SPECIAL REPORT
Safe, Secure Holiday Shopping

Will consumers have a safe and secure holiday shopping season? Or will identity thieves walk away with the lion's share of the profits?

According to VeriSign's (Nasdaq: VRSN) latest Internet Security Intelligence Briefing, which covers the period from July through September, the number of security attacks has declined slightly from the first and second quarter of 2004.

That's good news in an online retailing game where consumer confidence is key. Indeed, online retailers have plenty to be cheery about during the holiday season. Gartner (NYSE: IT) predicts e-commerce transactions will hit US$60 billion this year in the U.S. alone, the highest total ever.

That's in line with the 2004 Shop.org/BizRate.com Online Holiday Mood Study, which found that 98 percent of merchants are anticipating online growth this holiday season. Also, 32 percent of consumers plan to do more of their holiday shopping online this year.

Instilling Consumer Confidence

However, analysts said that before e-tailers break out the eggnog, they need to still make sure their Web sites are secure in order to protect themselves and their customers from fraud schemes. Moreover, they need to communicate that message to consumers.

That's because 30 percent of Americans cite security concerns as a key factor keeping them from shopping more online, according to a study by Harris Interactive (Nasdaq: HPOL). Almost half of Americans do not feel comfortable giving their credit card information over the Internet.

"E-tailers should explain their security infrastructure to consumers," Trevor Healy, VeriSign's vice president of payments, told the E-Commerce Times.

"They can do that by using a security seal, talking about encryption and discussing how identity is verified. Those steps really help in allaying consumer fear and will also generally lead to better conversion rates."

Healy said this is especially true of smaller brands, which have to be more vigilant in order to compete with well-known brands like Amazon.com (Nasdaq: AMZN) and eBay (Nasdaq: EBAY).

"In some cases, consumers will pay extra at a bigger-brand site because of the comfort factor with the brand name," Healey said. "Consumers would never do that in the offline world."

Telling It Like It Is

Smaller brands, like Creative Products and RubyLane.com, both make a point to communicate their security measures to instill consumer confidence.

"We have a strong privacy policy, as well as safeguards to ensure the confidentiality of your transaction information," Ruby Lane marketing director Karen Frishman told the E-Commerce Times. "And we never share contact information or data with third parties."

That, Frishman said, is exactly what the purveyor of antiques, art, jewelry and other collectible items publishes on its Web site via a link entitled, "The Ruby Lane Advantage."

That portion of the site also describes pre-screening measures, a customer-friendly return policy and other service policies to make the visitor feel good about shopping on the site.

CProducts.com peddles "As Seen on TV" products to thousands of visitors each month. Charles Kush, principal of Creative Products, told the E-Commerce Times that he also publishes a security guarantee online to boost consumer confidence.

"We let them know that they won't be liable for any unauthorized charges on their credit card," Kush said. "We take security of personal information for our customers very seriously.

"We use PGP encryption for all customer-sensitive information. We don't store any personal customer information on the Web server, so it can't be hacked. That's all spelled out in our Security Guarantee."

Consumer Confidence on Rise

Gartner principal analyst Adam Sarner told the E-Commerce Times that these types of "tell it like it is" initiatives are going a long way down the road to consumer confidence. The fact is the security is in place on most e-tail sites. However, old perceptions can be hard to break.

"A couple of years ago, people were just insanely upset about using their credit card online," Sarner said. "Attitudes are changing as technology improves. Consumer confidence is greater because more and more people are going online and there are no bad stories. Perceptions are changing."

That's important to the success of the holiday season because despite the hype, VeriSign's Healy said those sites with security measures -- and security seals -- in place will have the upper hand.

"If you believe the FTC numbers, identity theft cost consumers about $5 billion this year," he said. "With the whole advent of phishing and other scams, consumers are looking for items like security seals. This is even true in searching.

"Our studies show that when a consumer sees a security marking or some sort of reputable seal on a comparison shopping site, they are more likely to click through, whereas if they don't see objective information, they will tend to migrate to the bigger brands."

When it comes to security on the Internet, analysts said it is often the perception of security that becomes a reality in the minds of customers.