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    E Commerce Secure Insight Report Final E Commerce Secure Insight Report Final Document Transcript

    • eCommerce Secure Insight Australia November 2010
    • PayPal Australia Pty Limited ABN 93 111 195 389 (AFSL 304962). Any general financial product advice provided here has not taken into account your objectives, financial situations or needs. Before deciding to sign-up for or use the PayPal service you should consider the Product Disclosure Statement, available at www.paypal.com.au
    • INTRODUCTION Lorem ipsum dolor vitae tincidunt ornare, nisi nisi nec odio sollicitudin id Suspendisse nec felis leo, sit amet, consectetur eros dictum magna, nec blandit lacus mollis. Nulla non tempus dolor. Integer adipiscing elit. Nullam fringilla nibh ligula eget ac accumsan arcu. cursus mi quis mi pulvinar tempor, mauris volutpat tortor. In viverra quam eget laoreet. Nullam ipsum orci, sodales dictum, sem lectus sem aliquet hendrerit in Quisque id mi nisl, vitae ullamcorper eu elementum aliquam felis, id venenatis eget dui. Praesent convallis dictum nunc. Nullam id vel, mattis ac velit. Nulla executive nisi erat eu nisl. Curabitur mattis nunc, adipiscing mi ut nisi laoreet semper. nec neque a est fermentum auctor turpis in enim auctor ullamcorper metus varius Mauris sodales risus adipiscing tempor in at varius ipsum sollicitudin. ac. Mauris rhoncus, risus sit amet nisl commodo lacus. Fusce scelerisque Suspendisse at velit nisi, ut tristique semper, eros id pellentesque lacus arcu in nulla viverra sit amet vehicula lacus. tortor pellentesque ligula, ullamcorper. Praesent euismod. In gravida felis Nam sit amet malesuada in ullamcorper velit erat summary. ultricies pharetra enim, quis diam porta dapibus. dolor. Donec ultricies, ut eros. Etiam et velit eu venenatis nisi vehicula Ut fermentum sollicitudin sapien nec pellentesque orci. Proin mollis laoreet id. Curabitur facilisis, felis elementum. Suspendisse vehicula, justo nibh mattis nunc vel ullamcorper. Ut vel mollis rutrum, nisi eu ligula tortor, ac gravida velit, et volutpat felis nibh venenatis eleifend nulla, nibh commodo nibh, a elit. In mattis ultrices id dolor. Curabitur id elit nec feugiat quam ultrices cursus augue nibh vel nibh. velit bibendum tristique. metus. Phasellus at lacus faucibus. Cras pharetra Curabitur pretium lorem Vivamus porta nunc ac eros, eu blandit arcu. suscipit sagittis. Phasellus at mauris aliquam tempor nunc gravida hendrerit Maecenas sit amet nunc dui magna, porttitor at hendrerit nisi tristique. condimentum in magna. at turpis pulvinar porttitor. accumsan eu, faucibus ac Suspendisse mollis, tortor Sed blandit lacinia semper. Sed euismod fringilla diam enim. Mauris porta, nisi vel in porttitor pretium, ipsum Maecenas purus nulla, ut ullamcorper. Maecenas faucibus aliquet, lacus velit sem condimentum libero, condimentum vel rhoncus What does the ultricies nisi, future look like arcu nibh quis nibh lacus. Integer online eu ultricies eget posuere viverra, volutpat vitae for Australian consumersipsum. retailers? faucibus odio iaculis eros aliquet in venenatis nulla sapien ipsum quis and gravida mi. Pellentesque Aliquam tellus neque, et est ligula. Curabitur mi. Praesent ante risus, ullamcorper id luctus at, dignissim. Vestibulum sed ultrices quis posuere sit dignissim convallis ante a faucibus quis nibh. Donec elit The Australian eros. dolor, id pretium eCommerce industry is et lorem. amet, imperdiet experiencing tremendous growth as sodales. Nullam congue, vestibulum, ipsum molestie Mauris blandit venenatis retailers and consumers lorem luctus mollis blandit, embrace the benefits of transacting online. At PayPal,fringilla vulputate, arcu consectetur. Etiam at leo Phasellus eu justo sed risusrole in mi aliquet turpis, non we enable these transactions and play a critical dui facilitating eCommerce sem scelerisque erat, eget velit, id ultricies mauris. amongst Australian imperdiet condimentum. pharetra enim mi id enim. businesses and consumers. Indeed, transactions for our tincidunt nibh arcu in nibh. Duis mattis lacinia odio, 34,000 registered Aenean fermentum augue cent yearnisl augue, aliquet businesses have grown 19 per Quisque on year and 3.5 Maecenas pretium, turpis pulvinar dictum mauris now choose to carry out their transactions online id, million Australians condimentum tellus sit amet dignissim ac venenatis tincidunt, dapibus et. Vestibulum with PayPal. auctor ornare. Curabitur varius eu leo. Curabitur eros nisi pellentesque urna nunc, condimentum dolor dolor, laoreet eu ullamcorper, est non mollis massa, non imperdiet erat Frerk-Malte Feller nonEnabling eCommerce consequat laoreet, iaculis in, varius id arcu. for businesses and consumers is central sem facilisis auctor, neque to PayPal’s felis in odio. Director, PayPal Australia Managing consectetur sit amet proposition. As the safest, mostlacinia enim in convenient way to pay online, Aliquam secure and lacus, vitae semper ante augue. Nullam cursus, sem it is in our interests to libero viverra ultrices. help grow and develop this take an active role to erat non arcu. Phasellus Lorem ipsum dolor sit amet euismod lobortis, Curabitur at mollis dolor. adipiscing orci eget ligula booming industry. PayPal’s research report, ‘eCommerce: Secure Insight’, sit amet, consectetur augue nulla ultrices arcu, Fusce condimentum ipsum and The Leading Edge, developed in conjunction with Forrester Research malesuada nec interdum adipiscing elit. Nullam nonprovides unprecedented insight into bibendum. state of the ever growing sodales lacus metus eu dui viverra the current leo semper. Vivamus tempor, mauris volutpat adipiscing libero. Integer Proin sollicitudin, tortorAU$36.8 billion by 2013, nisl, Australian eCommerce market, set to reach dignissim fermentum sodales dictum, sem lectus elementum, diam nec ut sollicitudin interdum, ultricies suscipit diam up from a forecasted figure for calendar year 2010 of AU$26.86 billion. aliquam felis, id venenatis egestas ultrices, lacus leo be driven predominantly vestibulum at. Nam sed This significant growth will augue cursus nisi, at by consumer adoption nisi erat eu nisl. Curabitur ipsum posuere mauris, and better customer experiences. eros sit amet tempor nulla faucibus lacus. Donec a auctor turpis in enim auctor ut gravida sapien mauris neque. Integer dui neque, augue diam. at varius ipsum sollicitudin. commodo purus. laoreet eget gravida nec, Suspendisse at velit nisi, consectetur quis ligula. Proin sit amet libero sit amet vehicula lacus. Phasellus euismod, nibh Curabitur condimentum ante, ut adipiscing dui. Nam sit amet malesuada eCommerce Secure Insight - Page
    • EXECUTIVE SUMMARY A ustralians are now seeing the true benefits of online retail. Over the last year a number of major retailers have entered the online space, and retailers are beginning to respond to consumer demand by offering broader ranges online, along with transparent transaction, shipping and return policies. Another key driver of this growth is consumer adoption of new channels and technologies. Consumers are no longer satisfied with a separate ‘in-store’ and ‘online’ retail experience, they want to be able to buy what they want, from where they want, how they want. This calls for a truly multi-channel approach from retailers, providing the ultimate consumer experience. With the explosion of web enabled mobile devices, PayPal Australia has seen a 12 fold increase in mobile payment volumes over the last year, increasing from a value of $2.7 million in 2009 to $35 million to date in 2010. This trend is just emerging, we predict that this number will continue to grow at such rapid pace as retailers respond to consumer demand and offer consumers an innovative customer experience. One of the most gratifying findings from our research is that recent category growth is being driven by domestic retailers, and this is a trend that is set to continue. The convenience that consumers are being offered is a great credit to the calibre of the online retail offerings that are already available in Australia. PayPal Australia’s growth figures are outpacing those of the industry and we have seen double digit growth in the last year. Our research shows that consumers prefer buying from merchants who accept PayPal as it provides them with a safer, more secure and convenient payment process. We are also pleased to see a strong desire by our retailers to continue to improve this experience, embracing both social and mobile trends to deliver more fluid and integrated online stores, thereby increasing sales. While domestic eCommerce is growing fast, Australian retailers cannot ignore the number of Australians shopping overseas. Indeed, PayPal figures show a 74 per cent increase in the amount of money sent overseas in the last year alone. The number of overseas shoppers using PayPal is also increasing, at the beginning of 2008, approximately 465,822 customers made an overseas transaction and in September 2010, a staggering 1.2 million Australians bought online from overseas retailers. Surprisingly, it is not the strength of the Aussie dollar that was the main driver for consumer shopping overseas, it is the range of goods on offer overseas that is really driving local shoppers to buy offshore. Our research demonstrated a strong preference to “buy Aussie” with nearly a quarter of Australian adults only shopping online with domestic websites. Retailers need to realise that they are not solely competing with their international counterparts on price, presenting a call to action to expand their online offerings and capture the share of the market that is going overseas. As cliché as it may sound, the online world is a huge global shopping mall. The merchants that get noticed are those whose online stores deliver a best-practice end to end customer experience. Product range is not sufficient; it must be paired with an easy to navigate site, a great checkout experience, a clear returns policy, accessible customer support, and a good packaging and handling solution. PayPal can help by ensuring that consumers experience a safe, secure and convenient eCommerce Secure Insight - Page 2
    • INTRODUCTION EXECUTIVE SUMMARY Lorem ipsum dolor sit amet, consectetur adipiscing elit. the world. Businesses that think ahead of the game, Phasellus transaction process, wherever they are in ultrices faucibus. Cras pharetra suscipit sagittis. Nullam tempor, mauris volutpat sodales dictum, sem particularly about meeting the future needs and dui magna, porttitor at accumsan eu, that desires of their customers, are those faucibus ac enim. lectus aliquam felis, id venenatis nisi erat eu nisl. Curabitur will prosper online. Mauris porta, nisi vel faucibus aliquet, lacus velit ultricies auctor turpis in enim auctor at varius ipsum sollicitudin. nisi, eu ultricies sapien ipsum quis ipsum. Aliquam tellus Suspendisse at velit nisi, sit amet vehicula lacus. Nam boxes, it is about providing a fantastic customer eCommerce is not merely about shifting neque, ultrices quis posuere sit amet, imperdiet et lorem. sit amet malesuada dolor. It is quite simplysapien responding to consumer demand in the most effective way experience. Donec ultricies, about nec possible. Some consumers see benefit in havingPhasellus euvast rangerisus imperdiet condimentum. pellentesque vehicula, justo nibh mattis velit, et volutpat access to a justo sed of inventory, others appreciate the convenience of having bulky items home delivered. Merchants must assess felis nibh id dolor. Curabitur id elit metus. Phasellus at Aenean fermentum augue condimentum tellus auctor lacus eros, euconsumer need and then look to the best solutions to deliver the experience – laoreet eu iaculis in, varius blandit arcu. Maecenas sit amet nunc at ornare. Curabitur dolor dolor, be it online, off-line or on mobile devices. turpis pulvinar porttitor. Sed euismod fringilla diam ut id arcu. Aliquam lacinia enim in libero viverra ultrices. ullamcorper. Maecenas quis nibh lacus. Integer faucibus Curabitur at mollis dolor. Fusce condimentum ipsum eu dui This fantastic customer experience needs to roleviverra bibendum. Proin sollicitudin, tortor ut sollicitudin odio iaculis eros aliquet in venenatis nulla dignissim. out across the entire eCommerce process. Vestibulum sed elitbusinesses and consumers need to feel confident that they can cursus nisi, at tempor nulla eros sit Both dolor, id pretium eros. Mauris blandit interdum, leo augue both pay, and be paid securely venenatis consectetur. Etiam atPayPal comes into the equation. We are proud to be dui neque, laoreet eget gravida nec, and this is where leo velit, id ultricies amet neque. Integer considered by many as the mauris. Duis mattis lacinia secure and most convenient way toconsecteturpaid online. Curabitur condimentum nisi nec safest, most odio, pulvinar dictum mauris pay and be quis ligula. dapibus et. Vestibulum urna nunc, condimentum non odio sollicitudin id blandit lacus mollis. Nulla ac accumsan consequat laoreet, consectetur sit amet augue. Nullam heavily investing to make that process even simpler But we’re not resting on our laurels, and are arcu. cursus, sem sit amet euismod lobortis,launched a simple 2 click payment process for iPhone applications and a and easier. We have just augue nulla ultrices arcu, non sodales lacus experience that enables consumers to pay for content dictum nunc. Nullam id mi ut new digital goods metus adipiscing libero. Quisque id mi nisl, vitae in context without having Integer elementum, diam nec egestas ultrices,enjoying – be it a news article, streaming movies, orrisuspurchase nisl to leave the experience they are lacus nisi laoreet semper. Mauris sodales the sit amet ipsum posuere mauris,character in a video game.commodo to say, customer experience along with safety and of a new ut gravida sapien mauris Needless commodo id pellentesque lacus ullamcorper. Praesent purus. security sits at the core of all of our innovations. ultricies pharetra enim, eu venenatis nisi vehicula id. Curabitur facilisis, felis vel mollis rutrum, nisi nibh Phasellus euismod, nibh vitae tincidunt ornare, nisi less cash floating around thecursus augue nibh vel nibh. Curabitur In five years or less, when there is far commodo nibh, a world, we will do everything eros dictum magna, nec fringilla nibh ligula egetlunch, download a news article,mauris aliquam tempor hendrerit nisi from catch a bus to work, buy our tortor. pretium lorem at pay our personal trainer, buy In viverra quam eget sem a present and order eget dui.night takeaway, all using a webmollis, tortor in porttitor pretium, our partner aliquet hendrerit in a Friday tristique. Suspendisse enabled mobile device Praesent convallis just a couple adipiscing ullamcorper with mattis nunc, of clicks every time. Mobile devices are shaping the way we liveegetlives today ipsum sem condimentum libero, our posuere arcu nibh and businesses are challenged to integrate their gravida mi. Pellentesque et est ligula. these devices. metus varius ac. Mauris rhoncus, risus ut tristique semper, offerings, in a user-friendly way onto Curabitur dignissim eros tortor pellentesque ligula, in ullamcorperwe have already seen great successes, and at PayPal, we look luctus Whilst a substantial challenge, velit erat convallis ante a sodales. Nullam congue, lorem ut eros. Etiamforwardorci. Proin mollis businesses tovel et velit to working with laoreet nunc enable customer transactions, aliquet turpis, non pharetra enim mi mollis blandit, dui mi wherever they may take ullamcorper. Ut venenatis eleifend safestnec feugiat quam wayid enim. Quisque nisl augue, aliquet sit amet dignissim id, place, in the fastest, nulla, and most secure possible. I hope you enjoy the report and find the results both informative and valuable in helping to understand the future shape and key drivers to the Australian eCommerce industry in Australia. We at PayPal look forward in shaping this future together with you. Yours, Frerk-Malte Feller Managing Director PayPal Australia eCommerce Secure Insight - Page eCommerce Secure Insight - Page 3
    • eCommerce Secure Insight - Page
    • forrester research. The Australian eCommerce landscape has evolved rapidly within the last twelve months. Small businesses in Australia are increasingly adopting online business models and we have seen a number of well established bricks and mortar businesses building an online presence. With over 34,000 Australian businesses transacting online with PayPal, a number that is rapidly growing, we thought it important to provide a comprehensive overview of the eCommerce market in Australia along with strategic insights into business attitudes towards online retail. We partnered with leading global researchers, Forrester Research to investigate. eCommerce Secure Insight - Page
    • FORRESTER CONSUlTINg - ThE bUSINESS OF AUSTRAlIAN ONlINE RETAIl The Business Of AusTrAliAn Online reTAil ThE ChAllENgES AND OppORTUNITIES FACINg AUSTRAlIAN bUSINESS DURINg ThE ONlINE RETAIl bOOM OF 2010 NOVEMbER 2010 TAblE OF CONTENTS Executive Summary 6 Australian Online Retail Is Strong And Growing 7 Companies Experience Growing Pains As They Expand And Adapt 9 Key Recommendations 13 Appendix A: Methodology 13 Appendix B: Supplemental Material 13 Appendix C: Endnotes 13 © 2010, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to www.forrester.com. 1-HLJSMR. AbOUT FORRESTER CONSUlTINg Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester’s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit www.forrester.com/consulting. EXECUTIVE SUMMARY 2010 has been a year of extraordinary growth for online retail in Australia. But this boom has not just been economic. There has also been an increase in debate about Australian online retail the sector, as Australian merchants think again about whether and how they should is surging, but Australian serve their customers via the Internet. Unfortunately, there is the perception that merchants face challenges Australian business has largely missed the online retailing opportunity. However, with recruitment, logistics, a private market size evaluation and forecast that eBay commissions from Forrester marketing, and price Consulting each quarter shows that domestic online retail is booming in Australia. competition. Australian businesses that are willing to experiment, innovate, and learn from their customers and their peers could find themselves in the perfect position to exploit this growth. To better understand the challenges and opportunities that face Australian merchants today, Forrester Consulting surveyed 114 Australian online retail professionals. This report is Forrester Consulting’s analysis of that survey of online retail professionals, as well as of an earlier, similar survey that Forrester Research completed in partnership with Online Retailer Expo & Conference 2010, and the private market size evaluation and forecast that Forrester Consulting prepares for eBay. eCommerce Secure Insight - Page 6
    • INTRODUCTION FORRESTER CONSUlTINg - ThE bUSINESS OF AUSTRAlIAN ONlINE RETAIl KEY FINDINgS Forrester’s study yielded four key findings: • For multichannel retailers, one challenge is their reliance on traditional channels. Businesses that sell • Australian online retail, including domestic retail, through their physical stores as well as online channels is booming. While imports are important, most online still rely on the former channel for most of their sales. retail purchases are local. Overall, Australian online retail As a result, they tend to favor those channels, providing — including auctions, imports, and travel — will reach them with better access to product and protecting $36.81 billion per annum in 2013. The largest segments them against disruption whenever possible when then will be the same as today: travel and groceries. venturing online. • Despite this boom, Australian online retailers • Delivery is one challenge that many retailers are face many challenges. Four of the biggest issues willing to invest in defeating. Dissatisfaction with that online retail professionals said they faced current delivery methods runs deep, with the high were recruiting and retaining appropriately skilled cost of delivery being the most common complaint. staff, managing logistics, responding to low-priced Nonetheless, Australian online retailers will increasingly competitors, and controlling the relative cost and provide costly services, like free delivery and returns, effectiveness of marketing. in the year ahead. AusTrAliAn Online reTAil is sTrOng And grOwing Every quarter, Forrester Consulting sizes and forecasts The strength of domestic online retail is reinforced by the Australian online retail market for eBay, using a model the fact that many of the priciest items (like plane travel that includes travel, auctions, and imports in addition to and the most common online purchases (like groceries domestic online retail. This private study shows that: are largely fulfilled and supported through Australian Web sites. • Australian online retail’s growth is strong and sustained. Australian online retail, including • Travel and groceries combined are almost half of travel, auctions, and imports, is growing rapidly in all Australian online retail. Due to the frequency with Australia, from $24.02 billion in 2009 to a projected whichsome households buy groceries — which $26.86billion in 2010 (see Figure 1). The rate of growth includes pantry items, alcohol and other consumable in 2010 was particularly high, driven by the launch household goods like pet supplies — this is the single of new online stores, a surging Australian dollar, and largest category in Australian online retail (see Figure continued increases in the proportion of Australians 2). This segment is closely followed by travel, where who shop online. Likewise, the three years to 2013 will vendors and consumers alike have quickly adopted see growth driven by similar factors. online retail because of its efficiency. In the three years ahead, the categories that will be the strongest will be • Domestic retail is holding its own. The share of those that already dominate Australian online retail Australian online consumption that consists of imports today. However, music and video will post the strongest varies across categories, as well as between auctions growth as the Internet continues to migrate from the and fixed-price retail. It can also rise and fall in the study to the living room and the pocket, encouraging short term in line with the fortunes of the Australian more consumers to buy content online via the same dollar. However, despite this variation, the medium- devices they use to consume it. term trend is for roughly four-fifths of all Australian online expenditures to be placed with local Web sites. eCommerce Secure Insight - Page 7
    • FORRESTER CONSUlTINg - ThE bUSINESS OF AUSTRAlIAN ONlINE RETAIl Figure 1 Australian Online Retail - Both Imports And Domestic - Is Booming $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 0 Source: A commissioned study conducted by Forrester Consulting on behalf of eBay, Q3 2010 Source: Forrester Research, Inc. Source: Forrester Research, Inc. Figure 2-1 Travel And Groceries Are The Largest Segments In Australian Online Retail Figure 2-1 Travel And Groceries Are The Largest Segments In Australian Online Retail Apparel, $1,437 accessories, $1,559 $1,772 and footwear $2,025 Appliances $2,664 and home $2,961 improvement $3,249 $3,569 $768 Art and $839 collectibles $942 $1,079 $813 Auto parts $875 $948 $1,004 $606 Books $646 $700 $751 $2,592 Computer- $2,897 related $3,199 $3,604 $1,628 Consumer $1,879 electronics $2,086 $2,319 $245 Flowers $266 $288 $310 $577 Furniture $636 $718 $792 $4,998 Groceries $5,541 $6,358 $7,175 $562 Jewelry $612 $674 $752 $271 Medicine and $293 personal care $317 $339 $870 Music/video $1,002 $1,165 $1,293 $282 Office $303 products $322 $343 $515 2010 Sporting $542 goods $597 2011 $662 $690 Toys and $756 2012 video games $833 $943 2013 Total online spend on auction and retail in millions of $AU Source: A commissioned study conducted by Forrester Consulting on behalf of eBay, Q3 2010 Source: A commissioned study conducted by Forrester Consulting on behalf of eBay, Q3 Research, Inc. Source: Forrester 2010 Source: Forrester Research, Inc. eCommerce Secure Insight - Page 8
    • INTRODUCTION FORRESTER CONSUlTINg - ThE bUSINESS OF AUSTRAlIAN ONlINE RETAIl Figure 2-2 Travel And Groceries Are The Largest Segments In Australian Online Retail Source: A commissioned study conducted by Forrester Consulting on behalf of eBay, Q3 2010 Source: Forrester Research, Inc. META# Source: Forrester Research, Inc. COmpAnies experienCe grOwing pAins META# Source: Forrester Research, Inc. As They expAnd And AdApT Many Australian merchants are growing strongly, in line • Smaller firms face challenges with logistics. with the overall surge in online retail. However, they face Smaller firms tend to have shorter histories with significant challenges that will affect how well each of managing inherently complex tasks such as receiving, them can ride the wave. warehousing, and dispatching goods. Likewise, the smaller the retailer, the less able it is to fund major WhIlE gROWINg, AUSTRAlIAN ONlINE RETAIlERS investments in software or facilities that could help FACE ChAllENgES streamline processes like these. For small companies, managing logistics can be a major cause of angst. Certain challenges that confront online retailers are more common with some types of firms than others. The size • pure plays face challenges with marketing. of the retailer’s online channel and whether the retailer A significant brand name is a huge head start when has a bricks-and-mortar channel are both important in it comes to marketing. An Australian business that has determining which challenges matter most to each market built up its brand through decades of traditional retail (see Figure 3). Specifically: can interact with its customers many thousands of times a day, through events that range from physical • larger firms and multichannel retailers face store visits to online traffic. Each of these interactions greater challenges with recruitment. Larger is an opportunity to cost-effectively market the online firms have more to lose than smaller firms, as do store. By contrast, Australian pure plays must fight multichannel retailers with successful bricks- harder for every customer. For them, the cost and and-mortar channels. As a result, such retailers effectiveness of marketing are eternal challenges. can be risk averse. Their appetite for on-the-job learning and experimentation is lower, and they MUlTIChANNEl RETAIlERS ARE STIll TRADITIONAl prefer to hire eCommerce professionals who have RETAIlERS FIRST the proven ability to manage large budgets, multichannel relationships, and/or complicated Managing multiple sales channels — such as an online eCommerce projects. Such experienced professionals store plus traditional retail — is difficult because of the are hard to find and keep, especially in Australia, large number of customer touchpoints, the complexity with its smaller eCommerce market. of managing operations and the customer experience across channels, and the tendency for each channel to eCommerce Secure Insight - Page 9
    • FORRESTER CONSUlTINg - ThE bUSINESS OF AUSTRAlIAN ONlINE RETAIl compete with the others for the attention of the business. investment in delivery services in the year ahead, adding Freed of these cross-channel constraints, pure plays have options that customers value highly such as free shipping flourished in Australia. On the other hand, multichannel and returns. retailers are evolving more slowly, which is reinforced by the fact that: • Overall, cost of delivery is the greatest source of dissatisfaction. Some of the online retail professionals • Traditional channels still dominate their that were dissatisfied with delivery were able to provide retail trade. Online retailers that have bricks-and- an explanation of their experience. The only retailer mortar stores still make most of their sales through who explained why it was dissatisfied with having its those stores. Of the 40 multichannel retailers that own staff deliver its goods said it was because of the felt able to estimate how their sales were split across high cost of this form of delivery. High cost also channels, 31 said that online channels accounted for accounted for three of the seven explanations 30% or less of their total sales. What’s more, 24 said of dissatisfaction with Australia Post, three out of they expected online channels to still account for 30% four regarding local courier companies, one out of of less of their total sales in the year ahead. For some two regarding customers collecting their purchases time into the future, most multichannel retailers will themselves, and the only explanations given for rely on their traditional channels. dissatisfaction with direct downloads and global courier companies. • Traditional channels still enjoy greater access to product. Theoretically, an online store can provide • Other factors compounded merchant customers with infinite product variety. However, dissatisfaction with the cheapest delivery the reality is that the cost of online ranging and product methods. Two of the four retailers that explained content management can increase with the number of their dissatisfaction with local courier companies cited products. The result is that multichannel retailers unreliable delivery, as did four out of seven that tend to offer a fuller range of products in their bricks- explained their dissatisfaction with Australia Post and-mortar stores (see Figure 4). Of 46 multichannel Geographic reach accounted for two out of four retailers, 37 sometimes, often, or always offer products explanations of dissatisfaction with local courier through their bricks-and-mortar stores that they do companies. With Australia Post, three out of seven not offer online. Conversely, just 24 of these explanations mentioned maximum shipment sizes. multichannel retailers sometimes, often, or always offer This was in addition to the dissatisfaction they products online that they do not offer through their expressed with the price of these services. bricks-and-mortar stores. (Multiple responses were permitted.) • Traditional channels usually command equal or • Despite these challenges, retailers will invest to higher prices. Of the 41 multichannel retailers that improve their delivery. While costly, providing better were able to identify a consistent pattern in their delivery options is one of the most important ways in online and physical store prices, 17 sometimes or which online retailers can compete. In particular, usually charged a lower price online, 21 usually charged providing free delivery and return helps customers the same across channels, and just three usually or to become more comfortable with high-risk online sometimes charged a higher price online. Among the purchases, such as ordering clothing and footwear that stores that sometimes or usually charge less online, might not fit. Aware of this, Australian online retailers the average price differential is 10%. are planning costly improvements to their delivery service in the year ahead (see Figure 5). Twenty-two DElIVERY IS A hEADAChE FOR AUSTRAlIAN ONlINE percent will introduce next-day delivery, in addition to RETAIlERS, bUT IT IS AlSO A KEY TO SUCCESS the 31% that already provide it. Twenty-one percent will introduce free delivery, taking the total that provide this Australian online retailers struggle with the price of service to 62%. Sixteen percent will provide free delivery, and to a lesser extent with issues of reliability returns, on top of the 26% that do this already. And 18% of delivery, geographic reach, and maximum package will let customers select the time of delivery, which sizes. Nonetheless, they are planning to increase their only 18% of Australian online retailers support today. eCommerce Secure Insight - Page 10
    • INTRODUCTION FORRESTER CONSUlTINg - ThE bUSINESS OF AUSTRAlIAN ONlINE RETAIl Figure 3 Size, Scale, And Focus Create Different Online Retail Challenges META# Source: A commissioned study conducted by Forrester Consulting on behalf of eBay, Q3Source: Forrester Research, Inc. 2010 Source: Forrester Research, Inc. eCommerce Secure Insight - Page 11
    • FORRESTER CONSUlTINg - ThE bUSINESS OF AUSTRAlIAN ONlINE RETAIl Figure 4 Multichannel Retailers Are More Likely To Offer Products In-Store Figure 5 Australian Online Retailers Will Invest In Better Delivery Replace text with Source: A commissioned study conducted by Forrester Consulting on behalf of eBay, Source: Forrester Research, Inc. meta id number >> META# Q3 2010 Source: Forrester Research, Inc. Figure 5 Australian Online Retailers Will Invest In Better Delivery 71% 47% Next-day delivery 31% Letting the 22% customer select the time of 18% delivery 11% Currently Plan to provide Do not plan to provide in the next 12 months provide in the next 12 months Base: 46 Australian online retail professionals who work for or own multichannel retailers Source: A commissioned study conducted by Forrester Consulting on behalf of PayPal Australia, October 2010 Source: A commissioned study conducted by Forrester Consulting on behalf of eBay, Q3 2010 META# Source: Forrester Research, Inc. Source: Forrester Research, Inc. eCommerce Secure Insight - Page 12
    • INTRODUCTION FORRESTER CONSUlTINg - ThE bUSINESS OF AUSTRAlIAN ONlINE RETAIl Key reCOmmendATiOns While online retail is booming in Australia, it still faces challenges. New and existing merchants, suppliers to the sector, and the industry as a whole should take decisive action designed to relieve these pressures. In particular: • Multichannel retailers should reorganize around customers, not channels. At present, traditional channels account for most sales in multichannel businesses, and this can be seen as a powerful argument against dramatic change. But from the customers’ point of view, channels are just a means to an end. From their point of view, the most important issue is that they can access brands, channels, and products at whatever time and place they want, using whatever means make sense to them. To better meet such customer needs, therefore growing the business over the longer term, multichannel retailers should organize their business and create team incentives that are tied to customer goals, such as ease of doing business, more than to channel-specific performance metrics. • New players should disrupt Australian logistics. There are many operators in Australia’s delivery market, but most of the current delivery models are nearly identical: The provider delivers the product individually to the customer’s door. But other models are possible. For example, larger retailers that own their own fleets could deliver goods on behalf of other companies. For example, a customer might wait for her next grocery delivery to return clothing that doesn’t fit free of charge. Likewise, shopping centre owners could provide online order pickup bays for their tenants. The goal would be to make it simple and affordable for Australian retailers to provide unprecedented levels of service to their customers, including delivery. • The online industry should promote Australia as a career destination in the US and UK. While online retail is booming in the US and UK, both economies are still suffering, and some experienced online retail professionals from the US and UK might expect greater job security or a more relaxed lifestyle in Australia. They would certainly find greater opportunities to fast-track their careers in Australia based on their existing experience in their home markets. The online retail industry should work to relieve the skills shortage in Australia by encouraging temporary and permanent migration by overseas eCommerce professionals • Domestic online retailers should trumpet their successes. Current debate in Australia highlights what’s wrong with Australian online retail, with a focus on imports as well as the handful of iconic Australian retail brands that are not currently selling online. Successful Australian online retailers should step forward to tell the other side of the story. If domestic online retail is to continue to prosper, it needs a continuous supply of talented individuals who have confidence in the sector’s ability to perform in Australia. Leading retailers and the industry as a whole should encourage this optimism. AppENDIX Appendix A: Methodology In this study, Forrester conducted an online survey of 114 Australian online retail professionals to evaluate the opportunities and challenges they face during Australia’s current online retailing boom. Survey participants included decision-makers in leadership and full-time professional roles in the online retail sector in Australia. The survey asked participants about their online business performance, their use of all retail channels, and how they manage logistics and other challenges. Respondents were offered a free copy of this report as a thank you for time spent on the survey. The study began in September 2010 and was completed in October 2010. Appendix b: Supplemental Material Related Forrester Research “Online Retailing In Australia 2010: Technology Investment,” Forrester Research, Inc., August 19, 2010 “Online Retailing In Australia 2010: Performance And Channels,” Forrester Research, Inc., August 2, 2010 “Online Retailing In Australia 2010: Marketing, Merchandising, And Customer Service,” Forrester Research, Inc., July 6, 2010 Appendix C: Endnotes 1 On average, current Australian online retailers surveyed in Q1 2010 expected their sales to grow by 30% in the year ahead, outstripping the 3% growth that the IMF was then predicting for Australia’s economy as a whole. What’s more, 70% of respondents expected their business to grow by more than 10%, and only three out of 334 respondents were anticipating a contraction. Source: “Online Retailing In Australia 2010: Performance And Channels,” Forrester Research, Inc., August 2, 2010. 2 Overall, search marketing is the most popular marketing technique used by Australian online retail professionals because of its flexibility and cost-effectiveness. Cross-channel promotion is also popular with those who work in multichannel businesses. Source: “Online Retailing In Australia 2010: Performance And Channels,” Forrester Research, Inc., August 2, 2010. 3 Of the 334 Australian online retail professionals who responded to a Forrester Research and Online Retailer Expo & Conference 2010 survey in Q1 2010, 224 owned or worked for a business that had no bricks-and- mortar presence. Source: “Online Retailing In Australia 2010: Performance And Channels,” Forrester Research, Inc., August 2, 2010. 4 Improved content on the site is the leading area of investment that Australian online retail professionals identified for their businesses when surveyed in Q1 2010. Source: “Online Retailing In Australia 2010: Marketing, Merchandising, And Customer Service,” Forrester Research, Inc., July 6, 2010. The core eCommerce platform and the content management system are the two leading technology investment priorities, driven in part by the need to reduce the cost and complexity of product content management. Source: “Online Retailing In Australia 2010: Technology Investment,” Forrester Research, Inc., August 19, 2010. eCommerce Secure Insight - Page 13
    • INTRODUCTION the Lorem ipsum dolor vitae tincidunt ornare, nisi nisi nec odio sollicitudin id Suspendisse nec felis leo, sit amet, consectetur eros dictum magna, nec blandit lacus mollis. Nulla non tempus dolor. Integer adipiscing elit. Nullam fringilla nibh ligula eget ac accumsan arcu. cursus mi quis mi pulvinar tempor, mauris volutpat tortor. In viverra quam eget laoreet. Nullam ipsum orci, sodales dictum, sem lectus sem aliquet hendrerit in Quisque id mi nisl, vitae ullamcorper eu elementum leading aliquam felis, id venenatis eget dui. Praesent convallis dictum nunc. Nullam id vel, mattis ac velit. Nulla nisi erat eu nisl. Curabitur mattis nunc, adipiscing mi ut nisi laoreet semper. nec neque a est fermentum auctor turpis in enim auctor ullamcorper metus varius Mauris sodales risus adipiscing tempor in at varius ipsum sollicitudin. ac. Mauris rhoncus, risus sit amet nisl commodo lacus. Fusce scelerisque Suspendisse at velit nisi, ut tristique semper, eros id pellentesque lacus arcu in nulla viverra sit amet vehicula lacus. tortor pellentesque ligula, ullamcorper. Praesent euismod. In gravida felis Nam sit amet malesuada in ullamcorper velit erat ultricies pharetra enim, quis diam porta dapibus. edge dolor. Donec ultricies, ut eros. Etiam et velit eu venenatis nisi vehicula Ut fermentum sollicitudin sapien nec pellentesque orci. Proin mollis laoreet id. Curabitur facilisis, felis elementum. Suspendisse vehicula, justo nibh mattis nunc vel ullamcorper. Ut vel mollis rutrum, nisi eu ligula tortor, ac gravida velit, et volutpat felis nibh venenatis eleifend nulla, nibh commodo nibh, a elit. In mattis ultrices id dolor. Curabitur id elit nec feugiat quam ultrices cursus augue nibh vel nibh. velit bibendum tristique. metus. Phasellus at lacus faucibus. Cras pharetra Curabitur pretium lorem Vivamus porta nunc ac research. eros, eu blandit arcu. suscipit sagittis. Phasellus at mauris aliquam tempor nunc gravida hendrerit Maecenas sit amet nunc dui magna, porttitor at hendrerit nisi tristique. condimentum in magna. at turpis pulvinar porttitor. accumsan eu, faucibus ac Suspendisse mollis, tortor Sed blandit lacinia semper. Sed euismod fringilla diam enim. Mauris porta, nisi vel in porttitor pretium, ipsum Maecenas purus nulla, ut ullamcorper. Maecenas faucibus aliquet, lacus velit sem condimentum libero, condimentum vel rhoncus quis nibh lacus. Integer ultricies nisi, eu ultricies eget posuere arcu nibh viverra, volutpat vitae faucibus odio iaculis eros sapien ipsum quis ipsum. gravida mi. Pellentesque mi. Praesent ante risus, aliquet in venenatis nulla Aliquam tellus neque, et est ligula. Curabitur ullamcorper id luctus at, dignissim. Vestibulum sed ultrices quis posuere sit dignissim convallis ante a faucibus quis nibh. Donec elit dolor, id pretium eros. amet, imperdiet et lorem. sodales. Nullam congue, vestibulum, ipsum molestie Mauris blandit venenatis lorem luctus mollis blandit, fringilla vulputate, arcu The proportion Phasellus eu justo sed risus dui mi aliquet turpis, non sem scelerisque erat, eget consectetur. Etiam at leo of Australian retail spend going online is ever increasing as consumers learn velit, id ultricies mauris. imperdiet condimentum. pharetra enim mi id enim. tincidunt nibh arcu in nibh. Duis mattis lacinia odio, Aenean fermentum augue Quisque nisl augue, aliquet Maecenas pretium, turpis thedictum mauris of clicks over bricks. Indeed, 3.5 pulvinar benefits condimentum tellus sit amet dignissim id, ac venenatis tincidunt, million Australian consumers dapibus et. Vestibulum auctor ornare. Curabitur now transact varius eu leo. Curabitur eros nisi pellentesque urna nunc, condimentum dolor dolor, laoreet eu ullamcorper, est non mollis massa, non imperdiet erat regularly online iaculis in, PayPal and auctor, neque sem facilisis felis in odio. non consequat laoreet, with varius id arcu. this number is consectetur sitResponding to consumerlacus, vitae semper ante the rising. amet Aliquam lacinia enim in demand are augue. Nullam cursus, sem libero viverra ultrices. erat non arcu. Phasellus Lorem ipsum dolor thousands of Australian businesses both large sit amet, consectetur sit amet euismod lobortis, Curabitur at mollis dolor. adipiscing orci eget ligula augue nullasmall building condimentum ipsum and ultrices arcu, Fusce their presence online. interdum malesuada nec So what adipiscing elit. Nullam non sodales lacus metus eu dui viverra bibendum. leo semper. Vivamus tempor, mauris volutpat does the Australian online consumer look like? sodales dictum, sem lectus adipiscing libero. Integer Proin sollicitudin, tortor dignissim fermentum nisl, What are their preferences when it comes elementum, diam nec ut sollicitudin interdum, ultricies suscipit diam aliquam felis, id venenatis egestas ultrices, lacus leo augue cursus nisi, at vestibulum at. Nam sed nisi erat eu nisl. Curabitur to posuere mauris, ipsum online shopping and what dofaucibus lacus. Donec a tempor nulla eros sit amet they really auctor turpis in enim auctor ut gravida sapien mauris the neque. Integer dui neque, think about world of eCommerce? augue diam. PayPal at varius ipsum sollicitudin. commodo purus. laoreet eget gravida nec, Suspendisse at velit nisi, partnered with consectetur quis ligula. Edge to amet libero The Leading Proin sit find out. sit amet vehicula lacus. Phasellus euismod, nibh Curabitur condimentum ante, ut adipiscing dui. Nam sit amet malesuada eCommerce Secure Insight - Page
    • ThE lEADINg EDgE RESEARCh Online shopping in Australia is booming and the demand from consumers for sophisticated and integrated online offerings from Australian retailers is ever present. Whilst Australian retailers are gearing up their presence online, Australian consumers are already there – ready and waiting. Understanding consumer behaviour and their drivers for shopping online is critical to any retailer in the online space. Working with PayPal, The Leading Edge conducted two studies to provide insight into the mind of the Australian Online Shopper. The Leading Edge is a strategic market research consultancy, working with many of Australia’s and the world’s biggest and best businesses and brands. The Leading Edge solves business problems through insights, uses creative solutions and delivers results. ThE METhODOlOgY • The first study involved a nationally representative telephone survey of 1,000 Australian adults to understand the size and make up of online shopping in Australia. • The second study consisted of an online survey exploring the opinions of 1,500 Australian online shoppers, aged 18 to 54 years old and their behaviour and attitudes to online shopping in Australia ONlINE ShOppERS IN AUSTRAlIA Unsurprisingly, the next most important set of reasons for shopping online reflect consumers seeking ‘Value; Access Online shoppers are no longer a niche of the Australian to Offers Not in Store’ (18%) and ‘Less Expensive’ (15%). population and it is near impossible to classify them into “When looking at overseas drivers, we found that these particular segments of the market. An Australian online differ dramatically from domestic drivers. Firstly, it’s not shopper is just as likely to be a teenage boy purchasing a about ease it’s about wider choice and selection of goods.” new computer game as a middle aged woman purchasing her preferred perfume. Almost one third of all those shopping from overseas websites state that ‘Access to Goods’ and ‘Services Not However, whilst there is a sweeping online demographic, Available in Australia’ (32%) is an important driver to the research shows more than a third (35%) of online overseas purchases. This is a somewhat surprising finding shoppers living in rural areas. This is somewhat surprising for those who considered price to be the key overseas as rural Australian’s often have poorer connections and driver and a call to action for Australian retailers to access to the Internet than their city counterparts. increase the selection of goods that they offer online. DRIVERS TO ONlINE ShOppINg Combining this with those who state there is ‘Greater The main drivers to shopping online from domestic Choice’ overseas (18%, it is clear that wider availability websites reflect the desire for ‘Convenience’, stated as overseas than in the Australian market is the key driver the most important factor by 39% of domestic online to international websites. shoppers; ‘Availability 24/7’ (22%) and; ‘ Easier than Value is also incredibly important to Australian Visiting a Store’ (17%). consumers. ‘Less Expensive goods and services’ (19%) are at a similar level in terms of importance to ‘Greater Choice’ eCommerce Secure Insight - Page 16
    • INTRODUCTION ThE lEADINg EDgE RESEARCh “When looking at overseas drivers, we found that these differ dramatically from domestic drivers. Firstly, it’s not about ease it’s about wider choice and selection of goods.” bARRIERS TO ONlINE ShOppINg OVERSEAS bARRIERS TO ONlINE ShOppINg DOMESTICAllY Not all online shoppers in Australia shop overseas, The most frequent reason for not shopping more online which is both good news and an opportunity for domestic is ‘Not Adequately Protected if Something Goes Wrong’ retailers; 23% of Australian adults only shop online with (33%). Many online shoppers still feel exposed and domestic websites. there are a further range of concerns apparent from the ‘Possibility of Fraud’ (26%) to ‘Providing Details Online’ (14%). A large number of Australians have a general Preference for Buying from Australian Companies. While this Beyond the emotional concerns there are more functional obviously reflects a “buy Aussie” mindset, it is also likely issues at play that limit online shoppers’ spend. Of these, that it reflects broader concerns of shopping overseas. the biggest issue is shoppers ‘Don’t Like Paying Delivery Costs’ (28%). Beyond the costs, ‘Product Interaction’ is One third of Australian consumers (33%) believe it is ‘Safer an issue; ‘Correctly Identifying the Right Size’ (25%) and to Buy from Australia’, while a similar number (30%) worry ‘Touch and Feel the Product’ (24%) are key issues where about ‘Stories of Fraud from Overseas Websites’, again online retailers can focus to help consumers make their presenting an opportunity for domestic retailers to target purchases with less stress, to activate further revenue for these consumers. the online marketplace. Other concerns include ‘Worry about Giving Payment Details’ (25%), ‘Who can Help if Things Go Wrong’ (24%) and ‘Worry what I Buy Won’t be Delivered’ (23%), it is clear that there is concern about getting burned and having nowhere to turn. COnClusiOn Australians are becoming smart online shoppers, looking to purchase goods both domestically and overseas. Although there are a number of barriers to entry, retailers are providing consumers with reassurance and tools to address their concerns such as safe payments and solid returns policies. Most notably is the opportunity for retailers to take advantage of the current Australian retail spend going abroad. The broader selection of goods, rather than price is the key driver to Australian retail spend going overseas and Australians are showing a genuine preference to shop at home grown retailers when they can. eCommerce Secure Insight - Page 17
    • eCommerce Secure Insight - Page 18
    • INTRODUCTION staying Lorem ipsum dolor vitae tincidunt ornare, nisi nisi nec odio sollicitudin id Suspendisse nec felis leo, sit amet, consectetur eros dictum magna, nec blandit lacus mollis. Nulla non tempus dolor. Integer adipiscing elit. Nullam fringilla nibh ligula eget ac accumsan arcu. cursus mi quis mi pulvinar tempor, mauris volutpat tortor. In viverra quam eget laoreet. Nullam ipsum orci, sodales dictum, sem lectus sem aliquet hendrerit in Quisque id mi nisl, vitae ullamcorper eu elementum aliquam felis, id venenatis eget dui. Praesent convallis dictum nunc. Nullam id vel, mattis ac velit. Nulla safe nisi erat eu nisl. Curabitur mattis nunc, adipiscing mi ut nisi laoreet semper. nec neque a est fermentum auctor turpis in enim auctor ullamcorper metus varius Mauris sodales risus adipiscing tempor in at varius ipsum sollicitudin. ac. Mauris rhoncus, risus sit amet nisl commodo lacus. Fusce scelerisque Suspendisse at velit nisi, ut tristique semper, eros id pellentesque lacus arcu in nulla viverra sit amet vehicula lacus. tortor pellentesque ligula, ullamcorper. Praesent euismod. In gravida felis Nam sit amet malesuada in ullamcorper velit erat ultricies pharetra enim, quis diam porta dapibus. dolor. Donec ultricies, ut eros. Etiam et velit eu venenatis nisi vehicula Ut fermentum sollicitudin online. sapien nec pellentesque orci. Proin mollis laoreet id. Curabitur facilisis, felis elementum. Suspendisse vehicula, justo nibh mattis nunc vel ullamcorper. Ut vel mollis rutrum, nisi eu ligula tortor, ac gravida velit, et volutpat felis nibh venenatis eleifend nulla, nibh commodo nibh, a elit. In mattis ultrices id dolor. Curabitur id elit nec feugiat quam ultrices cursus augue nibh vel nibh. velit bibendum tristique. metus. Phasellus at lacus faucibus. Cras pharetra Curabitur pretium lorem Vivamus porta nunc ac eros, eu blandit arcu. suscipit sagittis. Phasellus at mauris aliquam tempor nunc gravida hendrerit Maecenas sit amet nunc dui magna, porttitor at hendrerit nisi tristique. condimentum in magna. at turpis pulvinar porttitor. accumsan eu, faucibus ac Suspendisse mollis, tortor Sed blandit lacinia semper. Sed euismod fringilla diam enim. Mauris porta, nisi vel in porttitor pretium, ipsum Maecenas purus nulla, ut ullamcorper. Maecenas faucibus aliquet, lacus velit sem condimentum libero, condimentum vel rhoncus The number one concern for consumers nibh quis nibh lacus. Integer ultricies nisi, eu ultricies eget posuere arcu viverra, volutpat vitae when shopping online quis ipsum. security of their faucibus odio iaculis eros aliquet in venenatis nulla sapien ipsum is the gravida mi. Pellentesque Aliquam tellus neque, et est ligula. Curabitur mi. Praesent ante risus, ullamcorper id luctus at, personal details. Asquis posuere sit businessesante a dignissim. Vestibulum sed ultrices Australian dignissim convallis build faucibus quis nibh. Donec their presence amet, imperdiet et lorem. sodales. Nullam congue, elit dolor, id pretium eros. Mauris blandit venenatis online, the issue loremsecurityblandit, of luctus mollis vestibulum, ipsum molestie fringilla vulputate, arcu consectetur. Etiam at leo stay front ofsed risus must always Phasellus eu justo mind. dui mi aliquet turpis, non PayPal is built sem scelerisque erat, eget around security and condimentum. businesses, id enim. velit, id ultricies mauris. Duis mattis lacinia odio, imperdiet helping Aenean fermentum augue pharetra enim mi and Quisque nisl augue, aliquet tincidunt nibh arcu in nibh. Maecenas pretium, turpis consumers, to condimentum tellus pulvinar dictum mauris transact safely online dignissim id, sit amet sits at ac venenatis tincidunt, the core of our dolor dolor, laoreet eu We varius eu leo.Alastair dapibus et. Vestibulum urna nunc, condimentum proposition. auctor ornare. Curabitur asked est non mollis ullamcorper, Curabitur eros nisi pellentesque massa, non imperdiet erat nonMacGibbon, Founder ofidthe Internet Safety consequat laoreet, iaculis in, varius arcu. auctor, neque sem facilisis felis in odio. Institute, an Australian ultrices.in consectetur sit amet augue. Nullam cursus, sem libero viverra industry bodyarcu. Phasellus Aliquam lacinia enim that lacus, vitae semper ante erat non Lorem ipsum dolor exists to encourage at mollis dolor. sit amet euismod lobortis, Curabitur the collaboration orci eget ligula adipiscing between sit amet, consectetur businesses, government and international augue nulla ultrices arcu, non sodales lacus metus Fusce condimentum ipsum eu dui viverra bibendum. malesuada nec interdum leo semper. Vivamus adipiscing elit. Nullam tempor, mauris volutpat organisations to provide tortor adipiscing libero. Integer Proin sollicitudin, a safe onlinefermentum nisl, dignissim sodales dictum, sem lectus environment, to share his views. elementum, diam nec egestas ultrices, lacus ut sollicitudin interdum, leo augue cursus nisi, at ultricies suscipit diam vestibulum at. Nam sed aliquam felis, id venenatis nisi erat eu nisl. Curabitur ipsum posuere mauris, tempor nulla eros sit amet faucibus lacus. Donec a auctor turpis in enim auctor ut gravida sapien mauris neque. Integer dui neque, augue diam. at varius ipsum sollicitudin. commodo purus. laoreet eget gravida nec, Suspendisse at velit nisi, consectetur quis ligula. Proin sit amet libero sit amet vehicula lacus. Phasellus euismod, nibh Curabitur condimentum ante, ut adipiscing dui. Nam sit amet malesuada eCommerce Secure Insight - Page
    • STAYINg SAFE ONlINE In the past few years online crime has evolved from a cottage craft to an industrial process. As broadband penetration increases, and Australians’ appetite for internet and mobile devices continues to grow, the problem will only become more important to address. UNDERSTANDINg ONlINE CRIME Of course that is not to say central repositories are For every crime we see online there is an offline analogue. disregarded by cyber criminals. For example, in August Hacking into a business’ computer is the same as breaking 2009, Miami resident Albert Gonzalez was charged for into their office and rifling through files. Spam emails are his part in stealing 140 million credit card details after akin to junk mail. Website defacement is graffiti. Identity compromising US credit card processor Heartland theft and fraud, is, well, identity theft and fraud. The list Payment Systems, 7-Eleven, and Hannaford Brothers goes on. supermarkets. In March 2010 he was sentenced to 20 years imprisonment. However, the internet does offer certain advantages as a channel for criminals: increased geographic reach; a bUT IT IS NOT All DOOM AND glOOM. large and growing potential victim base of well over a While criminals have been highly efficient at stealing billion people; a poorly regulated series of markets with identity and financial credentials to a point where there is insufficient governmental, business and social responses; now a glut, resulting in dramatic price drops on criminal and an unwary public. black market trading portals. That efficiency has not transferred to those who try to strip money out of the In recent years we have seen that ‘malware’ - malicious system by exploiting those credentials. This is the point criminal programs which perform functions not authorised where the crime moves from online to offline: people by the user like leaving a ‘back door’ open to the computer (‘mules’) are needed to ‘cash out’ from bank accounts and or transmitting passwords or sequences of keystrokes to wire money to criminal syndicates offshore via Western online collection points - has proliferated, exponentially Union. Even though recruitment for mules is carried out on Oftentimes such malware is combined with ‘social the internet via work from home and dating websites, as engineering’, aimed at convincing users to undertake well as within certain ethnic communities, criminals have activities they otherwise would not. It is this amalgam not been able to find enough participants. of devious software and human trickery which has compounded the problem. But criminals adapt. We are seeing an increase in large- scale “breakout” frauds with coordinated geographically A tipping point occurred around 2003 with the advent dispersed activities, taking money out of the system in of ‘phishing’, where criminals realised consumers very tight windows. There has also been a shift towards held information of value and began masquerading as stealing EFTPOS and debit card credentials at ATMs reputable businesses, using fake emails and websites to and point of sale (POS) devices, so cards can be used to trick consumers out of their passwords and other identity withdraw funds directly rather than having to transfer credentials, like credit card and bank details. Countless money via internet accounts. millions of people globally have fallen victim. eCommerce Secure Insight - Page 20
    • INTRODUCTION STAYINg SAFE ONlINE ThE CONSUMER RESpONSE ThE bUSINESS RESpONSE Australians are amongst the most active internet users The internet is a highly competitive place for businesses. in the world, and there are few signs demand will slow. This, coupled with a weak regulatory environment Online consumers have shown a capacity to rise above the (fostered by these businesses) and fast-paced actual crime threat level. Some of this may be misplaced technological advances, has meant cooperation between bravado; some a disinterest in their safety; most, probably businesses and industry good citizenship has been due to a failure on the part of IT security and crime experts largely lacking over time. Instead, an anarchic ‘gold rush’ to adequately articulate the threat. mentality has prevailed. It is easy to see how problems keep occurring. The March But the longer term viability (and profitability) of the 2009 Australian Communications and Media Authority, internet depends upon business taking a more cooperative Australia in the Digital Economy Report 1: Trust and approach towards chronic issues like criminal exploitation. Confidence highlighted the complacency of the Australian Just as we would see a group of shopkeepers banding internet population with less than 50 per cent of survey together offline to help remove graffiti and beautify a respondents having anti-virus software, and even fewer landscape, to work with local government and improve with firewalls or other protective measures. This is the amenity of a shopping district to lift the mutual inviting computer compromise and theft of personal and economic prospects for all by creating a better, safer, user financial data. It is a cavalier act on the part of individuals, experience for their customers, we need to see internet threatening not just themselves but the rest of us online. businesses do the same. Other surveys indicate that the biggest fear Australians Businesses need to view online crime as a customer have online is the loss of their personal financial retention issue, certainly as a customer activity issue, credentials. This has been a major factor driving consumer even as a customer acquisition issue. Widespread losses uptake of online payment services such as PayPal which (even if attributable to the customer’s computer or actions) allows online payments to occur without the sharing of will erode the internet channel through lost consumer personal financial information. confidence, brand and reputation. Consumers are also very rational in that positive At a tactical level, fraud against online businesses is also experience leads to more activity, and negative a major issue. How do customers prove they are who they experiences have been shown to reduce online activity. say they are, and that they have legitimate control over the financial instrument they are presenting? One of the On the whole, consumers need to do more. They need to: enduring problems for using credit and debit cards online is that they were just not designed for that purpose. • be more wary of how and where they expose personal and financial credentials Card not present transactions leave merchants at risk of • Use safer payment methods online chargebacks. By the time a consumer charges back, the • Install and update anti virus and firewall software, merchant will have shipped the goods or provided the as well as regularly patch their operating systems services. Every fraud perpetrated against a business will and software applications require several legitimate sales to cover the loss simply • begin to demand security and privacy from companies they do business with online, and if not satisfied, withdraw their custom While there is no doubt individual end users need to be more responsible in reducing their own risk, the mantra of end user responsibility has often been taken as an opportunity for governments and businesses to play a minimalist role and that is where the biggest failings have occurred. eCommerce Secure Insight - Page 21
    • because of the margin most businesses operate on: if you have a 25% margin you need 4 legitimate sales to cover a fraud, if you have a 10% margin, 10 sales, and so on. “We need an In response, many businesses have built various fraud internet crime rules ranging from credit card BIN limitations, IP blocking, through to blacklists of physical and email addresses complaints ‘shopfront’ for where they have lost money previously. The process tends to be highly manual, and inaccurate. Most online people to report criminals will be able to bypass these simple rules and are doing so at a greater rate. More sophisticated scalable third party fraud detection engines are needed. Collectively, online businesses need to offer safer matters, and to services to their customers, where education, security and encryption are built into the product, rather than seek advice.” - oftentimes - added as an afterthought. They should prove their security credentials, by outlining plain English Additionally, governments have pursued a ‘light touch’ privacy policies; demonstrating their understanding of approach towards telecommunications and broadcast payment card industry data security standards (PCI DSS); regulation (co-regulatory and industry self-regulatory and their overall site security (trust marks from legitimate models) expecting those businesses to deliver solutions third party website security firms). greater than or equal to the threats. And they - in most cases - haven’t. And businesses need to engage the Australian government as an ally, to offer their deep knowledge And the bureaucracy has taken a narrow definition of of the internet to assist government’s role in protecting cyber security (based on the criminal code definition of its citizens. cybercrime: unauthorised access to, or impairment of, data on computer systems), thereby excluding much of ThE gOVERNMENT RESpONSE the victimisation which occurs at the consumer level. The reality of online victimisation is that it is a combination While Australian policy on cyber security and safety has of technical and social vectors used by criminals, often progressed (and in the right direction), the gap between undistinguishable by the victim. Australia’s capabilities and our needs is widening. The multi-jurisdictional nature of the internet hampers The uptake of information and communications efforts to fight its abuse. Law enforcement, domestic technologies has been so rapid and corresponding intelligence and regulatory agencies are jurisdictionally threats and exploits have been exponential, making it bound, and criminals exploit the inefficiencies of hard for government institutions to keep pace with the jurisdiction to their own advantage. unintended consequences. The small nature of many individual online incidents means that much of the time they go unnoticed even eCommerce Secure Insight - Page 22
    • security INTRODUCTION if reported. One individual act may be spread across in the internet industry such as registrars (who issue many jurisdictions and be replayed against thousands domain names), and they could play a much greater role of victims, all of whom have a small loss that combined in protecting us. But for a long time many of them have becomes something of much greater magnitude. argued that as providers of a commercial service, they The fragmented and often opaque nature of incident are unable to assist. Banks sit in the same boat, but many reporting prevents us from seeing a true picture. years ago governments recognised that they could play an important part in fighting crime through financial We need an internet crime complaints ‘shopfront’ for monitoring, and thus introduced anti-money laundering people to report matters, and to seek advice. A recent and ‘know your customer’ requirements. Federal Parliamentary committee inquiry into cybercrime called for the same thing. Additionally, businesses need to have strong incentive to collect and store less information and better protect Such a ‘shopfront’ would deliver significant benefits, the information they do collect. Some of this change can including an ability to: be brought about by the government acting on the data disclosure changes suggested by the Australian Law • aggregate complaints to better determine the scope Reform Commission in its review of the Privacy Act. of crime, and to pass on that information to relevant In particular the need for businesses to notify individuals agencies if data is lost. • gather intelligence and trends on scams, illegal content, crime, and IT security attacks from Lastly, government education efforts have been well Australian households and businesses intentioned but sporadic, failing to reach most homes • provide a single point of education and remediation and businesses, and certainly not changing behaviour. for Australians The Australian Government needs to undertake a • give a sense of redress to victims, reducing feelings sustained ‘public health’ style approach - in conjunction of helplessness and frustration with responsible online businesses - to change poor • pass on relevant information to other countries for internet habits. their action • reduce individual victimisation and losses • provide information back to industry to reduce further victimisation. It is time for the Australian government to consider whether the current ‘light touch’ approach towards the internet has served its use-by date. It allowed Australia to develop its internet capacity in a relatively unfettered and competitive way, but at the cost of safety and security, which may now be inhibiting future growth. Internet Service Providers (ISPs) play a crucial role in connecting Australians to the internet, as do others eCommerce Secure Insight - Page 23
    • eCommerce Secure Insight - Page 24
    • PAYPAL OVERVIEW WhAt Is PAYPAL? PayPal is a secure payments system that lets people buy online without sharing their personal financial information. A PayPal user can purchase goods or services online through their PayPal account with a credit card, debit card, bank account or PayPal balance. PayPal enables businesses to get paid electronically, in a number of different currencies. PayPal’s advanced security techniques enable safe online transactions, offering both businesses and consumers a convenient and safe way to pay and be paid online. hOW PAYPAL hELPs ONLINE BUsINEssEs With no set up fee and an easy fee structure, PayPal is easy to manage and easy to implement. Recognised globally as a trusted payment method, PayPal gives consumers both peace of mind and choice when shopping online, helping to foster greater sales conversion rates. With unrivalled anti -fraud technology, transaction and financial information is kept safe and private protecting both consumers and businesses. For more information please visit www.paypal.com.au or speak to a member of our team on 1800-729725 (1800 PAYPAL). PAYPAL IN AUstRALIA PayPal has operated in Australia for 5 years and over this time the total number of transactions processed by PayPal Australia has grown 5 fold. With3.5 million active users and 30,000 Australian businesses now using PayPal , the number of transactions grew 32 per cent between calendar year 08 and 09. Half of Australia’s top 100 retailers now use PayPal and since 2005 PayPal’s off eBay business has grown 10 fold and now representing almost half of all payment volume. Enabling payment for both large and small businesses, PayPal’s total payment volume in 2009 was almost US$2 billion, an increase of 32 per cent from 2008, demonstrating rapid growth as consumers and businesses seek fast, safe and secure ways to shop online. With more than 87 million active accounts in 190 markets and 24 currencies, PayPal enables global eCommerce.