Private investment firm Comvest Partners acquires the financially troubled e-retailer, which filed for Chapter 11 bankruptcy protection in March.
Fraud-weary consumers look for the safe shopping seal of approval.
With online sales growing at 25% a year, it’s hard for some to imagine that there are still consumers who are not making purchases online. But there are-to the tune of 24% of consumers. That’s the proportion that told Forrester Research Inc. in the last holiday shopping season that they were making no purchases online due to security concerns.
In addition, 37% of consumers told Forrester that security concerns would affect their online shopping to some extent while 39% said it wouldn’t affect their holiday shopping at all.
In addition, fears don’t disappear even when consumers shop at well known retail brand names. That became apparent last November to Petco Animal Supplies Inc., a retailer with 740 stores nationwide, when it tested a safe-shopping certification service from ScanAlert Inc. on Petco.com and experienced an 8% increase in conversion rates. “That was a pretty big shock,” says John Lazarchic, vice president of e-commerce for Petco. “We had thought that with a recognized brand name like Petco, we would not need another company’s logo to make customers trust us.”
Consumers also clearly believe that retailers should be doing something to protect their personal and credit card data: 84% of respondents to the Forrester survey said they don’t think retailers are doing enough to protect their customers online.
As a result of these fears, several companies have sprung up to provide hand-holding to jittery consumers in the form of safe-shopping certifications.
In some cases, these companies conduct full-blown security audits and in other cases, they authenticate the identity of the retailer to fight against phishing or other scams where criminals set up web sites pretending to be legitimate retailers, with the sole purpose of stealing credit card numbers.
Few retailers would dispute the notion that having an expert security company inspect their web sites to certify that they are up to code could potentially make their sites more secure for consumers to shop on. But many, like Petco, were surprised that such inspections and the subsequent certification resulted in increased sales.
Petco.com performed a series of A/B split tests in November and January where half of the customers who went to Petco.com did not see the Hacker Safe logo issued by Scan Alert and half saw it. In November, the group who saw the logo converted at a rate 8% higher than the group of shoppers who did not see the logo, Lazarchic reports. “An 8% higher conversion rate represents a substantial growth in sales.” he says.
A positive experience
Petco.com is not the only retailer to conduct A/B studies and report increases in conversions. Fredericks.com, the online shopping site of Frederick’s of Hollywood, retailer of lingerie and sexy apparel, experienced a 3% increase in conversions with shoppers who saw the Hacker Safe logo over those who did not see it, reports Tracy Rhyan, Frederick’s director of e-commerce.
Frederick’s conducted its A/B test in September, shortly after being certified by Scan Alert, Rhyan says. “We wanted to make sure that our customers had a positive experience shopping at our site,” she says. “We were skeptical at first that just posting these labels could increase sales, but we have seen an increase in sales and continue to see increases since putting the Hacker Safe logos on our web site.”
The large-ticket benefit
Both Petco and Frederick’s of Hollywood are nationally known companies where most shoppers presumably know at least that they are dealing with legitimate companies and they would likely be perceived as having the more advanced security systems. Small, unknown companies typically experience even higher conversions rates because consumers are more likely to be fearful of shopping with them since they don’t know if some of them are legitimate businesses-let alone have confidence in their security systems.
“Although all the retailers who put our seal on their sites see increases in sales, those companies with well-recognized brands will see somewhat smaller increases,” says Ken Leonard, CEO of Napa, Calif.-based ScanAlert. “Most of those recognized companies will see single-digit increases while the small, lesser known companies will see double-digital increases, in some cases as much as 30%.”
Scan Alert has conducted A/B split tests with 130 retailers involving more than 8 million online shoppers. Those tests showed an average conversion increase of 14% for customers seeing the Hacker Safe image compared to a control group.
One small retailer that ScanAlert worked with, Binoculars.com, experienced a 30% increase in conversion rates when customers saw the Hacker Safe logo, Leonard says. That test was four years ago when Binoculars.com was just getting started. Since that time, Binoculars.com and its sister sites, part ofThralow Inc., have gone from less than $1 million in annual sales to $20 million, Leonard points out.
Additionally, Leonard notes that companies with large-ticket sales will benefit even more from security certification than other retailers because consumers are often more cautious about handing over credit card information related to purchases that cost in the thousands of dollars.
“Even though the risk is the same to buy a $2.95 CD as it is to buy a $2,000 diamond ring, the purchaser of the latter item is more security conscious,” Leonard says.
The reason for the increased sales at sites with certification is that consumers are increasingly afraid to hand over credit card information to sites when they’re not familiar with the retailer or, in the case of nationally recognized merchants, they can’t be sure the site is who it says it is.
“We’ve all seen statistics where consumers say one of their biggest concerns with shopping online is security. The fact is that these concerns hold back Internet sales. Posting a certification logo addresses those concerns,” Leonard says.
Indeed, Tim Calan, group product marketing manager for Mountain View, Calif. based-VeriSign Inc., explains that just making sure your web site is secure is not enough. “Investing in security is only half the story,” Callan says. “You have to let customers know that you are protecting their security.”
The rise of phishing