunds quickly and give targets for when consumers will receive their money
• Tell consumers what to do if they experience any problems in obtaining refund.